Midterm 2 Answers

Midterm 2 Answers - Econ 100B Midterm 2 LAST NAME Version A...

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Unformatted text preview: Econ 100B, Midterm 2 LAST NAME: _________________________ Version A – yellow Tuesday, February 24, 2009 FIRST NAME: _________________________ © 2009, Yuan Emily Tang All rights reserved. STUDENT ID: _________________________ SIGNATURE: __________________________ Good morning! You have one hour and twenty minutes for this exam. We reserve the right to deduct points from answers that are hard to read or do not clearly show all work. There are a total of 50 points possible. No notes, calculators, electronic devices, etc. allowed. Relax, take a deep breath, and have fun! 1) Consider the short run cost function 2 1 20 10 ) ( q q C + = . (6 pts total) a) Write down the profit function if P=5. (1 pt) 2 1 20 10 5 ) ( q q q-- = π b) Find the first order condition for profit maximization. (2 pts) 10 5 ) ( 2 1 =- =- q dq q d π c) Does the second order condition for profit maximization hold? (2 pts) ? ) ( 2 2 < dq q d π 5 ) ( 2 3 2 2 =- q dq q d π so NO. could also check ? ) ( dq q dMC 20 ) ( 2 3 <- =- q dq q dMC so NO. (either of these receive full credit) d) What is the firm’s optimal q*? (1 pt) ∞ = * q because of falling MC, profits rise as q rises, so firm wants to produce as much as possible. FOC finds a minimum, not a maximum, because SOC doesn’t hold. 2) The short run cost function for Theresa’s Mixed Berry Oscar Cakes is: q q q q C 38 9 3 1 100 ) ( 2 4 +- + = . (4 pts total) a) Find q* where Theresa’s AVC is minimized. (2 pts) 38 9 3 1 ) ( 3 +- = q q q AVC Find where ) ( = dq q dAVC 9 2 =- q q*=3 b) Below what price would Theresa be better off making zero cakes? (2 pts) 38 ) 3 * 9 ( 3 3 1 ) 3 ( 3 +- = AVC P=20 3) An individual firm has a cost function 2 2 1 10 ) ( q q q C + = . (4 pts) a) Find the supply curve for this individual firm. (1 pt) MC(q)=10+q P=10+q or q=P-10 (either of these receive full credit) b) Find the market supply curve when there are 10 identical firms. b) Find the market supply curve when there are 10 identical firms....
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Midterm 2 Answers - Econ 100B Midterm 2 LAST NAME Version A...

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