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Midterm2_review_part1

# Midterm2_review_part1 - Q TC VC FC MC ATC AVC AFC TR MR...

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Review Problems Midterm 2 Part 1 Economics 304K: Principles of Microeconomics Prof. Meg Ledyard You do not need to turn these in, but you would be well advised to go through these questions, and be able to answer them. Question 1: Suppose that Vanessa runs a company that makes fake hips. This company is a monopoly. a. In a well labeled diagram, show the price and quantity that Vanessa will choose, as well as her profits. b. In you diagram from above, show the efficient quantity and any DWL. c. Is Monopoly efficient? If so, why? If not, why not? Question 2: Fill in the following chart. The firm is perfectly competitive and the market price is \$7. (The filled in chart is on the next page, so you can check your answers.)

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Unformatted text preview: Q TC VC FC MC ATC AVC AFC TR MR Profit 4 1 1 2 5 3 5 4 6 5 3 6 3 5 / 6 b. Redo the chart above for a monopoly with the follwing demand function: Q P 0 20 1 17 2 14 3 11 4 8 5 5 6 2 Answer to the chart. Q TC VC FC MC ATC AVC AFC TR MR Profit 0 4 0 4 --- --- --- --- 0 --- -4 1 5 1 4 1 5 1 4 7 7 2 2 9 5 4 4 9/2 5/2 2 14 7 5 3 15 11 4 6 5 11/3 4/3 21 7 6 4 22 18 4 7 22/4 18/4 1 28 7 6 5 30 26 4 8 30/5 26/5 4/5 35 7 5 6 39 35 4 9 39/5 35/6 4/6 42 7 3 For monopoly: Q TC VC FC MC ATC AVC AFC TR MR Profit 0 4 0 4 --- --- --- --- 0 -4 1 5 1 4 1 5 1 4 17 17 12 2 9 5 4 4 9/2 5/2 2 28 11 19 3 15 11 4 6 5 11/3 4/3 33 5 18 4 22 18 4 7 22/4 18/4 1 32 -1 14 5 30 26 4 8 30/5 26/5 4/5 25 -7 -5 6 39 35 4 9 39/5 35/6 4/6 12 -13 -27...
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