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? A. 3. B. 6. C. 9. D. 12. 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? A. 5. B. 8. C. 10. D. 15. 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? A. 1.25. B. 12.5. C. 15. D. 20. 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 A. diseconomies of scale. B. differentiated products. C. patents. D. free entry and exit. 7. Which of the following is true under monopolistic competition in the long run? A. profits are always zero. B. P > MC. C. P = MR. D. all of the choices are true in monopolistic competition. 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 A. $32. B. $64. C. $128. D. cannot be determined with the given information. 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? A. Bertrand oligopolist. B. Cournot oligopolist. C. Sweezy oligopolist. D. Stackelberg leader. 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? A. P = $3. B. P = $10. C. P = $15. D. None of the statements associated with this question are correct.
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3 12. Consider a Cournot duopoly with the following inverse demand function: P = 100 2Q 1 2Q 2 . The firms' marginal cost are identical and given by MC i (Q i ) = 2Q i . Based on this information firm 1 and 2's marginal revenue functions are A. MR 1 (Q 1 ,Q 2 ) = 100 2Q 1 Q 2 and MR 2 (Q 1 ,Q 2 ) = 100 Q 1 2Q 2 .
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practicefinalMC-1 - SECTIONA:(50 Marks ANSWERALLQUESTIONS...

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