Practice Final Exam. Write an expression for each of the following cost concepts. [each 5 points]

Size: px
Start display at page:

Download "Practice Final Exam. Write an expression for each of the following cost concepts. [each 5 points]"

Transcription

1 Practice Final Exam Total : 200 points Exam time: 7:00 9:00. You have 6 questions in 3 pages. Please make your diagrams clear and label it. Good Luck! 1. Amy is currently spending her income to maximize her utility. Her utility can be expressed as the following function: U=10XY. Where X is dinner and Y is books. She spends her $500 income on Dinner and books. Dinner cost her $20 each and books cost $25 each. [30 a. Write down algebraic expression for her budget constraint and Draw Amy s budget constraint. Label appropriately and put Dinner on the horizontal axis. [5 b. What is her consumption combination of dinner and books? (hint: MRS=Y/X) [5 c. Dinner price decreased to $10 as a result of competition. What will be the new consumption combination? [10 d. Show the substitution effect and income effect graphically. [10 2. A firm s total cost function is given by the equation: TC= 5Q - 10Q Q 3 Write an expression for each of the following cost concepts. [each 5 a. Average Cost b. Marginal Cost c. Determine the quantity that minimizes average cost. d. Determine the quantity that minimizes marginal cost. 3. The equation for Total Revenue used above is TR=20Q - (Q 2 /4) and for Total Cost is TC = 5Q + (Q 2 /4). [25 a. Find the demand curve and write in the following form Q = a-bp (you are being asked to solve for a and b). What is a? What is b? [5 b. What is MC? [5 c. What is MR? [5 d. Solve for the profit maximizing quantity Q* where MR=MC (Q* may or may not be an integer). [5 e. What is the profit of this firm when this firm produces at quantity calculated at d? [5

2 4. Verizon is the only telephone company in Maryland. Demand curve for telephone service is given as: P = Q Marginal cost is given as: MC = Q Where Q is the number of telephone subscribers and P is the price of telephone service. There is only one telephone plans exist in Maryland. [45 a. What price and quantity would Verizon choose to maximize their profit? [10 b. What will be the socially most efficient price and quantity in this market? [5 c. Show consumer surplus and producer surplus in case of Monopoly graphically. [5 d. If there is any dead weight loss, show in the graph. [5 e. Let s assume that Verizon practice First-degree price discrimination. Calculate quantity under First-degree price discrimination. [10 f. Show consumer surplus and producer surplus in case of part e graphically. [10 5. Suppose that a firm's production function is q=10l ½ K 1/2 The cost of a unit of labor is $20 and the cost of a unit of capital is $80. [40 a. The firm is currently producing 100 units of output and has determined that the costminimizing quantities of labor and capital are 20 and 5, respectively. Graphically illustrate this using isoquants and isocost lines. (make sure to show intercept and slope) [10 b. The firm now wants to increase output to 140 units. Capital is fixed in the short run, how much labor will the firm require? Find the firm's new total cost. [10 c. Graphically identify the cost-minimizing level of capital and labor in the long run if the firm wants to produce 140 units. [10 d. If the marginal rate of technical substitution is K/L, find the optimal level of capital and labor required to produce the 140 units of output. [10

3 6. SBC, the monopoly satellite company, broadcasts TV to subscribers in New York and Washington D.C. area. The demand functions for each of these two areas are Q dc = P dc Q ny = P ny where Q is the number of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C= 40Q where Q=Q dc + Q ny (If you need rounding do it at the second digit. ex) you can use instead of ) [40 a. What are the marginal revenue for the New York and DC markets? [5 b. What are the profit maximizing prices and quantities for the New York and DC markets? [5 c. What are the maximized profit for the New York and DC markets? [5 As a new technology people in New York receives SBC's DC broadcasts and people in DC receives SBC's New York broadcasts. As a result, anyone in New York or DC can receive SBC's broadcasts by subscribing in either city. Thus SBC can charge only a single price. d. What price should he charge? [10 e. How much quantities can SBC sell in New York and DC altogether? [10 f. What will be the profit? [5

