WPR1 06-02 Version 2 with solution FINAL

WPR1 06-02 Version 2 with solution FINAL - Department of...

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Department of Social Sciences United States Military Academy West Point, New York 10996 SOLUTION SS201/251 Economics, Term 06-02 Cadet ID # __________________ WPR #1 Version 2 Section: __________ 150 points Please ensure you have a complete writ. The writ consists of this cover sheet plus 8 pages of questions. You have 55 minutes to complete your work. Question Topic Points Score 1 Multiple Choice / SA 45 2 Perfect Competition 30 3 Monopolies 30 4 Trade 25 5 Taxes 20 Total 150 Grade: ____________ % Letter Grade: ____________
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Cadet ID Number:_____________________ Section: ____, Version 2 SS201/251 Economics: Principles and Problems WPR 1 (150 pts; 55 min) 2. Perfect Competition (30 points) The following graphs depict the cost structure for a typical web-based media firm and the overall perfectly competitive market for web-based media. a. (14 points) Label the curves on the two graphs above (ATC, AVC, MC, S, and D). Graphically depict the marginal revenue curve faced by the typical firm (MR). Label the equilibrium price and quantity in the market (P o and Q o ) and the quantity produced by a typical firm (q o ). b. (4 points) Web-based media firms have historically made substantial profits in the web-based media market. Graphically depict the profits of a typical firm at this short-run equilibrium. c. (12 points) Based on the profits being made in the web-based media industry, the Wall Street Journal recently reported that this market is growing at a dramatic pace. Firms such as Brightcove are challenging the existing non-web-based media conglomerates by providing alternative means for producers of films and TV shows to “get shows in front of an audience.” Considering the influx of new web-based media firms in this perfectly competitive market, explain how the market for the web media will return to a long-run equilibrium and what this new equilibrium will look like for the market and the firm. ( Market Clearing Story -
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WPR1 06-02 Version 2 with solution FINAL - Department of...

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