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Exam 2 - NAME PID Information for questions 1-4 Figure 1...

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NAME: _____________________ PID#: _____________________ Information for questions 1 -4. Figure 1 shows the market demand, marginal revenue, marginal cost, and average cost for a monopolist. 1. The profit maximizing monopolist faced with the situation in Figure 1 will charge a price of: a) 5 b) 8 c) 9 d) 10 e) 15 2. From Figure 1, one can tell from the graph that 3. The government can make the monopolist to earn zero profit by setting the price at “fair price”. Which one of the followings is fair price? 4. The market shown in Figure 1 would generate the largest amount of social welfare (assume there are no consumption or production externalities) if 5. If the income effect dominates in your labor supply decision, you a) increase your hours worked as your wage rate rises b) decreases your hours worked as your wage rate rises c) decreases your hours worked no matter what d) none of the above Figure 1
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6. The demand curve for a monopolistic competitor slopes downward because 7. Which of the following will occur if a natural monopoly is broken into two smaller firms? 8. The Rand Corporation estimates that the external costs imposed by alcohol consumption to be 48 cents per ounce consumed. Taxes on alcohol amount to 23 cents per ounce consumed. This information suggests:
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