4 Econ206 Spring 2010 Department of Economics, Korea University Final Exam Beomsoo Kim Total : 170 points Exam time: 3:30 4:45. Explain the following words in microeconomics; [each 5 1. Adverse selection 2. Moral hazard Short answers: 3. Amy is currently spending her income to maximize her utility. Her utility can be expressed as the following function: U=5XY. Where X is dinner and Y is book. She spends her $500 income on Dinner and book. Dinner cost her $20 each and book cost $25 each. [each 5 a. Write down algebraic expression for her budget constraint and Draw Amy s budget constraint. Label appropriately and put Dinner on the horizontal axis. b. What is her consumption combination of dinner and book? c. Dinner price decreased to $10 as a result of competition. What will be the new consumption combination? d. Show the substitution effect and income effect graphically. 4. The market for wheat consists of 500 identical firms, each with the total cost functions shown: TC= 90, Q 2 Where Q is measured in bushels per year. The market demand curve for wheat is Q=90,000,000-20,000,000P, Where Q is again measured in bushels and P is the Price per bushel. [each 5 a. Determine the short-run equilibrium price and quantity that would exist in the market b. Calculate the profit maximizing quantity for the individual firm. c. Calculate the short-run profit (loss) at that quantity. d. Assume that the short-run profit or loss is representative of the current long-run prospects in this market. You may further assume that there are no barriers to entry or exit in the market. Describe the expected long-run response to the conditions. [7 5. Verizon is the only telephone company in Maryland. Demand curve for telephone service is given as: P = Q

5 Econ206 Spring 2010 Beomsoo Kim Marginal cost is given as: MC = 8 Where Q is the number of telephone subscribers and P is the price of telephone service. There is only one telephone plans exist in Maryland. [each 5 a. What price and quantity would Verizon choose to maximize their profit? b. What will be the socially most efficient price and quantity in this market? c. Show consumer surplus and producer surplus in case of Monopoly graphically. d. If there is any dead weight loss, show in the graph. e. Let s assume that Verizon practice First-degree price discrimination. Calculate quantity under First-degree price discrimination. [7 f. Show consumer surplus and producer surplus in case of part f graphically. 6. Let the inverse market demand for paper be P=120-Q, where P is the price of paper and Q is the market output of paper. The industry inverse supply curve of paper is P=2Q. The industry emits one unit of pollution for each unit of paper produced, with a marginal external cost of pollution equal to MEC=Q. [each 5 a. What is the market equilibrium price and output of paper? b. What is the socially optimal price and output of paper for this industry? c. What is the deadweight loss at the market equilibrium? [7 d. What is the level of specific tax, $T, imposed on producers, that would make this market attain the social optimum? e. What is the quantity tax, t(q), imposed on producers, that would make this market attain the social optimum? f. What is the industry emissions standard that attains the same outcome as the optimal quantity tax? 7. Acme Widgets is a monopolist in the widget market. The widget market consists of 60 A s and 40 B s. Acme can produce a high quality widget or a low quality widget at zero cost. The A s are willing to pay $90 for a high quality widget and $60 for low quality widgets; the B s are willing to pay $200 for a high quality widget and $70 for a low quality widget. Each consumer will either (i) buy one low quality widget, or (ii) buy one high quality widget, or (iii) buy no widgets. Suppose that Acme is unable to identify who is an A and who is a B. Acme would like to engage in second degree price discrimination. (a) What are the participation constraints in this problem? (b) What are the self-selection constraints in this problem? (c) Find the monopolist s profit-maximizing prices. (d) How much profit will Acme earn by engaging in second degree price discrimination? 8. The following graph presents demand and supply in the labor market. Market

6 Econ206 Spring 2010 Beomsoo Kim equilibrium quantity of labor and wage are marked as We and Le. Government set the minimum wage which is higher than free-market price. a. Draw the minimum wage in the graph. b. Compare the employment level before and after the minimum wage law. c. Show the consumer surplus and producer surplus after the minimum wage law d. Show the deadweight loss due to minimum wage law. e. Explain how Card and Krueger tries to evaluate the impacts of minimum wage law in their paper. [7 f. What are the possible concerns of Card and Krueger s approach? [7 W D S We Le L Honor Pledge: I pledge on my honor that I have not given or received any unauthorized assistance on this assignment/examination. Signature:

Practice Exam 3: S201 Walker Fall with answers to MC

Practice Exam 3: S201 Walker Fall with answers to MC Practice Exam 3: S201 Walker Fall 2007 - with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility

More information

Intermediate Microeconomics Midterm

Intermediate Microeconomics Midterm Econ 201 Spring 2016 Name: Student ID: Intermediate Microeconomics Midterm Thursday April 21, 2016 Beomsoo Kim There are 7 questions and 130 possible points. There are 2 pages to this exam. Please write

More information

ECON 251 Exam 2 Pink. Fall 2012

ECON 251 Exam 2 Pink. Fall 2012 ECON 251 Exam 2 Pink Use the table below to answer the following four questions The table below shows Harry s total utility from consuming beer and wine. The price of beer is $2 per bottle. The price of

More information

Ecn Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman. Final Exam

Ecn Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman. Final Exam Ecn 100 - Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman Final Exam You have until 12:30pm to complete this exam. Be certain to put your name,

