ECON 2510 Name_____________
Exam #2 April 29, 1999
1. How many feet in a mile? _________________
2. Currently, a new patent is good for _________ years.
Answer four (4) of the following six (6) questions.
1. Why is the equality of marginal revenue and marginal cost essential for profit
maximization (or loss minimization) in all market structures? How does the determination
of price vary in different markets structures?
2. How does monopolistic competition differ from pure competition in its basic characteristics?
From pure monopoly? Explain what product differentiation may involve. Explain
how entry of firms into its industry affects the demand curve facing a monopolistic
competitor and how its economic profit is affected.
3. The following data is for a purely competitive producer:
|
Total Product |
Average Fixed Cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
|
0 |
|
|
|
|
|
1 |
$60.00 |
$45.00 |
$105.00 |
$45 |
|
2 |
30.00 |
42.50 |
72.50 |
40 |
|
3 |
20.00 |
40.00 |
60.00 |
35 |
|
4 |
15.00 |
37.50 |
52.50 |
30 |
|
5 |
12.00 |
37.00 |
49.00 |
35 |
|
6 |
10.00 |
37.50 |
47.50 |
40 |
|
7 |
8.57 |
38.57 |
47.14 |
45 |
|
8 |
7.50 |
40.63 |
48.13 |
55 |
|
9 |
6.67 |
43.33 |
50.00 |
65 |
|
10 |
6.00 |
46.50 |
52.50 |
75 |
At a selling price of $32 will this firm produce in the short-run? Explain. What
will its total revenue
and costs be? What will it's per unit costs and revenue be? What if the selling
price is $41? What
would be the short run supply curve for the prices o$26, 32, 38, 41, 46, 56, and
66?
4. What is natural monopoly? Why is it hard to regulate a monopoly? What kind of
choices are there for society to address the problem of a natural monopoly?
5. What are the arguments for and against a minimum wage? How does the concept of
marginal revenue product apply to your discussion? As appropriate, identify pro
and con arguments.
6. What is an oligopoly? Why is it prices in this type of market tend to be stable
(without any evidence of collusion)? How is the cartel model different?