Midterm Exam II with Answers - Principle of Microeconomics | ECN 001A, Exams of Microeconomics

Download Midterm Exam II with Answers - Principle of Microeconomics | ECN 001A and more Exams Microeconomics in PDF only on Docsity! University of California, Davis Key Department of Economics ECONOMICS 14 Spring 2010 Prof Scott E. Carrell Secont Midterm Exam Total points=125 points, ANSWER ALL QUESTIONS (90 points for Multiple Choice and 35 points for short answer) Last Name: First Name: Your Student ID Number: Please check your registered section number: AO] o Abhijit Talathi F 10:30A-12:30P o A02 Abhijit Talathi F 10:30A-12:30P a A03 Abhijit Talathi F 10:30A-12:30P o A04 Abhijit Talathi F 10:30A-12:30P O AOS ~ Tony Maghakian = R 11:00A-1:00P oO A06 Teny Maghakian R 11:00A-1:00P 0 AO7 Elira Kuka W 10:30A4-12:30P oO Ads Elira Koka - Ww 10:304-1 2:30P a ~ “A09 Teny Maghakian R 11:00A-1:00P Q Al0 Teny Maghakian .R.11:00A~-1:00P Oo All ElraKuka Ww 10:304-12:30P : ol Al2 “Bilira Kuka W 10:30A-12:30P Write your name (last name first), subject, date, and your registered section number in the boxes on the Scantron form.as illustrated below: Lastname, Fi 05/24/10 Your section (e.g., AOG)  12. Suppose a monopolistically competitive firm is producing 4000 units of output and has total revenues of $200,000. If this is a long run equilibrium, then it must be the case that a} marginal cost is $50 b) minimum average total cost is $50 total cost is $200,000 c Cy all of the above » When a monopolistically competitive firm advertises, we know for sure that 6) total fixed costs rise ) total variable costs rise ¢c) profits will increase d) none of the above are true 14. The flatter the slope of the total product curve, the A) larger is the marginal product of labor. Cian is the marginal product of labor. the lower the total fixed costs. d) the higher the total fixed costs. oe 1S.ina Lokts Hb kquilibriumsfirms:maximize profits by setting MR=MC in the-following, markets: a) Perfect competition b) Monopolistic competition. c) Monopoly. ‘d) SAL of the above. 16, The marginal cost (MC) curve intersects the a) ATC, AVC, and AFC curves at their minimum points. b) ATC and AFC curves at their minimum points. AVC and AFC curves at their minimum points. (oyre and AVC curves at their minimum points. 17. All the following are true for a perfect price discriminating monopolist, except: a) the market is efficient b) profits are maximized. c) consumer surplus is zero. dal of the above are true. 18. In total, a three firm oligiopoly who successfully colludes will produce the efficient quantity. (HYoroduce less than the efficient quantity. ¢) produce greater than the efficient quantity. d) none of the above are true. PART Il - SHORT ANSWER QUESTION 1. (15 pts) Suppose Star Wars action figures are produced in a perfectly competitive, constant cost industry that is shown below in a short-rmn (but not long run) equilibrium after a rightward shift in the demand curve. In the previous long-run equilibrium, 50 million figures were sold, and in the new long-run equilibrium, 70 million will be sold. $10 T T T 7 T 7 T T T 0 10 20 30 40 5Q 60 70 80 90 100 Millions of ‘Star Wars' Action Figures a) (5 points) What was the market price in the previous long-run equilibrium? In the current short-run equilibrium are the firms’ making positive, negative or zero economic profits? O33, S nib te . ® Profits = poss one (Positive, Negative, or Zero) @ b) (5 points) Draw the long-run industry supply curve ¢) (5 points) What will the price be in the new long-run equilibrium? Will firms be making Cy positive, negative or zero economic profits in the new long-run equilibrium? Ve 5 pa. 3 CA) Profits = ___ eero (Positive, Negative, or Zero) 2. (20 pts) Now suppose instead that Hasbro is the monopoly producer of Star Wars toys, The graph below shows both market demand and Hasbro’s marginal cost curve. $10 T T T coy T T 1 T I I \ i I i 1 { I fo $9 + Soto po rb peptone tog \ \ \ | \ I ne? ss KO aa fen pe ee pee ’ I | \ i i i } i | $7 + ~ Dk --L--4---b --4---L-}¢-- Il | | $6 SOT TT nT I j J | $3 Soh ap te I | { | $4 Wp ate ee 83 i i \ { $2 \ pppoe | bl ee i | x\ | 8} pone BE i i 30. 40500 708000 Millions of ‘Star Wars’ Action Figures a) (8 points) Add Hasbro’s marginal revenue curve to the graph. Clearly label the MR, MC and Demand curves. * | OM y @ For lable py GP Por labels win (D Far abd S gD For drwirg mie correc b) (6 points) How many tedion figures will be sold? At what price? (> Go mleorn Sold P= ¢) (6 points) On the graph above, clearly label consumer surplus, producer surplus, and dead weight loss when Hasbro is a monopoly. FE/ C5 CEE Sy GAs D GD pa