SomeOldTestQuestions - Some Old Test Questions Question 1...

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Some Old Test Questions Question 1 (20 points) Suppose that Hiro is the Monopoly producer of swords. a. (15 points) In a diagram below, show the following: Label the quantity the monopolist will produce as QM. Label the price the monopolist will charge as PM. Label the efficient quantity (the one that maximizes total surplus) as Qeff. Label the monopolist’s profits. Label the Dead Weight Loss that occurs if the monopolist makes the profit maximizing quantity. b.(5 points) What is Hiro’s profit maximizing condition?
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Question 2 (20 Points) Suppose that the market for coconuts is perfectly competitive. Captain Jack owns a firm in the coconut industry. Suppose that in the winter, people hate coconuts and the price is PL. In the summer people love coconuts and the price is PH. Suppose that the FC = 0 in this industry. Suppose also that PL < minimum AVC and PH>minimum ATC. a. (15 points) In the left diagram below, show the market for coconut in the summer and the winter (assume supply is constant across seasons). In the other diagram, including MC, ATC
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SomeOldTestQuestions - Some Old Test Questions Question 1...

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