testDEC13.2007

# testDEC13.2007 - 1 ECMC02H3 Final Exam Professor Gordon...

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2 PART I - 25 Multiple Choice Questions – 3 marks each. 1-3. There are a group of 20 citizens; 4 of them are 10 years of age, 4 are 30 years of age, 4 are 50 years of age, 4 are 70 years of age, and the final 4 are 90 years of age. A new video game is available on the market; each of the 20 citizens is willing to pay \$100 minus his or her age (in dollars) to get this video game and each will buy only one copy of the game. For example, the 10-year-olds are willing to pay \$90 for the game (\$100 - \$10), and so on. There is a single monopoly firm, which has a total cost of producing video games given by TC = 160 – 40Q, with Q representing the quantity of video games produced. You can use this information to answer questions 1 to 3. 1. If this monopoly firm charges the same price to all its customers (i.e., a single-price monopolist), how many customers will it serve in order to maximize profit? A) 0 B) 1 C) 2 D) 3 E) 4 F) 5 G) 6 H) 7 I) 8 J) 9 K) 10 L) 11 M) 12 N) 13 O) 14 P) 15 Q) 16 R) 17 S) 18 T) 19 U) 20 V) 21 W) 22 X) 23 Y) 24 Z) none of the above 2. If this firm is able to perfectly price discriminate, how many customers will it serve in order to maximize profit? A) 0 B) 1 C) 2 D) 3 E) 4 F) 5 G) 6 H) 7 I) 8 J) 9 K) 10 L) 11 M) 12 N) 13 O) 14 P) 15 Q) 16 R) 17 S) 18 T) 19 U) 20 V) 21 W) 22 X) 23 Y) 24 Z) none of the above 3. If this firm is able to perfectly price discriminate, what will be the amount of profit it earns when it is maximizing profit? A) \$0 B) \$10 C) \$20 D) \$30 E) \$40 F) \$50 G) \$60 H) \$70 I) \$80 J) \$90 K) \$100 L) \$110 M) \$120 N) \$130 O) \$140 P) \$150 Q) \$160 R) \$170 S) \$180 T) \$190 U) \$200 V) \$210 W) \$220 X) \$230 Y) \$240 Z) none of the above
3 4-6. In the competitive market for cut flowers, demand is given by P = 200 – 0.1Q and supply is given by P = 20 + 0.05Q. The government considers the equilibrium price (\$80) too low to support farmers continuing to produce this product. They would like the price of cut flowers to be \$120 per unit. They are considering a number of alternative policies to help producers. You can use this information to answer questions 4 – 6. 4. Assume that the government legislates a minimum price of \$120 and credibly enforces this minimum price, but that producers do not restrict their output to the amount that can be sold. Further, output is perishable (i.e., not storable). What is the amount of deadweight loss that results from the implementation of a minimum price?

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## This note was uploaded on 04/21/2011 for the course ECMC 02 taught by Professor Cleveland during the Fall '08 term at University of Toronto.

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testDEC13.2007 - 1 ECMC02H3 Final Exam Professor Gordon...

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