1. Suppose that the inverse demand curve facing a monopoly is given by: P = 500 - 10Q. The monopoly production costs are given by: C(Q) = 10Q2 + 100Q.

a. Find perfectly competitive (PC) equilibrium price and quantity.

b. Find monopoly equilibrium price and quantity.

c. Compare the perfectly competitive solution with the monopoly solution

d. Derive the Lerner Index

e. Derive the consumer surplus (CS) and producer surplus (PS). Also derive the deadweight loss.

Choose the most appropriate answers from the following questions

1. What does a backward bending Engel curve signifies?

a) A causal relationship from income to consumption of food

b) A causal relationship operating both ways

c) A relationship where food can become an inferior commodity at some level of income

d) Both (a) and (b)

e) Both (a) and (c)

2. A leftward shift in the demand as well as the supply curves will necessarily result in:

a) Increase in equilibrium quantity;

b) Decrease in equilibrium quantity;

c) Increase in equilibrium price;

d) Both (a) and (c);

e) Cannot be determined

3. For measuring economies of scale in a firm which of the following is not assumed?

a) Technology remains the same

b) Units of the products are the homogenous

c) Learning by doing

d) Factor prices remain the same

e) All of the above

4. With the change in the price of Good 1, the change in the quantity demanded for the Good 1 will be large or small (by adjusting the money income such that at new income level the old consumption bundle is just affordable) will depend on the

a) Shape of the indifference curve

b) Slope of the budget line

c) All of the above

d) None of the above

5. In the theory of firm, when the total productivity of the labour is maximum then the marginal productivity of the labour will be:

a) Maximum at that point

b) Minimum at that point

c) Zero at that point

d) Cannot say