1. Is the online book retail (e.g. Amazon.com) industry qualified as a perfectly competitive market by the four market characteristics listed in the lecture note? If not, what characteristic(s) is (are) not met? Please discuss it briefly.
2. In Chapter 10, we construct the production function by the following cubic function:
Q = AL3 + BL2, where Q is output rate and L is labor input.
Why it has to be a cubic function? Why there is no constant (intercept) in the function? Please explain briefly in your own words.
Please answer all the two questions by one paragraph for each.