Section A: Short Answers - True/False Answer four (4) of the following five (5) questions in this section as described for each question. Where appropriate, be sure to justify your responses along with showing the appropriate formulae, as no marks will be rewarded without justification. Each question is worth 5 marks. 1. Suppose a monopolist has and inverse demand function of p(y) = a - by, a cost function c(y)=cy so that is has a constant marginal cost equal to c per unit. This monopolist is currently operating where Eal = 3. If the government were to impose a per unit quantity tax of $6, by how much more does the price rise to consumers if the monopolist has constant elasticity demand curve instead of a linear demand curve? P(y) = a - by 2. Explain intuitively and show why a monopolist will never operate on the inelastic portion of the demand curve. 3. How do you know that firm supply is always on the upward sloping portion of the marginal cost curve? 4. Consider the requirement that shopping malls need a license to remain open 24 hours, where these licenses are in fixed supply. These licenses are however freely tradable among actual and potential owners, and the industry is perfectly competitive. If the average 24-hour shopping mall's annual revenue is $250,000, while the licenses may be leased at an annual fee of $100,000. Given this information, average variable cost for the industry would be $100,000. Is the preceding statement true or false? 5. Suppose an industry has 2 firms each with a supply curve of S(p)=2p-8, and 4 firms each with a supply curve of S(p) = p - 2. What is the industry supply curve