Test22006 - Page 1 of 5 Last Name: _ First Name: _ Student...

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Page 1 of 5 Last Name: ____________________ First Name: ____________________ Student Number: ________________ Economics 100 Professor James E. Pesando Term Test 2 – December 8, 2006 Length: 55 minutes Answer ALL questions in the space provided Aids: Pen/ Pencil and non-programmable calculator ______________________________________________ please enter the multiple choice answers in the box below : 1 2 3 4 5 6 7 8 9 examiner’s report: question points 1 2 3 4 5 total Page 2 of 5
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Part I (14 points) The market for peanuts is perfectly competitive and in long-run equilibrium. There is an increase in the demand for peanuts. a) In the short-run, what happens to a representative firm’s marginal cost schedule, demand schedule, level of output, and level of profits? Illustrate your answer with an appropriate diagram for this representative firm . b) Will the market price remain at its new level in the long-term? Explain your answer. Part II (14 points) A perfectly competitive firm has a factory, and hires workers to produce widgets. a) If the wage rate paid by this single firm increases, what will happen to this firm’s level of output and profits? Explain your answer. b) To encourage the production of widgets, the government provides all firms in the industry with a lump-sum grant of $10,000. In the short-run, what happens to the level of each firm’s profits and to the market price of widgets? Explain your answer. Page 3 of 5
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Part III (20 points) A monopolist has a patent for an important drug. The monopolist is in long-run equilibrium and earning an economic profit.
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Test22006 - Page 1 of 5 Last Name: _ First Name: _ Student...

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