UNIVERSITY OF WATERLOO  Department of Economics  Professor J. Cuenca
Economics 201: Review Questions for the Final Examination
1.
A market with the following demand curve: P + 3X = 24
is supplied by a single profit
maximizing firm whose totalcost function is TC = 2X
2
+ 4X + 8. (a) What is the total
revenue equation for this firm? [Hint
: recall that TR = XP ]. (b) Calculate this firm's
equilibrium output and price [Hint
: MR = 6X + 24
and
MC = 4X + 4 ] AND DRAW A
DIAGRAM TO ILLUSTRATE YOUR ANSWER TO (b). Suppose now that the firm
introduces a price discrimination scheme, with a different price for each of the two halves
of the total equilibrium output. (c) REFER BACK TO YOUR DIAGRAM and find the
resulting increase in economic profits. [ Note
: assume that the increase in costs due to the
price discrimination scheme is insignificant ].
2.
A market's total demand is given by
P = 80  (Z/2).
This market is supplied by a
"dominant firm" and by other, relatively "small firms". The small firms' total supply is
given by
P = 4 Y.
The dominant firm's totalcost function is TC = (X
2
/20) + (17X/9) + 10
[ In case you have no calculus:
Marginal Cost = MC = (X/10) + (17/9) ].
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 Spring '09
 VANDEWAAL
 Economics, Monopoly, Supply And Demand, Equilibrium Output, Dominant Firm, price discrimination scheme

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