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sample final - August 1 2008 Version 2 Econ 100B Final...

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August 1, 2008 Version 2 Econ 100B Final Correct = 4 points, Blank = 1 point, Incorrect = 0 points 1. A monopolist faces an inverse demand function p(Q)=100-2Q. If she sells 20 units of output, her marginal revenue will be: (a) 20 (b) 60 (c) 80 (d) 100 (e) none of the above 2. The demand for Professor Bongmore's new book is given by the function Q=3,000-100p. If the cost of having the book typeset is 7,000, if the marginal cost of printing an extra copy is 4, and if he has no other costs, then he would maximize his profits by: 3. Late in the day at an antique rug auction there are only two bidders left, April and Bart. The last rug is brought out an each bidder takes a look at it. The seller says that she will accept sealed bids from each bidder and will sell the rug to the highest bidder at the highest bidder’s bid. Each bidder believes the other is equally likely to value the rug at any amount between 0 and $1000. Suppose April believes that Bart will bid half as much as the rug is worth to him. What is the probability that April will get the rug if she bids $200 for it?
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4. A seller decides to sell an object by means of a sealed-bid second-price auction without a reservation price. There are two bidders. The seller believes that for each of the two bidders there is a probability of 1/2 that the bidder's value for the object is $500 and a probability of 1/2 that the bidder's value is $300. The seller believes that these probabilities are independent between bidders. If the bidders bid rationally, what is the seller's expected revenue from the auction?
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