More information

Principles of Economics Final Exam. Name: Student ID:

Principles of Economics Final Exam. Name: Student ID: Principles of Economics Final Exam Name: Student ID: 1. In the absence of externalities, the "invisible hand" leads a competitive market to maximize (a) producer profit from that market. (b) total benefit

More information

Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007

Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007 Instructions: Econ 001: Midterm 2 (Dr. Stein) Answer Key Nov 13, 2007 This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and label

More information

Econ 2113: Principles of Microeconomics. Spring 2009 ECU

Econ 2113: Principles of Microeconomics. Spring 2009 ECU Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total

More information

sample test 3 - spring 2013

sample test 3 - spring 2013 sample test 3 - spring 2013 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. A natural monopoly occurs when a. the product is sold in its

More information

Do not open this exam until told to do so. Solution

Do not open this exam until told to do so. Solution Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Fall 003 Final (Version): Intermediate Microeconomics (ECON30) Solution Final (Version

More information

CLEP Microeconomics Practice Test

CLEP Microeconomics Practice Test Practice Test Time 90 Minutes 80 Questions For each of the questions below, choose the best answer from the choices given. 1. In economics, the opportunity cost of an item or entity is (A) the out-of-pocket

More information

ECON 251 Practice Exam 2 Questions from Fall 2013 Exams

ECON 251 Practice Exam 2 Questions from Fall 2013 Exams ECON 251 Practice Exam 2 Questions from Exams Gordon spends all his income on spatulas and mixing bowls. Spatulas cost $4 and mixing bowls cost $12. Gordon has $60 of income and considers both spatulas

More information

ECON 2100 Principles of Microeconomics (Summer 2016) Monopoly

ECON 2100 Principles of Microeconomics (Summer 2016) Monopoly ECON 21 Principles of Microeconomics (Summer 216) Monopoly Relevant readings from the textbook: Mankiw, Ch. 15 Monopoly Suggested problems from the textbook: Chapter 15 Questions for Review (Page 323):

More information

I enjoy teaching this class. Good luck and have a nice Holiday!!

I enjoy teaching this class. Good luck and have a nice Holiday!! ECON 202-501 Fall 2008 Xiaoyong Cao Final Exam Form A Instructions: The exam consists of 2 parts. Part I has 35 multiple choice problems. You need to fill the answers in the table given in Part II of the

More information

FIRST MIDTERM EXAMINATION ECON 200 Spring 2007 DAY AND TIME YOUR SECTION MEETS:

FIRST MIDTERM EXAMINATION ECON 200 Spring 2007 DAY AND TIME YOUR SECTION MEETS: FIRST MIDTERM EXAMINATION ECON 200 Spring 2007 STUDENT'S NAME: STUDENT'S IDENTIFICATION NUMBER: DAY AND TIME YOUR SECTION MEETS: BEFORE YOU BEGIN PLEASE MAKE SURE THAT YOUR EXAMINATION HAS BEEN DUPLICATED

More information

ECMC02H Intermediate Microeconomics - Topics in Price Theory

ECMC02H Intermediate Microeconomics - Topics in Price Theory 1 ECMC02H Intermediate Microeconomics - Topics in Price Theory Answers to the Term Test June 23, 2010 Version A of the test Your name (Print clearly and underline your last name) Your student number 1.

More information

Commerce 295 Midterm Answers

Commerce 295 Midterm Answers Commerce 295 Midterm Answers October 27, 2010 PART I MULTIPLE CHOICE QUESTIONS Each question has one correct response. Please circle the letter in front of the correct response for each question. There

More information

PICK ONLY ONE BEST ANSWER FOR EACH BINARY CHOICE OR MULTIPLE CHOICE QUESTION.

PICK ONLY ONE BEST ANSWER FOR EACH BINARY CHOICE OR MULTIPLE CHOICE QUESTION. Econ 101 Summer 2015 Answers to Second Mid-term Date: June 15, 2015 Student Name Version 1 READ THESE INSTRUCTIONS CAREFULLY. DO NOT BEGIN WORKING UNTIL THE PROCTOR TELLS YOU TO DO SO You have 75 minutes

More information

Monopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials

Monopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials LESSON 5 Monopoly Introduction and Description Lesson 5 extends the theory of the firm to the model of a Students will see that the profit-maximization rules for the monopoly are the same as they were

More information

Monopoly and How It Arises

Monopoly and How It Arises Monopoly and How It Arises A monopoly is a market: That produces a good or service for which no close substitute exists In which there is one supplier that is protected from competition by a barrier preventing

