Midterm 3 review problem set

# Midterm 3 review problem set - ECO303.03 Midterm 3 Review...

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ECO303.03 Midterm 3 Review Problem Set Multiple-Choice Questions Scenario 10.4: The demand for tickets to the Meat Loaf concert (Q) is given as follows: Q = 120,000 - 2,000P The marginal revenue is given as: MR = 60 - .001Q The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point. 1) Refer to Scenario 10.4. Given the information above, what are the profit maximizing number of tickets sold and the price of tickets? A) 0, \$60 B) 20,000, \$50 C) 40,000, \$40 D) 60,000, \$30 E) 80,000, \$20 Answer: D 2) Refer to Scenario 10.4. Suppose that the municipal stadium authority imposes a tax of \$10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would A) increase by \$10. B) increase by \$5. C) not change. D) decrease by \$5. E) decrease by \$10. Answer: B 3) A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is \$30 while the marginal cost in plant 2 is \$20. To maximize profits the firm will A) produce more output in plant 1 and less in the plant 2. B) do nothing until it acquires more information on revenues. C) produce less output in plant 1 and more in plant 2. D) produce less in both plants until marginal revenue is zero. E) shut down plant 1 and only produce at plant 2 in the future. Answer: C

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Figure 10.1 The revenue and cost curves in the diagram above are those of a natural monopoly. 4) Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at __________. A) P1 B) P2 C) P3 D) P4 E) none of the above Answer: B 5) Refer to Figure 10.1. Suppose that the government decides to limit monopoly power with price regulation. If the government sets the price at the competitive level, it will set the price at __________. A) P1
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Midterm 3 review problem set - ECO303.03 Midterm 3 Review...

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