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

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1 ECMC02H3 Final Exam – December 13, 2007 Time: 3 hours Professor Gordon Cleveland ______________________________________ ____________________ Your name (Print clearly and underline your last name) Your student number This exam consists of multiple choice questions and short answer questions. There are 25 multiple choice questions, each worth 3 marks, which are to be answered on the front sheet of this exam in the spaces provided. If two multiple choice answers seem reasonable, choose the best possible answer. There are three short answer questions at the end of this exam paper. Space is provided to answer those questions directly on this exam paper. Your exam consists of 17 pages (counting this first page). Please count your exam's pages immediately and report any problems. FILL IN YOUR NAME NOW. 1. _______ 6. _______ 11. ________ 16. _______ 21. ________ 2. _______ 7. _______ 12. ________ 17. _______ 22. ________ 3. _______ 8. _______ 13. ________ 18. _______ 23. ________ 4. _______ 9. _______ 14. ________ 19. _______ 24. ________ 5. _______ 10. _______ 15. ________ 20. _______ 25. ________
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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
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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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