More information

Monopoly. Cost. Average total cost. Quantity of Output

Monopoly. Cost. Average total cost. Quantity of Output While a competitive firm is a price taker, a monopoly firm is a price maker. A firm is considered a monopoly if... it is the sole seller of its product. its product does not have close substitutes. The

More information

Econ 001 Levinson -- Fall 2009

Econ 001 Levinson -- Fall 2009 Page 1 of 9 Print this page. Econ 001 Levinson -- Fall 2009 Homework 8 An industry contains 5 firms, with the following sales: Firm 1 $80 million Firm 2 $50 million Firm 3 $40 million Firm 4 $10 million

More information

Econ Microeconomic Analysis and Policy

Econ Microeconomic Analysis and Policy ECON 500 Microeconomic Theory Econ 500 - Microeconomic Analysis and Policy Monopoly Monopoly A monopoly is a single firm that serves an entire market and faces the market demand curve for its output. Unlike

More information

a. Sells a product differentiated from that of its competitors d. produces at the minimum of average total cost in the long run

a. Sells a product differentiated from that of its competitors d. produces at the minimum of average total cost in the long run I. From Seminar Slides: 3, 4, 5, 6. 3. For each of the following characteristics, say whether it describes a perfectly competitive firm (PC), a monopolistically competitive firm (MC), both, or neither.

More information

Math Recitation #5 October 20, 2009

Math Recitation #5 October 20, 2009 Math Recitation #5 October 20, 2009 I. Production functions II. Isoquants and isocost lines III. Increasing, decreasing and constant returns to scale IV. Costs (average, marginal, total) V. Perfect competition

More information

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011

Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011 Instructions: Econ 001: Midterm 2 (Dr. Stein) Answer Key March 23, 2011 This is a 60-minute examination. Write all answers in the blue books provided. Show all work. Use diagrams where appropriate and

More information

COST OF PRODUCTION & THEORY OF THE FIRM

COST OF PRODUCTION & THEORY OF THE FIRM MICROECONOMICS: UNIT III COST OF PRODUCTION & THEORY OF THE FIRM One of the concepts mentioned in both Units I and II was and its components, total cost and total revenue. In this unit, costs and revenue

More information

CHAPTER 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

CHAPTER 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets CHAPTER 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets CHAPTER OUTLINE Perfect competition Demand at the market and firm levels Short-run output decisions Long-run decisions

More information

Monopolistic Markets. Causes of Monopolies

Monopolistic Markets. Causes of Monopolies Monopolistic Markets Causes of Monopolies The causes of monopolization Monoplositic resources Only one firm owns a resource which is crucial for production (e.g. diamond monopol of DeBeers). Monopols created

More information

ECN 3103 INDUSTRIAL ORGANISATION

ECN 3103 INDUSTRIAL ORGANISATION ECN 3103 INDUSTRIAL ORGANISATION 3. Monopoly Mr. Sydney Armstrong Lecturer 1 The University of Guyana 1 Semester 1, 2016 OUR PLAN Monopoly Reference for reviewing these concepts: Carlton, Perloff, Modern

More information

Basics of Economics. Alvin Lin. Principles of Microeconomics: August December 2016

Basics of Economics. Alvin Lin. Principles of Microeconomics: August December 2016 Basics of Economics Alvin Lin Principles of Microeconomics: August 2016 - December 2016 1 Markets and Efficiency How are goods allocated efficiently? How are goods allocated fairly? A normative statement

More information

Turgut Ozal University Department of Economics ECO 152 Spring 2014 Assist. Prof. Dr. Umut UNAL PROBLEM SET #5

Turgut Ozal University Department of Economics ECO 152 Spring 2014 Assist. Prof. Dr. Umut UNAL PROBLEM SET #5 Turgut Ozal University Department of Economics ECO 152 Spring 2014 Assist. Prof. Dr. Umut UNAL PART A - Definitions 1) Define these terms: Perfect competition Homogeneous products Total revenue Total cost

More information

ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions

ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions www.liontutors.com ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions 1. A A large number of firms will be able to operate in the industry because you only need to produce a small amount

More information

Exam 1. Pizzas. (per day) Figure 1

Exam 1. Pizzas. (per day) Figure 1 ECONOMICS 10-008 Dr. John Stewart Sept. 30, 2003 Exam 1 Instructions: Mark the letter for your chosen answer for each question on the computer readable answer sheet using a No.2 pencil. Note a)=1, b)=2

More information

Econ 200: Lecture 6 October 14, 2014

Econ 200: Lecture 6 October 14, 2014 Econ 200: Lecture 6 October 14, 2014 0. Learning Catalytics Session: 47811348 1. Economic Efficiency 2. Price Ceilings and Floors and Efficiency 3. Start Taxes (if time) Reminder: Article Response Writing

