ARE 100B
SPRING 2009
M.
Whitney
YOUR NAME:
____________________________________
__
FIRST MIDTERM
This exam has two sections.
Section A consists
of 10 multiplechoice questions, each worth 10 points.
Total possible points in Section A
=
100.
Section B consists of 5 problems each worth 30 points. Partial credit is given for correct approach even if
fmal answer is incorrect, so show your work!
Total possible points in Section B
=
150.
Total points in this exam: 250
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View Full DocumentSECTION A
1. A monopolist owns two plants with the following cost functions:
TCa
=
1000
+
500 qa
+
qa
2
TCb
= 4000
+
600 qb
Suppose the monopolist's optimal total output is Q
=
200 units. What does this imply?
~
Plant a will produce 1/4 of the total output
b. Plant a will produce
~
of the total input
c. Plant a wiJJ shut down.
d. Plant b will shut down.
e. The optimal monopoly price will be $600.
f.
None of the above.
Questions 2 and3 refer to the info below.
A
competitive firm's annual total costs are: TC
=
2500
+
10q
+
q2
2.
In
longrun equilibrium, how many units of output does this firm produce?
a. 10
b. 25
~50
0.100
e. None of the above.
3. What is the longrun equilibrium price ofthis good?
a.$30
b.$60
(e)$110
do $210
e.$300
f. None of the above.
4. For a monopolist, which of the following pricing strategies results in an efficient outcome, with no
deadweight loss?
©
Firstdegree (perfect) price discrimination
b. Seconddegree price discrimination
c. Thirddegree price discrimination
d. All of the above.
e. None of the above, since all monopoly pricing strategies create a deadweight loss.
5. A monopolist charges $150 per treatment for a patented drug it sells. The cost of producing the drug is
constant at $100 per treatment. What is the implied elasticity of demand for this drug?
a.l
b. 1.5
c.
2
@3
e. None of the above.
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 Spring '09
 CHENGUANG
 Monopoly, Price Discrimination, seconddegree price discrimination, bob T

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