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 demand curve (or at unit elasticity) and the monopolist always seeks to maximize profit (so MR=MC
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This note was uploaded on 06/11/2011 for the course ECMA 04 taught by Professor Cleverland during the Spring '09 term at University of Toronto- Toronto.

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

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