Prelim_2_Version_B_Solutions-1 - P P Pc 1 0 P * PQ P0 P* *...

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HA 1141 – Dr. Carroll Fall ‘08 Prelim 2 October 30, 2008 VERSION B SOLUTION P P 1 P 2 0 Q 1 Q 2 D Q P * P 0 q * d = mr q mc s rate lratc P * P 0 Q * D Q S MARKET P 0 Q 1 Q S 1 MARKET D 2 S 2 P 2 P 1 Q 2 Q 3 P 1 P 0 q 1 d = mr 1 q mc lratc q 2 d = mr 2 P 2 Profit D 1 P * P 0 Q * D Q mc Profit LRATC LRATC MR P c P 0 Q c D Q S = mc MARKET Q m P m PSs CS MR s ratc P P 0 d = mr q mc lratc Name: ______________________________ Date: _______________________ Student ID#__________________________ Exam Number: _______________ Signature: ____________________________ INSTRUCTIONS: 1) There are THREE sections in this exam. 2) ANSWER ALL QUESTIONS. TOTAL POINTS = 100 3) Part I: 15 multiple choice questions (30 points) Part II: 2 short answer analytical questions (40 points) Part III: 1 long answer problem (30 points) 4) Read all questions carefully. 5) Write legibly and remember to include explanations and label all graphs. 6) If you use the back of a page to complete an answer, please note that on the front of the page. 7) Total time = 75 minutes. HA 1141 Dr. Bill Carroll Page 1 of 12
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Part I: (30 points) Multiple choice. Do the following 15 multiple choice questions: Read each question carefully and CIRCLE the best answer on the provided answer sheet. It often helps to jot down a quick graph or do some work next to the question before searching for the answer. 1) A single-price monopolist sets a price of $35. Which of the following is true? a. The average cost of that unit must be $35. b. The marginal cost of that unit must be $35. c. The marginal revenue of that unit must be $35. d. The marginal revenue of that unit must be less than $35. 2) The profit-maximizing single-price monopolist will charge a price a. equal to marginal revenue. b. greater than marginal cost. (both b and d are correct) c. less than marginal revenue, but greater than marginal cost. d. greater than marginal revenue, but greater than marginal cost. 3) If a monopolist produces the quantity of output at which marginal revenue equals marginal cost and charges a price greater than average total cost, it necessarily a. maximizes the difference between its total revenue and total cost. b. maximizes its differences between its total fixed cost and total variable cost. c. maximizes total revenue. d. earns profit. 4) If, for a perfectly competitive firm, price is greater than average variable cost, then it follows that a. total revenue is greater than total cost. b. total revenue is greater than total variable cost. c. the firm will lose more or earn less by shutting down in the short run than by continuing to produce. d. There is not enough information to answer the question. 5)
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Prelim_2_Version_B_Solutions-1 - P P Pc 1 0 P * PQ P0 P* *...

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