More information

Agenda. Profit Maximization by a Monopolist. 1. Profit Maximization by a Monopolist. 2. Marginal Revenue. 3. Profit Maximization Exercise

Agenda. Profit Maximization by a Monopolist. 1. Profit Maximization by a Monopolist. 2. Marginal Revenue. 3. Profit Maximization Exercise Agenda 1. Profit Maximization by a Monopolist 2. Marginal Revenue 3. Profit Maximization Exercise 4. Effect of Elasticities on Monopoly Price 5. Comparative Statics of Monopoly 6. Monopolist with Multiple

More information

Gregory Clark Econ 1A, Winter 2012 SAMPLE FINAL

Gregory Clark Econ 1A, Winter 2012 SAMPLE FINAL Gregory Clark Econ 1A, Winter 2012 SAMPLE FINAL 1. Medical doctors in the USA earn very high incomes compared to some other countries such as Canada. Label each of the following with N for NORMATIVE, or

More information

SCHOOL OF ECONOMICS AND FINANCE THE UNIVERSITY OF HONG KONG ECON6021 MICROECONOMICS PROBLEM SET NO.3 COMPETITIVE MARKETS AND MONOPOLY

SCHOOL OF ECONOMICS AND FINANCE THE UNIVERSITY OF HONG KONG ECON6021 MICROECONOMICS PROBLEM SET NO.3 COMPETITIVE MARKETS AND MONOPOLY SCHOOL OF ECONOMICS AND FINANCE THE UNIVERSITY OF HONG KONG ECON60 MICROECONOMICS PROBLEM SET NO.3 COMPETITIVE MARKETS AND MONOPOLY This problem set contains short-answer (true, false, uncertain) problems

More information

Monopoly. While a competitive firm is a price taker, a monopoly firm is a price maker.

Monopoly. While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly A firm is considered a monopoly if... it is the sole seller of its product. its product does not

More information

Monopoly. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University

Monopoly. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 15 Monopoly PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Market power Why Monopolies Arise Alters the relationship between a firm s costs and the selling price Monopoly

More information

Economics : Principles of Microeconomics Spring 2014 Instructor: Robert Munk April 24, Final Exam

Economics : Principles of Microeconomics Spring 2014 Instructor: Robert Munk April 24, Final Exam Economics 001.01: Principles of Microeconomics Spring 01 Instructor: Robert Munk April, 01 Final Exam Exam Guidelines: The exam consists of 5 multiple choice questions. The exam is closed book and closed

More information

Chapter 11. Monopoly. I think it s wrong that only one company makes the game Monopoly. Steven Wright

Chapter 11. Monopoly. I think it s wrong that only one company makes the game Monopoly. Steven Wright Chapter 11 Monopoly I think it s wrong that only one company makes the game Monopoly. Steven Wright Chapter 11 Outline 11.1 Monopoly Profit Maximization 11.2 Market Power 11.3 Welfare Effects of Monopoly

More information

Monopoly CHAPTER. Goals. Outcomes

Monopoly CHAPTER. Goals. Outcomes CHAPTER 15 Monopoly Goals in this chapter you will Learn why some markets have only one seller Analyze how a monopoly determines the quantity to produce and the price to charge See how the monopoly s decisions

More information

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting

Chapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting Microeconomics Modified by: Yun Wang Florida International University Spring, 2018 1 Chapter 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Outline 13.1 Demand and

More information

JANUARY EXAMINATIONS 2008

JANUARY EXAMINATIONS 2008 No. of Pages: (A) 9 No. of Questions: 38 EC1000A micro 2008 JANUARY EXAMINATIONS 2008 Subject Title of Paper ECONOMICS EC1000 MICROECONOMICS Time Allowed Two Hours (2 Hours) Instructions to candidates

More information

ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela

ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is defined as a. net revenue

More information

11.1 Monopoly Profit Maximization

11.1 Monopoly Profit Maximization 11.1 Monopoly Profit Maximization CHAPTER 11 MONOPOLY A monopoly is the only supplier of a good for which there is no close substitute. Monopolies are not price takers like competitive firms Monopoly output

More information

ECON Midterm #2 Practice Problems

ECON Midterm #2 Practice Problems ECON 1101 - Midterm #2 Practice Problems Question #1 Suppose that there is a small country known as Econland. Now lets open up Econland to the world economy. Suppose the world price of widgets is $2. Since

