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practicefinalMC-1 - SECTIONA:(50 Marks ANSWERALLQUESTIONS...

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1 SECTION A: Multiple Choice Questions: (50 Marks) ANSWER ALL QUESTIONS: 1. You are the manager of a monopoly that faces a demand curve described by P = 230 20Q. Your costs are C = 5 + 30Q. Your firm's maximum profits are A. 495. B. 475. C. 480. D. 415. 2. You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 120 6Q, where Q = Q 1 + Q 2 . The marginal cost associated with producing in the two plants are MC 1 = 2Q 1 and MC 2 = 4Q 2 . How much output should be produced in plant 1 in order to maximize profits? 3. You are a manager in a perfectly competitive market. The price is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5 Q 2 . What level of output should you produce in the short run? 4. Eric provides cheese (H) and milk (M) to the market with the following total cost function C(H, M) = 10 + 0.4 H 2 + 0.2M 2 . The price of cheese and milk in the market are $2 and $5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of milk maximizes profits? 5. Differentiated goods are not a feature of a A. perfectly competitive market. B. monopolistically competitive market. C. monopolistic market. D. perfectly competitive market and monopolistic market.
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2 6. One of the sources of monopoly power for a monopoly may be 7. Which of the following is true under monopolistic competition in the long run? 8. Consider a monopoly where the inverse demand for its product is given by P = 50 2Q. Total costs for this monopolist are estimated to be C(Q) = 100 + 2Q + Q 2 . At the profit maximizing combination of output and price, consumer surplus is 9. Two identical firms compete as a Cournot duopoly. The demand they face is P = 100 2Q. The cost function for each firm is C(Q) = 4Q. In equilibrium, the deadweight loss is: A. $128. B. $256. C. $384. D. $512. 10. Which firm would you expect to make the lowest profits, other things equal? 11. The market demand in a Bertrand duopoly is P = 15 4Q, and the marginal costs are $3. Fixed costs are zero for both firms. Which of the following statement(s) is/are true?
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