Solutions to SAMPLE midtem 1 SPRING2017.pdf

# Solutions to SAMPLE midtem 1 SPRING2017.pdf - Econ/Mgec 330...

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Econ/Mgec 330, SOLUTIONS TO MDT #1, SPRING 2017, Saturday, March 25, 2017 The exam is 120 minutes. This is a closed-book exam. Please store away all your notes notebooks and books in your bag or under your seat. You can use your calculator. Use of any other electronic device (including mobile phones) is prohibited during the exam. Please turn off your phone and put it away during the exam. Please show your work for each problem, except the T/F questions. Good Luck. T / F 8 Q 1: 8 Q 2: 14 Q 3: 14 Q 4: 10 Q 5: 8 Q 6: 10 Q 7: 14 Q 8: 14 Total 100

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There are one short answer question and 9 True/False questions. (Each correct answer is worth 0.8 points!) 1) In the graph, D is the market demand curve, MR is the marginal revenue curve, MC is the marginal cost curve, and ATC is the average total cost curve. The level of output that would minimize dead weight loss is 884 units. ( Write a number, NO EXPLANATION! ) The next questions are T/F questions! NO EXPLANATION! T / F 2) A monopoly firm produces an output level at which P = AC (price equals average cost). Then it must be the case that there is no deadweight loss. T / F 3) L = 1 for a monopoly firm. (at the profits maximizing price) [ Remember that L denotes the Lerner index of market power. ] T / F 4) In the short run competitive equilibrium P = MC for all firms. T / F 5) In the long run competitive equilibrium P = MC for all firms. T / F 6) In the short run competitive equilibrium P = AC for all firms. T / F 7) In the long run competitive equilibrium P = AC for all firms. T / F 8) Allocative efficiency is achieved when all active firms in the industry expand their output to the point at which price equals their average cost. T / F 9) Arnold Harberger’s estimations show that for the US economy the Deadweight Loss is substantial. (substantial means large, sizable, important) T / F 10) Cowling and Mueller estimate a larger Deadweight Loss for the US economy than Harberger.
Q1. HHI and CR4 and CR8 A. Compute the lowest and the highest value for HHI for an industry with CR4 = 60%.

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