Economics 1b Foldvary

Interview Project, due Tuesday, Nov. 24

100 pts. max

Interview a manager, owner, or well-informed employee of a for-profit enterprise that has not yet been selected by another student. Tell the interviewee that this is a project for an economics class. The answers and name will not be published or given to others. If he does not want to provide company information, then go to the next question. If he provides very little information, then interview some other firm.

Ask the following questions and report the answers. Number your answers the same as the questions below. All submissions must be typewritten or printed by computer on paper.

1. Write the name and address of the firm, person interviewed, and the date of the interview.

2. What products or services are sold here? E.g. food, clothing, cleaning, legal services.

3. What kind of market do you think the firm operates in?
Is it only a local market, nation wide, both, etc.
Important: identify which market structure the firm is in.
Choose only one of these:
atomistic competition, monopoly, oligopoly, monopolistic competition.
You may need to explain these to the interviewee.

Is there strategic behavior in your industry, i.e. if another firm advertises or changes its price, does this affect you? How do you react?

4a. Does your firm seek to maximize profits? If not, what is the main goal?
If there is another goal, does this indirectly maximize profits?

4b. Do you think the firm earns economic profits (explain what this means)?

5. Is the firm a price taker or a price maker?
If a price maker (setter), how do you or the decision maker set prices for the products? What rules are used?

How do the managers decide when to change the price?

6. Are the managers aware of and calculate:

variable costs?
average costs?
marginal costs?
Does the firm advertize? If so does it calculate the gain in sales from more advertizing. Does it set the quantity of ads at MC=MR?

7. Does the firm seek to set prices or quantities where marginal cost equals marginal revenue?

If not, are you aware that economic theory states this how profit is maximized?
Do you think this happens as a result of trial and error?

8. What are the main costs and obstacles imposed on the firm by government?
What are the most important benefits the firm receives from governments?
What taxes and regulations would you personally like to see changed?

9. Add any other questions you might wish to ask, or conversation topics offered. If any.

After the interview, answer this question:

10. How did the entrepreneur's responses relate to economic theory?
For example, strategic behavior in oligopoly.
Economic profits. Price setting.
Are the answers consistent with, or do they contradict, theory; if so, how?
What did you learn from this real-world case?