More information

Managerial Economics Chapter 9 Practice Question

Managerial Economics Chapter 9 Practice Question ECO 3320 Lanlan Chu Managerial Economics Chapter 9 Practice Question 1. The market for widgets consists of two firms that produce identical products. Competition in the market is such that each of the

More information

ECON 311 MICROECONOMICS THEORY I

ECON 311 MICROECONOMICS THEORY I ECON 311 MICROECONOMICS THEORY I Profit Maximisation & Perfect Competition (Short-Run) Dr. F. Kwame Agyire-Tettey Department of Economics Contact Information: fagyire-tettey@ug.edu.gh Session Overview

More information

Perfect Competition & Welfare

Perfect Competition & Welfare Perfect Competition & Welfare Outline Derive aggregate supply function Short and Long run euilibrium Practice problem Consumer and Producer Surplus Dead weight loss Practice problem Focus on profit maximizing

More information

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.

Perfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product. Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities

More information

A monopoly market structure is one characterized by a single seller of a unique product with no close substitutes.

A monopoly market structure is one characterized by a single seller of a unique product with no close substitutes. These notes provided by Laura Lamb are intended to complement class lectures. The notes are based on chapter 12 of Microeconomics and Behaviour 2 nd Canadian Edition by Frank and Parker (2004). Chapter

More information

2) All combinations of capital and labor along a given isoquant cost the same amount.

2) All combinations of capital and labor along a given isoquant cost the same amount. Micro Problem Set III WCC Fall 2014 A=True / B=False 15 Points 1) If MC is greater than AVC, AVC must be rising. 2) All combinations of capital and labor along a given isoquant cost the same amount. 3)

More information

MONOPOLY. Characteristics

MONOPOLY. Characteristics OBJECTIVES Explain how managers should set price and output when they have market power With monopoly power, the firm s demand curve is the market demand curve. A monopolist is the only seller of a product

More information

Section I (20 questions; 1 mark each)

Section I (20 questions; 1 mark each) Foundation Course in Managerial Economics- Solution Set- 1 Final Examination Marks- 100 Section I (20 questions; 1 mark each) 1. Which of the following statements is not true? a. Societies face an important

More information

Chapter Summary and Learning Objectives

Chapter Summary and Learning Objectives CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect

More information

ECON 101 Introduction to Economics1

ECON 101 Introduction to Economics1 ECON 101 Introduction to Economics1 Session 12 Market Structures(Monopoly) Lecturer: Mrs. Hellen A. Seshie-Nasser, Department of Economics Contact Information: haseshie@ug.edu.gh College of Education School

More information

Monopoly. Chapter 15

Monopoly. Chapter 15 Monopoly Chapter 15 Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly u A firm is considered a monopoly if... it is the sole seller of its product. its product

More information

Principles of Microeconomics Module 5.1. Understanding Profit

Principles of Microeconomics Module 5.1. Understanding Profit Principles of Microeconomics Module 5.1 Understanding Profit 180 Production Choices of Firms All firms have one goal in mind: MAX PROFITS PROFITS = TOTAL REVENUE TOTAL COST Two ways to reach this goal:

More information

AP Microeconomics Review With Answers

AP Microeconomics Review With Answers AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show

More information

EconS Perfect Competition and Monopoly

EconS Perfect Competition and Monopoly EconS 425 - Perfect Competition and Monopoly Eric Dunaway Washington State University eric.dunaway@wsu.edu Industrial Organization Eric Dunaway (WSU) EconS 425 Industrial Organization 1 / 47 Introduction

More information

FINAL EXAMINATION ECON 200 Spring 2008 Version A DAY AND TIME YOUR SECTION MEETS: ENTER THE NUMBER UNDER "SPECIAL CODES" ON THE SCANTRON SHEET

FINAL EXAMINATION ECON 200 Spring 2008 Version A DAY AND TIME YOUR SECTION MEETS: ENTER THE NUMBER UNDER SPECIAL CODES ON THE SCANTRON SHEET FINAL EXAMINATION ECON 200 Spring 2008 Version A STUDENT'S NAME: STUDENT'S IDENTIFICATION NUMBER: DAY AND TIME YOUR SECTION MEETS: ENTER THE NUMBER 135246 UNDER "SPECIAL CODES" ON THE SCANTRON SHEET BEFORE

More information

a. Find MG&E s marginal revenue function. That is, write an equation for MG&E's MR function.

a. Find MG&E s marginal revenue function. That is, write an equation for MG&E's MR function. Economics 101 Spring 2015 Answers to Homework #5 Due Thursday, May 7, 2015 Directions: The homework will be collected in a box before the lecture. Please place your name on top of the homework (legibly).

