Give correct answers please...
Problems 1. A monopoly faces a market demand curve given by P = 42 - Q. Its marginal cost curve is given byMC = Q. a. What is the equation for the marginal revenue? Show this on a graph. Find the profit-maximizing level of production for this monopolist. What price will the monopolist charge? What price and quantity would be socially optimal? What is this monopolist' s total revenue? Graph the producer surplus, the consumer surplus, and the deadweight loss for the market with the monopolist. rhopur!!!' 2. True or False: A monopolist can always make a positive prot. 3. True or False: A firrnin perfectly competitive market will always earn zero economic profit. 4. Suppose a monopolistic local utility company faces a demand curve givenby P = 120 - 4Q. Total cost for this rm is given by TC = 400 + 41.1. and MC is fixed at $4 per urlit. a. Does the technologyr of a firm represent economies of scale? b What is the fixed cost? Does this indicate high barriers to entry? c What is the socially optimal level of production and price? d. Suppose this industry operates as amonopoly. Find the equilibrium price and quantity. e. The government, bowing to public pressure to regulate monopolies, decides to nrce rms to charge their marginal cost just like they would in perfect competition. How much will the monopolist produce? What is the profit for this monopolist? f. Suppose the government instead chooses to force the monopolist to charge a price equal to their average total cost, this monopolist will supply 25 units. What will be their prots? ECON 101: Principles of Microeconomics - Discussion Section Week 12 TA: Kanit Kuevibulvarlich Practice Questions for Midterm 2 1 Demand-su l and International Trade Montrovia is a small. closed economy that produces tires The domestic demand and domestic supply of tires in Montrovia is given by the following equations where P is the price per unit and Q is the quantity of tires: Domestic Demand: P = 500 - {5f1000}Q Domestic Supply: P = 100 + {If 500]Q You are also told that the world price for tires is $1.50 per tire. Suppose Montrovia opens its tire market to international trade while simultaneouslyr the government of Montrovia implements a tariff that raises the price per tire to $130. Holding everything else constant, the amount oftariff revenue the government earns from this tariff will equal? a. $511,000 b. $16,111] c. $2,330,000 d- $143me 2} Elasticity Which of the following statements is false? a. If Andrew's income elasticity of demand for good X is equal to zero, Andrew's demand for good X would not be affected if he suddenlyloses his job. b. For Mary, honey is a substitute for sugar. Then. her cross-price elasticity of demand for honey and sugar must be positive. c. The lntemet has made it easier for people to search for a large number of products on websites like eBay and Amazon. This should result in a higher price elasticity of demand for many goods. cl. For John. apples are an inferior good. Then, his income elasticity of demand for apples must be positive. 3} Elasticity and Taxation The market for telephones is in equilibrium when the government decides to levy an excise tax of $5 per telephone on consumers. If at the irlitial equilibrium point consumer demand is inelastic and producer supply is urlit elastic, which of the following could describe the tax incidence? Consumers pay HIT}: of the tax incidence. Consumers pay 2094': and producers pay 80% of the tax incidence. Consumers pay 00% and producers pay 20% of the tax incidence. . Consumers pay 0% of the tax incidence. an .u's 7) Production and Cost Suppose the marginal cost curve is increasing. If at a quantity q" the marginal cost curve is above the average total cost curve, we can conclude that: a. q" is larger than the quantity at which the average total cost curve achieves its minimum. b. q" is smaller than the quantity at which the average total cost curve achieves its minimum. At q* the average total cost curve has a negative slope. d. At q* the marginal cost curve has a negative slope. 8) Production and Cost Suppose that when a firm triples all of its inputs, it doubles the amount of output it produces. Then this firm . Is experiencing increasing returns to scale. b. Is experiencing decreasing returns to scale. C. Is experiencing constant returns to scale. d. Is experiencing diminishing marginal returns. 9) Perfectly Competitive Market Pizza and beer are complementary goods for consumers in a local market. The beer industry, which has constant marginal cost, is perfectly competitive and is now in long run equilibrium. If the market price of pizza permanently decreases, which of the following statements is correct about the beer market in the short run? a. The market price of beer falls and each firm produces less beer. b. The market price of beer does not change, but the quantity increases because new firms enter the beer industry. C. The market price of beer does not change, but the quantity decreases because some firms exit the industry. 1. The market price of beer rises and each firm produces more beer. 10) Monopoly A B C E D MC = ATC MR From the information in the above figure we can say that: a. Monopoly revenues are given by the area BCQ,O. b. The deadweight loss in this market is given by the area CEF. c. The total profit for this monopolist is given by the area BCED. d. All of the above.7. Nesli has $1000 income per month which she spends on fitness classes and all other goods (i.e., a composite good whose price is equal to $1). Her preferences are given by U(f, c) = fl/c/4, where f is the amount of fitness classes and c is the amount (of money) she buys of the composite good (the price of the composite good is $1). The fitness centre she attends has two plans. Non-members pay $10 per class and members pay $5 per class. Membership costs $100 per month. (a) Find her optimal bundle if she does not become a member.Problem 3 Consider an exchange economy in which there are two agents, A and B, and two goods, 1 and 2. The two agents have preferences described by the real-valued utility functions u" ( x x) =alexi + (1 -@) Inx2. and u B(x1, x5) := (1 -@) Inx, +alnx2, where a e (1/2, 1). Suppose that consumers start with initial endowments (wi , w; ) = (wf , w;) = (1, 1). The agents have agreed to share their resources. They have also agreed that the weight that A receives in the economy is yA E (0, 1), and the weight that B receives is y8 := 1 - YA. Note: For this problem, feel free to be loose and ignore the fact that the natural logarithm function is not defined at zero.] Q.1 For every weight yA 6 (0, 1), find the allocation which would maximize the social surplus given the weights; that is, we are interested in finding the allocation ((xA, x4). (xP, x;)) which maximizes the sum YAU (x4, x4 ) + (1 - YA)UB( xP. x2 ) subject to the resource constraints of the economy
