Quiz 4 F2000 - P 1 = 20-Q 1 and in the other P 2 = 15-...

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Economics 2G03/2X03 Fall 2000 Quiz 4 Total Marks=45 Instructor: Fred Aswani November 15 th 2000 Part A . Each question is worth 5 Marks 1. A natural monopoly is always characterized by a. A downward sloping long run average cost curve b. A downward sloping marginal cost curve c. Economies of scale d. All of the above e. a and c 2. A monopolist has a marginal revenue curve given by MR= 102 -y, and a total cost curve given by TC = y 2 + 16. The monopolist's profit maximizing price and quantities are a. 85, 34 b. 52, 50 c. 100, 2 d. 77, 50 3. A monopolist faces a demand function y= 10-p and has a total cost function TC=2y. Calculate the dead weight loss associated with the monopolist. a. $64 b. $16 c. $8 d. $32 e. $12 4. A profit maximizing monopolist faces the following information: P= $4, MR=$2, MC=$1.50. The firm should a. Shut down b. Increase output c. Decrease output d. Stay at its current level of output
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Part B. 5. A monopolist firm sells its goods in two markets. Its demand curve in one market is:
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Unformatted text preview: P 1 = 20-Q 1 and in the other P 2 = 15- (3/2)Q 2 and its total cost: C=6Q where Q = Q 1 + Q 2 . What quantities will it sell in each market and what prices will it charge in the two markets? (10 Marks). 6. A profit maximizing chain of video stores holds an exclusive license to rent out the movie " Steamy Nights in North Bay", of which it holds multiple copies. It discovers that the demand curve for daily rentals in North Bay is different from the demand curve in Hamilton. Specifically, the demand functions it faces are P 1 =500-Q 1 P 2 =700-Q 2 Where P 1 and P 2 denote the prices per rental, Q 1 and Q 2 are the numbers of rentals, and subscript 1 refers to North Bay and subscript 2 to Hamilton. The stores total costs are C=1000 + 0.5Q 2 a. Find P 1 , Q 1 , P 2 and Q 2 (8 Marks) b. Calculate total profits (2 Marks) c. Show that a higher price is charged in the market where demand is less elastic (5 Marks)...
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Quiz 4 F2000 - P 1 = 20-Q 1 and in the other P 2 = 15-...

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