ECON 2510 Name: ____________________________________
Exam #2 April 23, 1998

1. A normal piano has ________________ keys.
2. The first President of the U.S. was _________________.
3. The capital of Nevada is ______________________.

Answer four (4) of the following six (6) Questions.

1. What are the key characteristics of pure competition. What is the role of each in the operation of the purely competitive model? What makes this model so useful?

2. What is an oligopoly model? Illustrate a kinked demand curve and how it can be used to explain the behavior of oligopolists.

3. Graphically illustrate and explain how each of the following would affect (a) marginal cost, (b) average variable cost, (c) average fixed cost, and (d) average total cost for a manufacturing firm:
1) Decrease in business property taxes
2) Increase in production worker money wages
3) Decrease in the price of electricity
4) Increase in insurance rates on plant and equipment
5) Increase in transportation costs.

4. The minimum wage is a frequent topic of debate and potential legislation. What are the arguments for and against it? What evidence is there to support these positions?

5. How can economies of scale create a natural monopoly? What does this mean and what may need to be done? What makes it difficult to regulate a natural monopoly?

6. Given the following information about a monopolistic competitor what should he produce what will his profits (losses) be? Explain how you arrive at this answer.