Economics 301
301  Fall 1999  FINAL A
J. Wissink
Fall 1999
Cornell University
Directions:
Answer all questions.
Write legibly, concisely, and coherently.
Be sure to label
all
axes, functions, and variables you use.
READ QUESTIONS CAREFULLY.
Draw pictures whenever possible.
Show all your work!
Total time for the test is 120 minutes + 30 extra minutes  you can work for 2.5 hours even though the exam is designed for 2 hours.
Part I.
Short essay: 48 minutes.
Answer all five.
Answer the question and/or do the stated problem.
1.
Suppose you are a simple profit maximizing monopolist with the following demand function and total
cost function:
X
D
= 3002p and tc=10+½x
2
.
Calculate your profit maximizing price and quantity.
Is demand price elastic or inelastic at your solution?
2.
Derive the
longrun total cost function
for widgets assuming that widgets are produced with the
technology:
x = min{2K, 2L}. Assume p
K
= $6 and the p
L
= $2 per unit. Show all work.
Determine the
shortrun total cost function
assuming K = 8 and that p
K
= $6 and the p
L
= $2 per unit.
3.
What condition(s) would characterize Pareto efficiency in a simple pureexchange economy where there
are only 2 goods, mangos and coconuts and only two nicely behaved people, Abe and Betty.
4.
White Inc. and Cane Inc. are duopolists in the sugar market and have a successful cartel arrangement
going in the market for sugar.
White has the following total cost function:
c
1
(x
1
) = 2
•
(x
1
)
2
+90.
Cane
has the cost function:
c
2
(x
2
) = 6
•
(x
2
)
2
+40.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '07
 WISSINK
 Economics, Microeconomics, Game Theory, Supply And Demand, Airbus, total cost function

Click to edit the document details