More information

Coffee is produced at a constant marginal cost of $1.00 a pound. Due to a shortage of cocoa beans, the marginal cost rises to $2.00 a pound.

Coffee is produced at a constant marginal cost of $1.00 a pound. Due to a shortage of cocoa beans, the marginal cost rises to $2.00 a pound. Microeconomics, Module 11: Monopoly (Chapter 10) Illustrative Test Questions (The attached PDF file has better formatting.) Updated: June 27, 2005 Question 11.1: Monopoly All but which of the following

More information

Chapter 13 Perfect Competition

Chapter 13 Perfect Competition Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) Is the number of sellers in the market the only thing that is different in each of the four market types economists study? Answer:

More information

EC101 DD/EE Midterm 2 November 7, 2017 Version 01

EC101 DD/EE Midterm 2 November 7, 2017 Version 01 EC101 DD/EE Midterm 2 November 7, 2017 Version 01 Name (last, first): Student ID: U Discussion Section: Signature EC101 DD/EE F17 Midterm 2 INSTRUCTIONS (***Read Carefully***): ON YOUR QUESTION BOOKLET:

More information

MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions

MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions MICROECONOMICS SECTION I Time - 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best

More information

Pricing with Market Power

Pricing with Market Power Chapter 7 Pricing with Market Power 7.1 Motives and objectives Broadly The model of perfect competition is extreme (and hence wonderfully powerful and simple) because of its assumption that each firm believes

More information

Monopolistic Competition

Monopolistic Competition CHAPTER 16 Monopolistic Competition Goals in this chapter you will Examine market structures that lie between monopoly and competition Analyze competition among firms that sell differentiated products

More information

7 The Optimum of Monopoly, Price Discrimination

7 The Optimum of Monopoly, Price Discrimination Microeconomics I - Lecture #7, March 31, 2009 7 The Optimum of Monopoly, Price Discrimination 7.1 Monopoly Up to now we have analyzed the behavior of a competitive industry, a market structure that is

More information

AGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7

AGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7 AGENDA Mon 10/12 Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp 173-176 Q #7 QOD #21: Competitive Farming A purely competitive wheat farmer can sell

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Micro - HW 4 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In central Florida during the spring, strawberry growers are price takers. The reason

More information

UNIT 4 PRACTICE EXAM

UNIT 4 PRACTICE EXAM UNIT 4 PRACTICE EXAM 1. The prices paid for resources affect A. the money incomes of households in the economy B. the allocation of resources among different firms and industries in the economy C. the

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is correct? A) Consumers have the ability to buy everything

More information

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION YOUR NAME Row Number ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION Prof. Bill Even Novermber 12, 2014 FORM 1 Directions 1. Fill in your scantron with your unique-id and the form number

More information

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION YOUR NAME Row Number ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION Prof. Bill Even Novermber 12, 2014 FORM 3 Directions 1. Fill in your scantron with your unique-id and the form number

More information

Homework 4 Economics

Homework 4 Economics Homework 4 Economics 501.01 Manisha Goel Due: Tuesday, March 1, 011 (beginning of class). Draw and label all graphs clearly. Show all work. Explain. Question 1. Governments often regulate the price of

More information

AP Microeconomics Review Session #3 Key Terms & Concepts

AP Microeconomics Review Session #3 Key Terms & Concepts The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph

More information

Imperfect Competition

Imperfect Competition Imperfect Competition 6.1 There are only two firms producing a particular product. The demand for the product is given by the relation p = 24 Q, where p denotes the price (in dollars per unit) and Q denotes

More information

2003/2004 FIRST EXAM 103BE/BX/BF Microeconomics, Closed part

2003/2004 FIRST EXAM 103BE/BX/BF Microeconomics, Closed part 1 2003/2004 FIRST EXAM 103BE/BX/BF Microeconomics, Closed part Note 1: Always read all the options before choosing one, and then select the best option. Sometimes the final option may read like all the

More information

Application: the effect of immigration on domestic wages

Application: the effect of immigration on domestic wages LABOUR DEMAND Application: the effect of igration on domestic wages Case 1. Immigrants and nonigrants are perfect substitutes in production W S 0 S 1 Law of one price: all workers earn the same wage W

More information

Other examples of monopoly include Australia Post.

