Why might Rafael's market demand schedule and curve not be an accurate reflection of the actual market? To answer this question, consider the assumption that was made when the schedule and curve were created.

How might an owner of a bookstore put together a market demand schedule for his or her store?

Review the information of Vera Wang on the opposite page. Why is it unlikely that most brides will have demand for an original Vera Wang gown?

Explain the differences between the terms in each of these pairs: a. demand, law of demand b. demand schedule, demand curve c. market demand schedule, market demand curve

Does quality demanded always fall if the price rises? List several goods or services that you think would remain in demand even if the price rose sharply. Why does demand for those items change very little? (You will learn more about this topic in Section 3.)

Explain the differences between the terms in each of these pairs: a. supply, law of supply b. supply schedule, supply curve c. market supply schedule, market supply curve b. su

Why does the demand curve slope downward?

The term "spa" originated from the name of the Belgian town Spa, known for its healing mineral baths. A new market for spas is teenagers. More than 30 percent of spas offer teen packages. Popular treatments include facials, head-and-shoulder massage, and manicures. Gather primary data by interviewing five teenagers on what spa services they would want and how much they would spend for the services. Consider if targeting teens who have limited funds is ethical. Summarize your findings and opinions in a one-page report.

Explain the role of consumers and producers in a market economy.

What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of five years if the opportunity cost of using funds is 8 percent?

Suppose the risk-free return is $3.5 \%$ and the market portfolio has an expected return of $11.2 \%$ and a volatility of $17.9 \%$. Merck & Co. (Ticker: MRK) stock has a $21.5 \%$ volatility and a correlation with the market of $0.045$.

a. What is Merck's beta with respect to the market?

b. Under the CAPM assumptions, what is its expected return?

This book discusses companies that are oligopolists in the market for the goods they sell. Many of the same ideas apply to companies that are oligopolists in the market for the inputs they buy.

Major league baseball team owners have an oligopoly in the market for baseball players. What is the owners’ goal regarding players’ salaries? Why is this goal difficult to achieve?

Hincapie Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $2,000,000 of 11% term corporate bonds on March 1, 2017, due on March 1, 2032, with interest payable each March 1 and September 1. At the time of issuance, the market interest rate for similar financial instruments is 10%.

As the controller of the company, determine the selling price of the bonds.

Fill in the blank out of the following terms using the correct definitions.

• A market in which high start- up costs make it prohibitively expensive for more than one firm to operate._______

A. Imperfect competition

B. Market structure

C. Product market

D. Monopoly

E. Monopolist

F. Market power

G. Barriers to entry

H. Natural monopoly

I. Average cost

J. Economies of scale

K. Reservation price

L. Price discrimination