midterm2-w.ans_moodle

midterm2-w.ans_moodle - A/S ECON 1000, Fall 2007 Sections A...

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A/S ECON 1000, Fall 2007 Sections A and D Instructor: Professor Sudeshna Maitra Midterm 2 Answer Key on Last Page 1
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The graph below depicts the cost structure for a firm in a competitive market. Use the graph to answer questions 1 through 3. Question 1 When price rises from P 2 to P 3 , the firm finds that a. marginal cost exceeds marginal revenue at a production level of Q 2 . b. if it produces at output level Q 3 it will earn a positive profit. c. expanding output to Q 4 would leave the firm with losses. d. All of the above are correct. Question 2 When price falls from P 3 to P 1 , the firm finds that a. fixed cost is higher at a production level of Q 1 than it is at Q 3 . b. it should produce Q 1 units of output. c. it should produce Q 3 units of output. d. it is unwilling to produce any output. Question 3 When price rises from P 3 to P 4 , the firm finds that a. fixed costs are lower at a production level of Q 4 . b. it can earn a positive profit by increasing production to Q 4 . c. profit is maximized at a production level of Q 3 . d. average revenue exceeds marginal revenue at a production level of Q 4 . GO TO NEXT PAGE The figure below depicts the demand, marginal revenue and marginal cost curves of a profit-maximizing monopolist. Use the figure to answer questions 4 through 7. 2
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Question 4 If the monopoly firm is NOT allowed to price discriminate, then the deadweight loss amounts to a. $50. b. $100. c. $500. d. $1,000. Question 5 If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to a. $0. b. $100. c. $200. d. $500. Question 6 Monopoly profit without price discrimination equals a. $500. b. $1,000. c. $2,000. d. $4,000. GO TO NEXT PAGE 3
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Question 7 Monopoly profit with perfect price discrimination equals a. $500. b. $1,000. c. $2,000. d. $4,000. Use the information provided below to answer questions 8 through 10. Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the health care related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illness). State prosecutors do not have access to the same data used by cigarette
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This note was uploaded on 09/25/2010 for the course ECON ECON 1000 taught by Professor Noordeh during the Fall '09 term at York University.

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midterm2-w.ans_moodle - A/S ECON 1000, Fall 2007 Sections A...

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