Section 1 - in the town. 5. Name the three conditions...

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EEP 101/Econ 125 Section 1 Diana Lee Spring 2010 1 Review: Short answer 1. Consumer surplus is the area (above/below) the price and (above/below) the (supply/demand) curve. 2. True or False: Under a monopsony with a linear supply function, the slope of the marginal outlay curve is twice that of the supply curve. 3. Suppose supply and demand are linear. The equilibrium quantity under a middleman is (more/less/ambiguous) than the quantity under perfect competition. The equilibrium price under a middleman is (more/less/ambiguous) than the price under perfect competition. 4. Newbie is a town with one company which only produces soda, and all Newbie residents work at that company. This company is an example of a (monopolist/monopsonist/middle man) because it (buys/sells) all the _______________
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Unformatted text preview: in the town. 5. Name the three conditions necessary for the main welfare theorem to hold. 2 Review: Math Example 1. Suppose the inverse demand function is given by Q = 200 - 2P and the supply function is given by P = 50 + Q. Find the market equilibrium price and quantity. For all sections except for Friday 1-2, we changed the problem to be P=200-2Q for inverse demand and supply as Q=50+P. The solutions reect the latter problem. As is, the rst function is actually a demand function (since quantity is a function of price). My apologies. 2. Calculate the consumer surplus and producer surplus. 3. Calculate the deadweight loss. 4. Now suppose the market is operated by a monopolist. Find the new equilibrium price and quantity under a monopolist. 1...
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