ECON 701 Midterm: Micro I August Prelim 2016_701
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This exam has 4 questions and a total of 100 points. Answer each question in a separate exam book. If you need to make additional assumptions, state them clearly. Good luck: (25 pts) the inverse demand function for oil is given by a continuously di erentiable function. R++ satisfying p 0 < 0 and p (x) ! 1 as x # 0: the price elasticity of the demand for oil is de(cid:133)ned at any x > 0 as e(x) := (cid:0) The total stock of oil below the ground is 0 < (cid:22)x < 1: it is all owned by one oil company, which can extract it at zero cost. Find a system of four equations this equilibrium must satisfy. Then compare xc when p1((cid:1)) = p2((cid:1)): is a competitive equilibrium satisfying xc. Find a sys- tem of four equations this outcome must satisfy. 2 ) is a monopoly outcome satisfying xm.