Other examples of monopoly include Australia Post. In this session we will look at monopolies, where there is only one firm in the market with no close substitutes. For example, Microsoft first designed the operating system Windows. As a result of this

More information

iv. The monopolist will receive economic profits as long as price is greater than the average total cost

iv. The monopolist will receive economic profits as long as price is greater than the average total cost Chapter 15: Monopoly (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- Monopolies have no close competitors and,

More information

Econ 121b: Intermediate Microeconomics

Econ 121b: Intermediate Microeconomics Econ 11b: Intermediate Microeconomics Dirk Bergemann, Spring 01 Week of 3/18-3/4 1 Lecture 14: Theory of Production We can use tools similar to those we used in the consumer theory section of the class

More information

A few firms Imperfect Competition Oligopoly. Figure 8.1: Market structures

A few firms Imperfect Competition Oligopoly. Figure 8.1: Market structures 8.1 Setup Monopoly is a single firm producing a particular commodity. It can affect the market by changing the quantity; via the (inverse) demand function p (q). The tradeoff: either sell a lot cheaply,

More information

The Competitive Model in a More Realistic Setting

The Competitive Model in a More Realistic Setting CHAPTER 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Summary and Learning Objectives 13.1 Demand and Marginal Revenue for a Firm in a Monopolistically Competitive

More information

Monopolistic Competition. Chapter 17

Monopolistic Competition. Chapter 17 Monopolistic Competition Chapter 17 The Four Types of Market Structure Number of Firms? Many firms One firm Few firms Differentiated products Type of Products? Identical products Monopoly Oligopoly Monopolistic

More information

Economics of Managerial Decision Making (MGEC 611) SAMPLE EXAM

Economics of Managerial Decision Making (MGEC 611) SAMPLE EXAM Economics of Managerial Decision Making (MGEC 611) SAMPLE EXAM QUESTION 1 Short Questions. This part consists of three short, stand-alone questions of lower math intensity. Please provide an answer or

More information

2007 Thomson South-Western

2007 Thomson South-Western WHAT IS A COMPETITIVE MARKET? A competitive market has many buyers and sellers trading identical products so that each buyer and seller is a price taker. Buyers and sellers must accept the price determined

More information

Economics N. Gregory Mankiw. The Markets for the Factors of Production. In this chapter, look for the answers to these questions CHAPTER

Economics N. Gregory Mankiw. The Markets for the Factors of Production. In this chapter, look for the answers to these questions CHAPTER Seventh Edition Principles of Economics N. Gregory Mankiw CHAPTER 18 The Markets for the Factors of Production In this chapter, look for the answers to these questions hat determines a competitive firm

More information

Lecture 22. Oligopoly & Monopolistic Competition

Lecture 22. Oligopoly & Monopolistic Competition Lecture 22. Oligopoly & Monopolistic Competition Course Evaluations on Thursday: Be sure to bring laptop, smartphone, or tablet with browser, so that you can complete your evaluation in class. Oligopoly

More information

Welker s Wikinomics practice activities. Unit 1.5 Theory of the Firm Pure Monopoly

Welker s Wikinomics practice activities. Unit 1.5 Theory of the Firm Pure Monopoly Unit 1.5 Theory of the Firm Pure Monopoly 1. Assume that Welcorp is a purely monopolistic publisher of Economics textbooks. All econ texts available are published by the firm. The table below shows the

More information

Market structures. Why Monopolies Arise. Why Monopolies Arise. Market power. Monopoly. Monopoly resources

Market structures. Why Monopolies Arise. Why Monopolies Arise. Market power. Monopoly. Monopoly resources Market structures Why Monopolies Arise Market power Alters the relationship between a firm s costs and the selling price Charges a price that exceeds marginal cost A high price reduces the quantity purchased

More information

1. Suppose that policymakers have been convinced that the market price of cheese is too low.

1. Suppose that policymakers have been convinced that the market price of cheese is too low. ECNS 251 Homework 3 Supply & Demand II ANSWERS 1. Suppose that policymakers have been convinced that the market price of cheese is too low. a. Suppose the government imposes a binding price floor in the

More information

MICRO EXAM REVIEW SHEET

MICRO EXAM REVIEW SHEET MICRO EXAM REVIEW SHEET 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2 Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2 Economics 2 Spring 2016 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. Recall that the price elasticity of supply is the percentage change in quantity supplied divided

More information

1 Budget Set, Preferences, Consumer s Optimum

1 Budget Set, Preferences, Consumer s Optimum Microeconomics I - Lecture #1, September 22, 2008 1 Budget Set, Preferences, Consumer s Optimum People choose the best things they can afford. Every consumer makes a decision about how much to consume

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Sample Test 3 Ch 10-13 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A cost incurred in the production of a good or service and for which

More information

Chapter 10: Monopoly

Chapter 10: Monopoly Chapter 10: Monopoly Answers to Study Exercise Question 1 a) horizontal; downward sloping b) marginal revenue; marginal cost; equals; is greater than c) greater than d) less than Question 2 a) Total revenue

More information