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Sample Exam 3 - Econ102 Principles of Microeconomics Sample...

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Unformatted text preview: Econ102: Principles of Microeconomics Sample Exam 3 1. Consider the following information about a firm’s costs: a. Fill in the blank columns for Total Cost, Average Total Cost, and Marginal Cost. b. Sketch the firms ATC and MC curves on the same graph. c. Suppose the firm operates in a perfectively competitive industry where the price is $11.50. How many units of output would the firm produce? What is the firm’s profit? What if the price falls to $9.50? 1 Econ102: Principles of Microeconomics 2. Figure: Payoff Matrix I for Blue Spring and Purple Rain Using the payoff matrix above: a. Define dominant strategy. b. Define Nash equilibrium. c. Does Blue Spring have a dominant strategy? Does Purple Rain? Briefly Explain. d. What is the Nash Equilibrium of this game? 2 Econ102: Principles of Microeconomics 3. The following table depicts the daily output, price, and costs of the only dry‐cleaner located near the campus of a small college town in a remote location. The dry cleaner is effectively a monopolist. Output (suits cleaned) 0 1 2 3 4 5 6 7 8 Price per Suit ($) 8.00 7.50 7.00 6.50 6.00 5.50 5.00 4.50 4.00 Total Costs ($) 3.00 6.00 8.50 10.50 11.50 13.50 16.00 19.00 24.0 a. Calculate the dry cleaner’s total revenue and total profit at each output level. What is the profit maximizing level of output? b. Calculate the dry‐cleaner’s marginal revenue and marginal cost at each output level. Based on marginal analysis, what is the profit maximizing level of output? c. Graph the demand function, the marginal revenue curve, the marginal cost curve and the average total cost curve and show the equilibrium price and output. 3 Econ102: Principles of Microeconomics 4. The Best Computer Company just developed a new computer chip, on which it immediately acquires a patent. a. Draw a diagram in which you label the consumer surplus, producer surplus, and total surplus in the market for this new chip. Write down what these areas are in a table next to your diagram. b. In a new graph or in the graph from part (a), show what happens to these three measures of surplus if the firm can perfectly price discriminate. In the table from part (a), include another column indicating the new consumer surplus, producer surplus, and total surplus areas. What is the change in deadweight loss? What transfers occur? Explain for full credit. 4 Econ102: Principles of Microeconomics 5. Why does a typical monopolistically competitive firm face a downward‐sloping demand curve? 6. Use a graph to demonstrate why a profit‐maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint. 5 ...
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