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Midterrm Examination1

Midterrm Examination1 - University of Southern California...

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University of Southern California Economics 332: Contracts, Organizations, and Institutions Professor: Dr. Grigor M. Sukiassyan September 27, 2006 Midterm Examination 1 Use bluebook to provide your answers. Type your name and student ID on your blue book. You may use a calculator. All questions are compulsory and weight as specified. Time Allowed: 1 hour and 30 minutes. Good luck! 1. (20 points) A firm can choose between two production technologies for a new product line. If it installs technology 1, its yearly costs will be C 1 ( q ) = 3600 + 65 q + 36 q 2 . If it installs technology 2, they will be C 2 ( q ) = 900 + 900 q + q 2 . a) What is the minimum efficient scale with both technologies? (Hint the minimum efficient scale is the output level when the average cost is at minimum). b) Which technology would the firm prefer (purely from a cost standpoint) if it expected to sell 30 units in summer and 10 units in winter each year? 2. (20 points) The inverse market demand curve for a good is p = 100 0.25 Q . The inverse market supply curve for the good is p = 20 + 0.55 Q .
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