ECO100Y5 Study Guide - Midterm Guide: Nominal Interest Rate, G4S, Gdp Deflator

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ECO100Y5 Full Course Notes

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Except the diagram in question 7, any part of your answers done in pencil will not be eligible for appeal. Do not use red-coloured pen or pencil in your answers. Show calculations in every part of question 6. You must relate your explanation in question 7 to your diagrams for full marks. Only put your answers to questions 6 and 7 in the designated page(s), and do not separate any page from this test. Page 1 of 3: suppose econland produces only two products, and , and the citizens there also only consume these two products. Make sure you check all your calculations carefully because no step marks will be given. (30 marks) (a) the table below lists the prices and quantities of these products for the period 2008-2010. Use 2008 as the base year to complete the table below. (11 marks) 62. 5% (b) suppose the typical consumption basket has and .

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1. Assume every buyer purchases only one unit of a product, which forms the market demand P = 650 - 20. The monopoly firm has constant marginal cost at 50 and zero fixed cost. You may find it useful to draw your diagram in part (d) as you work through this question. 1. (a) Show your step-by-step calculations of the profit-maximizing output Qs and price Ps, profits Ts, consumer surplus CSs, producer surplus PSs, and deadweight loss DWL, if this monopoly firm is the least powerful type of monopoly. (18 marks) ls 150 Ps 350 TS 45,000 CS 22,500 PS 45,000 DW Lộ 22,500 1. (b) Show your step-by-step calculations of the profit-maximizing output Qp, profits tip, consumer surplus Sp, producer surplus PSp, and deadweight loss DWLp if this monopoly firm is the most powerful type of monopoly. (15 marks) Op 300 Tp 90,000 0 PSp 90,000 DWL, 0 1. (c) Use your results to explain the trade-off between efficiency and equity when there is only one firm serving all the consumers in the market and it is not regulated by the government to protect the interests of the consumers. (7 marks) 1. (d) Plot all your results in a properly labeled diagram. (5 marks) 650 P = 350 MR D = MRP MC = AC Qs = 150 Qp = 300 = Qc Q

