Question 5 10 out of 10 ports Learning objective 5Distinguish between short and long run horizons and assess their consequence. Total = 5 points Gasoline is sold through local gasoline stations under perfectly competitive conditions. All gasoline station owners fare the name long-run average cost curve given by: AC - 0.01q-1+100/q The long-run marginal cost curve is given byt MC= 0.ooq-1 where q is the number of gallons sold per day. a. Write down the long-run equilibrium condition for the gas station industry. (4 points) B. How much gasoline will each individual gas station sell per day? (4 points) o. What are the long-run average cost and marginal cost at this output level? (2 points)Question 1 9.5 out of 10 points Learning objective 4: Distinguish different market structures and explain how each of them work. a. Why is the demand curve for a competitive firm horizontal? (a point) What does this imply about the charged price in relation to marginal revenue? (1 point) (Total = 2 points) b. Why is the demand curve for a monopoly downward sloping? (1 point) What does this imply about the charged price in relation to marginal revenue? (1 point) (Total = 2 points) e. A monopoly faces a market demand curve given by P - 70 - Q. Its marginal revenue function is given by MR - 70 - 20, If the monopoly's MC-6. What quantity will the monopoly choose to produce to maximize profit? (2 points) What is the price at this output level? (2 points) If the monoply's AC-MC-6, calculate the profit at the profit maximizing output level. (2 points) (Total = 6 points) Question 2 10 out of 10 points Learning objective 1: Explain how consumers make choices that maximize their utility given their limited income. Part B (Total = 6 points) Alya likes oriental sweets. Her utility function from eating Basbousa (B) and Kenafo (K) is expressed as: U (B, K) - B + K The prices of Bashouse and Kenafa are equal. Each are AED 3 per piece, a) Write down the MRS equation in terms of the marginal utility of each of the two sweets, assuming that Kenafa is on the x- asks (2 points). b) Calculate the MRS (2 points). c] Which of the two sweets provides Alya with more utility? Explain (2 points) dj If the price of each sweet is AED 4 per unit, write down the utility maximization condition. (2 points) "d) If Alya has an income of AED 24 to spend on both sweets and each sweet costs AED a per piece, how much of each sweet should she buy to maximize utility? (2 points)Question 3 Bout of 10 paints Learning objective 2: Analyze the process through which firms convert inputs into outputs. Imagine that the production function for tuna cans is given by: Q = 0.5K + L where Q - output of tuna cans per hour K= Capital input per hour L- Labor input per hout a. Using the above production function, write down the equation for the isoquant. (4 points) b. Calculate the RTS. (3 points) C. Assuming capital is fixed at K = 10, how much L. is required to produce So tuna cans per hour? (3 points) Question 4 Pout of 10 points Learning objective 6: Appraise how government intervention affects efficiency and welfare as well as differentiate between its positive and normative implications, Total - 5 points a, Define consumer surplus (2 points) and producer surplus (2 points). (Total = 4 points) b. Suppose the government intervenes in a competitive market and reduces quantity below the equilibrium level. How does this affect the price (2 points) and quantity (2 point ) of the good? (Total = 4 points) Does this intervention increase or decrease consumer surplus? Explain. (2 points]