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Unformatted text preview: Ecn 100 - Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman Final Exam - Solutions You have until 12:30pm to complete this exam. Be certain to put your name, id number and section on both the exam and your scantron sheet and fill in test form A on the scantron. Answer all multiple choice questions on your scantron sheet. Choose the single best answer for each question; if you fill in multiple answers for a question you will be marked wrong. Answer the long answer questions directly on the exam. You must show your work for full credit. Answers may be left as fractions. Please place a box around final answers when appropriate. Good luck! Name: ID Number: Section: SECTION I: MULTIPLE CHOICE (60 points) 1. A monopolist with constant marginal costs in an industry with a downward sloping demand curve will: (a) Produce more if the firm can only charge a single price per unit than if it can use first-degree price discrimination. (b) Produce less if the firm can only charge a single price per unit than if it can use first- degree price discrimination. (c) Produce the same quantity whether it charges a single price per unit or uses first-degree price discrimination. (d) Produce more than the efficient quantity if it can use first-degree price discrimination. (b) If the firm can only charge a single price, it will choose the quantity at which the marginal revenue curve intersects the marginal cost curve. If the firm can use first- degree price discrimination, they will choose the quantity at which the marginal cost curve intersects the demand curve (which is to the right of where the marginal cost curve intersects the marginal revenue curve). 2. Suppose that a firm has two factories, A and B . The cost of producing y at factory A is 4 y 2 . The cost of producing y at factory B is 2 y 2 . To minimize costs, the firm will: (a) Split output evenly between the two factories. (b) Use both factories but produce more at factory A than at factory B . (c) Use both factories but produce more at factory B than at factory A . (d) None of the above. (c) Note that both factories have increasing marginal costs. Producing everything at one factory would therefore be more expensive than splitting output between factories. The firm will split output such that marginal costs are equal between the two factories (8 y A = 4 y B ). This will lead to the firm producing twice as much at factory B as at factory A . 3. Suppose that instead of the cost functions given in Question 2, the cost of producing y at factory A is 4 y and the cost of producing y at factory B is 2 y . Given these costs, the firm will minimize total costs by: 2 Final Exam - Solutions (a) Splitting output evenly between the two factories....
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This note was uploaded on 10/22/2010 for the course ECN 100 taught by Professor Parman during the Fall '08 term at UC Davis.
- Fall '08