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Unformatted text preview: 1 ECMC02H Intermediate Microeconomics - Topics in Price Theory Answers to the Term Test – June 23, 2010 Version A of the test ______________________________________ ____________________ Your name (Print clearly and underline your last name) Your student number 1. _ O _________ 6. __ M ________ 11. _ L ________ 2. __ A _______ 7. ___ C_ ______ 12. __ O ________ 3. __ A ________ 8. ___ I_ ______ 13. __ L ________ 4. __ V_ _______ 9. ___ Q _______ 14. __ P_ _______ 5. __ F ________ 10. ___ L _______ 15. __ X ________ This exam consists of TWO PARTS, both of which are to be answered in this exam booklet. For the first part , there are 15 multiple choice questions, each worth 5 marks, which are to be answered on this front sheet of the exam . Each question should be answered by indicating with a BLOCK CAPITAL LETTER the alternative which is correct (if you feel that a question is ambiguous or that no one answer is entirely correct, pick the answer which you believe to be the "best" answer). You will receive 5 marks for each correct answer, 0 for each wrong or blank response (thus you will not be penalized for wrong guesses). For the second part , there are two short answer and graphical problems. You should answer both of these questions; they are worth a total of 25 marks. These problems are provided at the end of the multiple choice questions, and you are to answer them in the space provided. If you make mistakes and need to redo the question, or if you need extra space for your answers, you can use the back of the pages, but clearly indicate that you are doing this below the question. The exam is out of 100. Your exam consists of 11 pages . FILL IN YOUR NAME NOW. 2 PART I - 15 Multiple Choice Questions - 75 marks 1. A profit-maximizing monopolist charges a price of $10 to all its customers. The elasticity of demand is -4. What is the marginal cost of production for this monopolist? A) $0 B) $1 C) $1.50 D) $2 E) $2.50 F) $3 G) $3.50 H) $4 I) $4.50 J) $5 K) $5.50 L) $6 M) $6.50 N) $7 O) $7.50 P) $8 Q) $8.50 R) $9 S) $9.50 T) $10 U) $10.50 V) $11 W) $11.50 X) $12 Y) $12.50 Z) none of the above 2-5. A firm in a perfectly competitive constant cost industry has total costs in the short run given by: TC = 2.5q 2 + 5q + 40 where q is output per day and TC is the total cost per day in dollars. The firm has fixed costs of $30 (already included in the TC equation above). The TC equation generates minimum average costs of $25 (per unit) at q = 4. You are also told that this size firm generates minimum long run average costs (that is, minimum LRAC occurs at q = 4, with min LRAC = $25). In the short run, there are 400 firms in this industry. Questions 2 through 5 concern this firm and this industry....
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