Econ 100A PS4 - Department of Economics University of...

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Econ 100A-Spring 2010 Page 1 Problem Set 4 Department of Economics Spring 2010 University of California Prof. Woroch Economics 100A PROBLEM SET 4 Due: Thursday, April 1 st , 2010, 2:00 PM (in lecture) I. TRUE or FALSE and EXPLAIN : For each statement below, decide whether it is true or false, and explain the reasoning behind your answer in a few sentences. When appropriate, provide a diagram. 1. A price floor set above the market equilibrium price harms consumers and but benefits producers. 2. Partial equilibrium analysis will give biased predictions of the impact of a sales tax on a good when there is a close substitute for that good. 3. If a firm has a cost function given by C(Q) = 100 + Q 2 , then it is a natural monopoly. 4. Perfect price discrimination is impossible when all consumers have identical tastes and preferences. II. MULTI-PART QUESTIONS : Answer each part of the following questions. 1. [Auctioning a Monopoly] The “State Power Corp.” (SPC) has a monopoly on the production of electricity in China. Assume that their cost function for electricity in dollars is given by C(Q) = 0.05Q, where Q is in billions of kilowatt-hours of electricity. The demand for electricity is given by D(P) = 9 60P, where P is in U.S. dollars per kilowatt-hour. a)
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Econ 100A PS4 - Department of Economics University of...

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