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Answers.TEST2.A04aaaa.2008 - 1 ECMA04H Second Term Test...

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ECMA04H Second Term Test – November 15, 2008 Time: 90 minutes Professor Gordon Cleveland Version A 1. The shut down price occurs at P = min AVC. AVC = .5q + 2 + 32q -1 . At 8 units of output, AVC reaches its min at a price of \$10. The correct answer is (D). 2. MC = 2 + q. The short-run industry supply curve is P = 2 + .005Q. Together with the demand curve this puts short-run equilibrium at Q = 4000 and P = \$22. The correct answer is (E). 3. Each firm produces 20 units of output. The profit is \$72. The correct answer is (G). 4. In the long run, the industry supply curve in this constant cost industry is horizontal at P = 18. Given the demand curve, the total industry output is 5000 units. The correct answer is (E). 5. Given that, in the long run, each firm is at q = 16, the increase in the number of firms is, rounding up, 113. The correct answer is (D). 6. If technological change changes the long run supply curve to P =10 and the optimum size of a firm to 14 units of output, there will be 500 firms in the long run. The correct answer is (F). 7. In a monopoly industry, entry is blocked, the monopolist only produces in the elastic section of the

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Answers.TEST2.A04aaaa.2008 - 1 ECMA04H Second Term Test...

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