2. You are the manager of a firm that sells its product in a competitive market at a price of $60.

Your firm’s cost function is C=60 + 2Q^2. Your firm’s maximum profits are: $390

3. You are a manager in a perfectly competitive market. The price in your market is $35. Your
total cost curve is C(Q) = 20 + 5Q + .5Q2. What level of output should you produce in the short
run? 33

4. You are the manager of a firm that has an exclusive license to produce your product. The
inverse market demand curve is P = 1800 - 1.5Q. Your cost function is C(Q)=2Q+Q2.

Determine the output you should produce, the price you should charge, and your profits.

$92,303.60

5. Beta Industries manufactures floppy disks that consumers perceive as identical to those
produced by numerous other manufacturers. Recently, Beta hired an econometrician to
estimate its cost function for producing boxes of one dozen floppy disks. The estimated cost
function is C = 10 + Q2. Now suppose other firms in the market sell the product at a price of $5.
How much should this firm charge for the product? $5

6. Which of the following market structures would you expect to yield the greatest product
variety? Monopolistic Competition.

7. You are a monopolist with the following cost and demand conditions: P=100-2Q and
C(Q)=50+Q^2. Determine the profit -maximizing output and price.

Q=16 2/3; P=$66 2/3

8. You are a manager in a perfectly competitive market. The price in your market is $35. Your
total cost curve is C(Q) = 20 + 5Q + .5Q2. What price should you charge in the short run? 35

9. A perfectly competitive firm faces a: perfectly elastic demand function

10. Price in competition market is 6. The firms marginal cost is 4 and the marginal cost curve
has the normal shape. What would you advise the firm to do? Increase its output

11. A monopsony is a market with one buyer

13. For a monopolist to earn an economic profit in the long run, which of the following must
happen? There are barriers to entry

14. A firm can produce two products with the cost function C(Q1, Q2) = 10 + 5Q1 + 5Q2 -
0.2Q1Q2. The firm enjoys: cost complementary
15. Differentiated goods are NOT a feature of a: perfectly competitive market and monopolistic
market

16. Advertising adds cost to producing a good. Therefore, it increases the average total cost of
production

17. In a market there are many firms selling differentiated products. The product is: a
monopolistically competitive market

18. A profit-maximizing monopolist will: produce an output level at which P>MC

19. Economies of scale exist whenever: average total costs decline as output increases

20. If a firm is producing at an output level at which: price exceeds average total costs then the
firm is earning an economic profit

21. Which of the following formulas correctly measures the profit of a monopoly?

π= TR - TC andπ = (P - ATC)Q

22. You are a monopolist with the following cost and demand conditions: P = 100 - 2Q and C(Q)
= 50 + Q2. Determine the actual amount of deadweight loss. $138.86

23. Which of the following are examples of price discrimination?

iii peak and off-peak train fares

iv a doctor charging wealthier higher consultancy fees

24. In a competitive market, which of the following is the firms supply curve? The marginal cost
curve

25. You are a manager in a perfectly competitive market. The price in your market is $35. Your
total cost curve is C(Q) = 20 + 5Q + .5Q2. Will you make any profits in the short run? $534.50