Unit 4 Exam - FRQ AP Microeconomics 1. The graph below shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), average total cost curve (ATC), and long-run average total cost curve (LRATC) for a monopolist. PRICE $60 $50 $40 $35 $30 $20 MC = ATC = LRATC $10 ID 8 10 12 QUANTITY MR (a) Using the numbers given in the graph, identify each of the following for the profit-maximizing monopolist. (i) The quantity produced (ii) The price (iii) The allocationy efficient quantity (b) At the profit-maximizing quantity from part (a)(i), is the monopolist experiencing economies of scale? Explain. (c) Now assume that the monopolist produces 10 units. Using the numbers given in the graph, calculate each of the following. Show your work. (i) The monopolist's economic profit (ii) The consumer surplus (iii) The deadweight loss (d) At what quantity is demand unit elastic? (e) Suppose the monopolist perfectly price discriminates and chooses the quantity that maximizes profit. Determine the dollar value of each of the following. (i) The monopolist's profit (ii) The consumer surplusAP Microeconomics Unit 4 Exam 1. As Assume that the gove excise tax on gasoline people comm Unit 4 Exam - FRQ AP Microeconomics 2. A typical profit-maximizing firm in a perfectly competitive constant-cost industry is earning a positive economic profit. (a) Is the market price greater than, less than, or equal to the firm's price? Explain. (b) Draw correctly labeled side-by-side graphs for both the market and a typical firm and show each of the following. (i) Market price and quantity, labeled Pm and Om (ii) The firm's quantity, labeled Or iii) The firm's average revenue curve, labeled AR (iv) The firm's average total cost curve, labeled ATC (v) The area representing total cost, shaded completely (c) If one firm in the market were to raise its price, what will happen to its total revenue? Explain. (d) Now suppose the market is in long-run equilibrium. The government gives a lump-sum subsidy to each firm producing in the industry. Indicate whether each of the following will increase, decrease, or remain the same. (i) The firm's quantity in the short run. Explain. ii) The market price and quantity in the long run. Explain. 3. Quicklunch High Price Low Price High Price $105, $110 $40, $130+ Breadbasket Low Price *$120, $80 $575, $70 (a) Does each shop have a dominant strategy to set a high price, a dominant strategy to set a low price, or does it have no dominant strategy? (i) Breadbasket (ii) Quicklunch (b) If the two shops do not cooperate on setting prices, what will be the profit for each shop? (i) Breadbasket (ii) Quicklunch (c) The town government is concerned that food prices are too high. It decides to give a daily subsidy of $20 to any shop that chooses to set a low price for its food items. Redraw the payoff matrix under the government subsidy system. Using your redrawn payoff matrix, answer each of the following. redrawn matrix. (i) Would Quicklunch choose to set a high price or a low price? Explain using specific values from your (ii) Would the profits for Breadbasket increase, decrease, or stay the same? Explain with a comparison t your answer in part (b)(i). Use the specific values