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Progress Test: SUBJECT: Microeconomics (ECO111) - Essay

This document contains an exam for a Microeconomics course. It includes 3 questions worth 60% of the final exam score. Question 1 involves calculating profit maximization for a monopolist given demand and cost curves. It asks the student to find the optimal price and quantity, and calculate profits, consumer surplus, producer surplus, and deadweight loss. It then asks the student to repeat these calculations for an increased demand curve. Question 2 provides data on variable costs for a catering business and asks the student to calculate costs and profits at different output levels, and determine the break-even and shutdown prices. It asks if the business would earn a profit or shutdown at two different market prices. Question 3 asks the student to explain why

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dung le
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53 views3 pages

Progress Test: SUBJECT: Microeconomics (ECO111) - Essay

This document contains an exam for a Microeconomics course. It includes 3 questions worth 60% of the final exam score. Question 1 involves calculating profit maximization for a monopolist given demand and cost curves. It asks the student to find the optimal price and quantity, and calculate profits, consumer surplus, producer surplus, and deadweight loss. It then asks the student to repeat these calculations for an increased demand curve. Question 2 provides data on variable costs for a catering business and asks the student to calculate costs and profits at different output levels, and determine the break-even and shutdown prices. It asks if the business would earn a profit or shutdown at two different market prices. Question 3 asks the student to explain why

Uploaded by

dung le
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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BUSINESS ADMINISTRATION DEPARTMENT

HOA LAC
PROGRESS TEST
Summer 2022
SUBJECT: Microeconomics (ECO111) - Essay
Duration:160 minutes

Student Information
Name: Roll number:
Room No: Class:

FOR TEACHER ONLY


MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

Instructions:
The following exam section has three questions which account for 60 percent of the final exam score.
Students have 160 minutes for this exam section. Students are not allowed to use any materials. Simple
calculators are allowed. Numerical answers without calculations do not have full credits. All graphs
should have necessary labels.

Question 1 (5 points)
Suppose the market demand curve for a monopolist is given as P = 200 – 2Q. Furthermore, suppose the
MC curve for the firm can be written as MC = 20 + 2Q. The firm’s TC can be expressed as
TC = 20Q + Q2 + 100. Use this information to answer this set of questions.

a. What is the profit maximizing price and quantity for this monopolist given the above
information? Calculate the monopolist’s profit.

b. Calculate the monopolist’s consumer surplus (CS), producer surplus (PS), and
deadweight loss (DWL).

c. Suppose demand increases by 90 units at every price. Find the equation for the
monopolist’s new demand curve. Then, calculate the new profit maximizing price and
quantity for this monopolist given the new demand curve. Calculate the new level of
monopoly profits.

d. Calculate the value of consumer surplus (CS’), producer surplus (PS’), and deadweight
loss (DWL’) for this monopolist given the information in (c).

04.12e-BM/DH/HDCV/FU 1/0 1
Question 2 (3 points)

Kate provides catered meals, and the catered meals industry is perfectly competitive. Kate’s machinery
costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks
and the food ingredients. The variable cost per day associated with each level of output is given in the
accompanying table.

Q VC ($)
0 0
10 200
20 300
30 480
40 700
50 1,000

a. Calculate the total cost, the average variable cost, the average total cost, and the marginal
cost for each quantity of output.

b. What is the break-even price? What is the shut-down price?

c. Suppose that the price at which Kate can sell catered meals is $21 per meal. In the short run,
will Kate earn a profit? In the short run, should she produce or shut down?

d. Suppose that the price at which Kate can sell catered meals is $17 per meal. In the short run,
will Kate earn a profit? In the short run, should she produce or shut down?

Question 3 (2 marks)

Assume your business operates in a monopolistically competitive market. This means that your firm
could earn positive economic profit in the short run, but not in the long run. Explain this statement.

04.12e-BM/DH/HDCV/FU 1/0 2
04.12e-BM/DH/HDCV/FU 1/0 3

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