Question 1 (1 point) Question 1 Unsaved In a competitive market the equilibrium price is determined: Question 1 options: at the intersection of the firmâs demand and the market supply curves. at the intersection of the market demand and supply curves. at the intersection of the firmâs demand and marginal cost curves. so as to cover the costs of the potential firms. so as to cover the costs of the firms currently in the industry. Save Question 2 (1 point) Question 2 Unsaved If the perfectly competitive market demand for gym shoes is given by QD = 100 â P and the market supply is given by QS = 10 + 2P, then the equilibrium price and quantity will be: Question 2 options: P = 50 and Q = 50. P = 40 and Q = 90. P = 40 and Q = 60. P = 30 and Q = 70. P = 25 and Q = 75. Save Question 3 (1 point) Question 3 Unsaved A constant-cost industry is one in which: Question 3 options: input prices do not change over time. technology does not change over time. input prices and technology do not change as firms enter or exit the industry. input prices and technology do not change over time. firms have reached the maturity phase of the industryâs life cycle. Save Question 4 (1 point) Question 4 Unsaved At the profit-maximizing level of output for the monopolist: Question 4 options: total revenue is equal to total cost. total costs are minimized. total revenue is maximized. marginal revenue is equal to marginal cost. average revenue is equal to average cost. Save Question 5 (1 point) Question 5 Unsaved Craigâs Red Sea Restaurant is the only restaurant in Columbia, South Carolina, that sells Ethiopian food. The demand for Ethiopian food is given by Q = 25 â P. Craigâs costs are given by TC = 25 + Q + 5Q2. Its maximum monopoly profit is: Question 5 options: â$1. $21. $22. $24. $26. Save Question 6 (1 point) Question 6 Unsaved So long as price exceeds average variable cost, in the model of monopolistic competition, a firm maximizes profits by producing where: Question 6 options: the difference between marginal revenue and marginal cost is maximized. marginal cost equals marginal revenue. marginal revenue equals price. the difference between price and marginal cost is maximized. price equals marginal cost. Save Question 7 (1 point) Question 7 Unsaved If a firm in a monopolistically competitive industry is profit maximizing, it should choose its level of advertising such that the marginal revenue of an additional dollar of advertising: Question 7 options: is equal to the elasticity of its demand curve minus 1. is exactly $1. increases revenues by $1. is equal to 1 plus the elasticity of its demand curve. is equal to the elasticity of its demand curve. Save Question 8 (1 point) Question 8 Unsaved Firms advertise in order to: Question 8 options: build brand loyalty. appeal to the price-sensitive consumers. increase the demand elasticities of their loyal customers. shift the market supply curve to the left. shift the market demand curve to the left. Save Question 9 (1 point) Question 9 Unsaved Firms offer promotions in order to: Question 9 options: build brand loyalty. appeal to the price-sensitive consumers. increase the demand elasticities of their loyal customers. shift the market supply curve to the left. shift the market demand curve to the left. Save Question 10 (1 point) Question 10 Unsaved If the demand increases for the product of a decreasing-cost industry: Question 10 options: short-run price goes up, but long-run price falls. long-run output goes up, but long-run price may go up or down. short-run output goes up, but long-run output may go up or down. long-run output goes up, but short-run price remains constant. long-run price goes up, but short-run price may go up or down. Save Question 11 (1 point) Question 11 Unsaved If the demand increases for the product of an increasing-cost industry: Question 11 options: short-run price goes up, but long-run price falls. long-run output goes up, but long-run price may go up or down. short-run output goes up, but long-run output may go up or down. long-run output goes up, but short-run price remains constant. short-run price goes up, and long-run price goes up. Save Question 12 (1 point) Question 12 Unsaved When Pan United Airlines gives a $400 fare discount to persons with student IDs, they are practicing: Question 12 options: first-degree price discrimination. second-degree price discrimination. third-degree price discrimination. markup pricing. tying. Save Question 13 (1 point) Question 13 Unsaved When a utility charges homeowners less than big industrial users, it is practicing: Question 13 options: first-degree price discrimination. fourth-degree price discrimination. third-degree price discrimination. markup pricing. tying. Save Question 14 (1 point) Question 14 Unsaved Cereal manufacturersâ use of coupons can be partially explained by: Question 14 options: first-degree price discrimination. second-degree price discrimination. third-degree price discrimination. markup pricing. tying. Save Question 15 (1 point) Question 15 Unsaved If a firm supplies separable markets with price elasticities h1 and h2, it should set prices P1 and P2 so that: Question 15 options: P1h1 = P2h2. P1 /h1 = P2 /h2. P1(1 + 1/h1) = P2 (1 + 1/h2). P1/(1 â 1 /h1) = P2 / (1 â 1/h2). P1 = 1 â 1/h1 and P2 = 1 â 1/h2. Save Question 16 (1 point) Question 16 Unsaved If a firm supplies separable markets with price elasticities h1 = â3 and h2 = â2, it should set prices P1 and P2 so that: Question 16 options: P1 = P2. 3P1 = 2P2. 2P1 = 3P2. 2/3P1 = 1/2P2. 2P1 = 2/3P2. Save Question 17 (1 point) Question 17 Unsaved Women are often charged more than men for haircuts performed by the same haircutter. This is not considered price discrimination because: Question 17 options: women receive more consumer surplus from haircuts than men receive. haircutters claim to spend more time on womenâs hair, raising the cost of the haircut to the firm. firms make up the extra cost to consumers by giving women free samples of products. men receive more consumer surplus from haircuts than women receive. women have a lower price elasticity of demand for haircuts. Save Question 18 (1 point) Question 18 Unsaved If price is above the average variable cost but below the average total cost of a representative firm in a competitive industry: Question 18 options: there will be entry to the industry over time. there will be exit from the industry over time. the firms in the industry are just earning a normal rate of return. the firms in the industry are earning a supranormal rate of return. the industry is in long-run equilibrium. Save Question 19 (1 point) Question 19 Unsaved Joeâs T-shirts has costs given by TC = $100 + 3Q, where Q is the number of shirts. If Joe charges $5 each, the percentage markup for 100 shirts is: Question 19 options: 20%. 25%. 33%. 50%. 67%. Save Question 20 (1 point) Question 20 Unsaved In the model of monopolistic competition, there can be short-run: Question 20 options: losses or profits, but there must be profits in long-run equilibrium. profits, but there must be losses in long-run equilibrium. losses or profits, but there must be losses in long-run equilibrium. losses or profits, but there must be neither profits nor losses in long-run equilibrium. losses, but there must be profits in long-run equilibrium.

An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is an average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Price ($)	Quantity
Price ($)	Adults	Children
5	15	20
6	14	18
7	13	16
8	12	14
9	11	12
10	10	10
11	9	8
12	8	6
13	7	4
14	6	2

Calculate the price, quantity, and profit if: The amusement park charges a different price in the adult market

Please express your answers for Price and Profit in whole dollars (i.e.10.00)

Please use whole numbers for Quantity (i.e. 10, 27, 4)

*Price*	*Quantity*	*Total* *Revenue*	*Marginal* *Revenue*	*Marginal* *Cost*	*Total* *Cost*	*MR-MC*	*Profit*
	6	84		5	30		34
13		91	7	5	35	2	56
12	8	96	5	5	40	0
	9	99	3	5	45	-2	54
10		100	1	5	50	-4	50
9	11	99	-1	5	55	-6
	12	96	-3	5	60	-8	36
7		91	-5	5	65	-10	26
6	14	84	-7	5	70	-12
5	15	75	-9	5	75	-14	0

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ECO100Y5 Study Guide - Midterm Guide: Nominal Interest Rate, G4S, Gdp Deflator

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