Quiz 4 Ec21 W2014.pdf - Dartmouth ID(not name Economics 21...

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Page 1 of 8 Dartmouth ID ( not name): ___________________________ Economics 21 Winter 2014 Quiz 4 Instructions: Show all your work! (no credit for correct answers unless the intermediate steps are shown) You can earn 45 points in total. All items (including the axes) in a graph need to be labeled to get full credit There one extra page at the end in case you need additional space Do not remove the staple or tear out pages Books, notes, your own calculators or cell phones are not allowed. You are only allowed to use the calculator provided by me. Good luck!
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Page 2 of 8 1. Short Answer Questions (15 points) a. Define “natural monopoly.” b. Explain in words why a profit-maximizing monopoly will never operate on the inelastic part of a demand curve (i.e., will never set a quantity where the demand curve is inelastic).
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Page 3 of 8 c. Define “Nash equilibrium.” d. Suppose a law outlawing price discrimination is repealed. After the repeal, a profit-maximizing monopolist starts to practice group price discrimination but keeps its total output at the same quantity as before the repeal. Explain the effect of the repeal of the law (i) on the profits of the monopolist and (ii) on Social Surplus.
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