1.Consider a market where: Consumer surplus is 250; Producer surplus is 125.

If  both  consumer  surplus  and  producer  surplus  are  maximized,  whatis  the  amount  of the deadweight loss? ___(round your answer to the nearestpenny)

Next, suppose that consumer surplus falls to 190, but producer surplus rises to 145. Whatis the change  in  welfare?__(round  your  answer  to  the  nearestpenny  and  add  the  minus  sign ifnecessary).

You can conclude that __ the competitive output is being produced.

2．A typical firm in long-run equilibrium in an industry with identical firms has a cost function given by c(q)=3600+2q^2, What is the equilibrium price?

The equilibrium price is $__. (Enter your response rounded to two decimal places.)

3. Should a firm shut down if its weekly revenue is $1000, its variable cost is $800, and its fixed cost is $1,200, of which $550 is avoidable if it shuts down? Why?

The firm should

A. shut down because variable costs are less than fixed costs.

B. produce because revenue is positive

C. shut down because revenue of $1,000 is less than fixed costs.

D. shut down because revenue of $1,000 is less than avoidable costs.

E. produce because revenue of $1,000 is greater than variable costs.

4. Mister Jones was selling his house. The asking price was 220,000, and Jones decided he would take no less than 20,000. After some negotiation, Mister Smith purchased the house for S205,00. Smith's consumer surplus is

A. $5,000

B. $20.000

C. $15,000

D. not able to be calculated from the information given\

5. Firms might vertically disintegrate when

A. the industry becomes too large to support itself.

B. the industry shrinks in size.

C. it becomes more profitable for a firm to specialize

D. the IRS cracks down on transfer pricing.

6. If a short-run fixed cost is sunk. then

A. losses can be minimized by shutting down

B. the firm should keep producing to cover the sunk cost

C. the cost cannot be avoided by shutting down

D. Both b and c

7. Initally, the market pnce is p= 16, and the competitive firm’s average variable cost is 17, while

its average cost is 20

Should it shut down? Why?

This firm should

A. shut down because average cost is greater than the market price

B. not shut down because average fixed cost is less than the market price

C. shut down because average variable cost is greater than the market pnce

D. not shut down because average cost is greater than average variable cost

E. shut down because average fixed cost is less than the market price

8.The figure at right shows the market demand curve for mobile telecommunications (time spent on a mobile phone). At the current price of $0.35 per minute, consumer surplus equals

A.$1,225.50

B.$301.00

C.$924.50

D.$1,250.00

9. Producer surplus equals

A. profit plus fixed cost

B. total revenue minus the sum of all marginal cost

C. total revenue minus total variable cost

D. All of the above

10. Assume a firm faces two customers in the market. Customer 1 has an inverse demand of p=110-q1, and Customer 2 has an inverse demand of. p=200-q2 ·

Marginal cost per unit is constant and equal to $40. Determine the profit-maximizing price and identical lump-sum fee charged to these two customers.

For the following questions, assume the firm will always sell to both customers.

The profit-maximizing price is $ __(Enter a numeric response using a real number rounded to two decimal places.)

The lump-sum fee is $ __(Enter a numeric response rounded to the nearest penny.)

11. Suppose a monopoly's price is $210.00 and its marginal cost of production is $126.00. What is the firm's markup?

The monopoly's markup is __percent.(Enter a numeric response using a real number rounded to two decimal places.)

What is the firm's elasticity of demand?

The monopoly's price elasticity of demand is ε = __  ( Enter a numeric response using a real number rounded to two decimal places.)

12. Which of the following explains why two-part pricing causes customers who purchase few units to pay more per unit than customers who buy more units?

A. Customers who purchase few units payalarger per-unit price than those customers who buy more units.

B. The average per-unit price is constant while the average lump-sum fee decreases as the quantity purchased increases.

C. Customers who purchase few units pay alarger lump-sum fee than those customers who buy more units.

D. The average lump-sum fee is constant while the average per-unit price decreases as the quantity purchased increases.

13. A monopoly sells two products, of which any given consumer wants to buy only one (and places novalue on the othergood -ie.uncorrelated reservatin prices) If the monopoly can prevent resale, can itincrease its profit by bundling the goods, forcing the consumers to buy both goods? With bundling, the monopoly's profits

A. will notincrease because it cannot charge more for the bundle than for the valued good.

B. will increase because consumer reservation prices for the two goods are negatively correlated.

c. will  not  increase  because  consumer  reservation  prices for the two  goods  are  positively correlated.

D. will increase because twill cost less to produce both goods jointly.

E. will increase because the bundled price equals the combined values of the two goods.

14. You are given the following: Cost = 0.5q^2 +20q+F；   Marginal Cost = dC/dq=1.0q+20, and p=100-2q, where q = output and F =fxed costs =$300. Determine the proft-maximizing price and output foramonoply.

The profit-maximizing output level occurs at __units of output (enter youransweras a whole number).

The profit-maximizing price is $__ (roundyouranswer to the nearestpenny.

The profit per unitis $__ (roundyouranswer to the nearest penny).

15. Lf a monopoly faces an inverse demand curve of p=210-Q, has a constant marginal and average cost of $90, and can perfecly price discriminate, whatis its proft? What are the consumer surplus welfare, and deadweight loss? How would these results change if the firm were a single- price monopoly? Profit from perfect price discrimination ( ) is $__ (Enter your response as a whole number, Corresponding consumer surplus is (enter yourresponse as whole numbers):

CS=$__welfare is W=$__and deadweight loss is DWL=$__

Pofit fom single-pice profit-maximiztion is =__.(Enter yrresponse as a whole number.) Corresponding consumer surplus is (enter your response as whole numbers)

CS =$__welfare isW=$__and deadweight loss is DWL=$__

16. A firm has the following cost and marginal cost functions:C (q)=36+q2       and MC =2q.

What is the minimum efficient scale?

The minimum efficient scale occurs at __ units of output (enter your response as a whole number ).