Fall 2009 - Exam II - BLUE

# Fall 2009 - Exam II - BLUE - Mesa Manufacturing sells its...

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Mesa Manufacturing sells its product in two markets, Market A and Market B. In Market A demand for its product is Q A = 140 – 0.1P A . In Market B demand is Q B = 180 – 0.1P B . Mesa’s costs of production, for any level of output Q, is C(Q) = 120,000 + 20Q. Mesa is able to practice 3 rd degree price discrimination and is a profit maximizing firm. 1. Mesa’s marginal revenue function in market A is: a) MR(Q A ) = 1400 – 10Q A c) MR(Q A ) = 140 – 0.2Q A b) MR(Q A ) = 140 – 0.2Q A d) MR(Q A ) = 1400 – 20Q A 2. Mesa will sell _____ units of output in Market B. a) 69 b) 79 c) 89 d) 99 e) None of the above are correct. 3. Mesa will set a price equal to ______ dollars in Market A. 4. Mesa’s total variable costs of production will equal ________ dollars. 5. If Mesa is unable to practice 3 rd degree price discrimination, it will set its price equal to ____dollars. 6. If Mesa is unable to practice 3 rd degree price discrimination, its profit will equal ______ dollars. a) 4,820 b) 5,680 c) 6,820 d) 7,680 e) None of the above are correct. BLUE EXAM II Page 1 of 8 FALL 2009

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Corinthian Consolidated is the only employer of labor (L) in its region, confronting a supply of labor L = (1/3)W – 100. Here W is the wage paid per unit of labor. Labor is the only variable input into Corinthian’s production process, with total output Q = 200L – (1/4)L 2 . The marginal product of labor is MP L = dQ/dL = 200 – (1/2)L. In its product market, Corinthian faces perfect competition. The current market price for its output is P = \$6. Corinthian is a profit maximizing firm. 7. Corinthian’s marginal labor costs are: 8. Corinthian will produce ______ units of output.
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