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Intermediate Microeconomics: A Modern Approach, Seventh Edition

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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 = 300-2p and tc=10+½x 2 . Calculate your profit maximizing price and quantity. Is demand price elastic or inelastic at your solution? 2. Derive the long-run 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 short-run 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 pure-exchange 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.
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