03 Jun Question Clearly identify your name and ID in both, the question
Question
Clearly identify your name and ID in both, the question sheet and exam book, and submit both.
Show your answers only in the exam book. Any writing in the question sheet will not be read for grading.
Answer All.
Each question is equally weighted of 10 marks.
60 minutes in length
Questions:
1. Suppose a firm in Toronto has two markets with the following demand curve for each market,
P 1=100 ?
Q and P2=$60, and the marginal cost of this firm is MC=2Q. Discuss the best pricing policy for this firm to
maximize its profit.
2. Suppose the market demand for a particular product is given:
P= 10 – 0.002Q, and the industry marginal cost is MC=4+0.001Q.
Compare the welfares between the market structures of perfect competition and monopoly.
3. The production function is f (L, M) = 4
, where L is the number of units of labor and M is the
number of machines. If the amounts of both factors can be varied and if the cost of labor is $36 per unit and
the cost of using machines is $4 per machine, then
a.
Compute the total cost of producing 24 units of output.
b.
Compute the amount of output if cost constraint is limited $432.00
4. Suppose the cost function for a perfectly competitive firm is given that: TC = 100 + q 2. Market
demand is Q = 10,000 – 100p.
a.
b.
c.
What could be the profit when the industry is in a long-run equilibrium position?
How many identical firms will there be in the long-run position?
Derive the long-run industry supply curve.
5. A monopolist faces the following demand curve: Y=50-0.5P, has the cost function that C=100+4Y,
where Y is the quantity of the product, and the price elasticity of demand is currently -3.
a.
b.
Compute the profit maximum level of price and quantity.
Compute the size of markup.
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