Quiz 4 Ec21 S2015.pdf

Quiz 4 Ec21 S2015.pdf - Dartmouth ID(not name Economics 21...

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Page 1 of 10 Dartmouth ID ( not name): ___________________________ Economics 21 Spring 2015 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 are extra pages 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 10 1. Short Answer Questions (17 points) a. Define “Nash equilibrium.” b. Explain in words (not equations or symbols) why a monopolist’s marginal revenue is less than the price at which the product is sold. c. Consider a monopolistically competitive market that is in equilibrium. There are six firms that could potentially operate in this market. These firms all have the same constant marginal costs. Two firms have a fixed cost of 20, two firms have a fixed cost of 50, and two firms have a fixed cost of 60. In equilibrium, 3 firms are operating in this market. Circle the letter(s) of all statements that are necessarily (i.e., always) correct given the information above. A. All three firms that are operating make exactly zero profit B. At least one of the three firms that are operating makes exactly zero profit C. Exactly one of the three firms that are operating makes exactly zero profit D. Two firms make a profit of at least 20 E. One firm makes a profit of at least 50 F.
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