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ARE100ASP08MT3FINAL_vA_KEY

# ARE100ASP08MT3FINAL_vA_KEY - Name_KEY_UPDATED Last 4 digits...

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Name:_KEY______UPDATED 12/09/11____________________________ Last 4 digits of your Student ID Number:__________ Managerial Economics (ARE) 100A University of California, Davis, Spring 2008 Dr. John H. Constantine Final Exam Thursday, June 12, 1:00 p.m. – 3:00 p.m. (Exam “W”) 120 TOTAL POINTS NOTE: All work must be shown to receive any credit. Quadratic Formula : a 2 ac 4 b b 2 There are 11 pages and 7 problems. Please verify your exam as all pages.

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1 Problem 1 (22 points) : Problem 1 is continued on the following page. The market for product Q has many identical firms, each having the short-run total cost function: STC(q) = 900 + 10q + q 2 , where q is the firm’s annual output. We also know that the market demand curve for Q is given by: Q = 287.5 – 0.25P, where P is the market price. Each firm is currently earning zero economic profit. (a) Calculate numeric values for: (15 points.) (i) the market price, (ii) each firm’s output, (iii) the number of firms in the market. Since each firm is earning zero economic profit, we can find where P = SATC or min ATC. In either case: q = 30 and P = 70. This the yields the market level demand to be: Q = 287.5 – 0.25(70) Q = 270. Finally, the number of firm is given by: Number of firms = Q/q = 270/30 Number of firms = 9 (b) State the equation for the market-level supply curve. (7 points.) Each firm’s MC curve is given by: P = MC = 10 + 2q. We need to sum this equation across all 12 firms, but to do so, we need to state the equation in q- dependent form: q = – 5 + (1/2)P. Q = 9q = 9[– 5 + (1/2)P] Q = – 45 + 4.5P