BUSINESS ADMINISTRATION DEPARTMENT

HOA LAC
ESSAY TEST
SUBJECT: Microeconomics (ECO111) - Essay
Duration: 120 minutes

STUDENT INFORMATION
Name: NGUYỄN HỮU NGHĨA Roll number: HS180944
Room No: BE-308 Class: MKT1831

FOR TEACHER ONLY

MARK MARKED BY Signature of Proctor
(NAME AND SIGNATURE)

Instructions:
Students have 120 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).
-Answer:
1a:
-To find the profit maximizing quantity for the monopolist we need the firm’s MR curve.
- For a linear downward sloping demand curve, the MR has the same y-intercept and twice the
slope of this demand curve =>MR = 200 – 4Q.
- Set MR = MC to find the profit maximizing quantity for the monopolist: 200 – 4Q = 20 +
2Q=> Q = 30units
-Use this quantity and the demand curve to find the monopolist’s profit maximizing price: P =
200 – 2Q => P = $140 per unit
- Profit is equal to TR – TC:
=> P x Q – (20Q + Q2 + 100) = 140x30 – (20x30 + 302 + 100) = 2600$

1b:
-CS=(1/2)(200$ per unit -140$ per unit)(30 units)=900$
-PS=(1/2)(80$ per unit – 20$ per unit)(30 units) = (140$ per unit -80$ per unit)(30 units)=2700$
-DWL=(1/2)(140$ per unit – 80$ per unit)(45 units -30 units)=450$

1c:
-The slope of the demand curver is unchanged but at each price the quantity is now 90 units
greater than the original quantity at that price.
=>when P=$100 per unit,the quantity demanded initially was 50 units and now it is 140 units
-Use these new (Q,P) coordinates to find the new demand curve:P=b+m Q
-The slope of the new demand curve is the same as the slope of the initial demand curve=>P=b-
2Q
-Then ,plugging in(Q.P)=(140,$100) into this equation we get:
100=b-2(140)=>b=380
=>the new market demand curve is P=380-2Q
For a linear downward sloping demand curve,the MR has the same y-intercept and twice the
slope of this demand curve=> MR’-380-4Q
-Set MR’=MC
=>the profit maximizing quantity for the monopolist:380-4Q=20 +2Q
=>Q’=60 units
-Use this quantity and the new demand curve to find the monopolist’s profit maximizing price:
P’=380-2Q=>P’=$260
-Profit is equal to TR-TC:
=>Profit=($260 per unit)(60 units)-[20(60) + (60)(60) +100] or Profit = $15,600 -
$4900=$10,700

1d:
CS=(1/2)(200$ per unit -140$ per unit)(30 units)=900$
PS=(1/2)(80$ per unit – 20$ per unit)(30 units) + (140$ per unit -80$ per unit)(30 units)=2700$
DWL=(1/2)(140$ per unit – 80$ per unit)(45 units – 30 units)=450$

Question 2 (5 points)

Kate’s Katering 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?
Answer:
a.

Q VC ($) Total cost AVC ATC MC

0 0 100 n/a n/a
10 200 300 20 30 20
20 300 400 15 20 10
30 480 580 16 19,33 18
40 700 800 17,5 20 22

b. 50 1000 1100 20 22 30
-The break-even price is the minimum ATC:$19,33
-The shut down price is the minimum AVC:$15

c.
-If Kate sells cartered meals is $21 per meal,she will earn profit because $21 > the break-even
price is $19,33.She will earn a profit
-In the short run,she should produce.Because $21 > the shut down price is $15

d.
-If Kate sells cartered meals is $17 per meal,she will get loss because $17 < the break-even price
is $19,33.She will not earn a profit
-In the short run,she should produce.Because $17 > the shut down price is $15

Approved by: Checked by: Built by:

Name: Nguyễn Thành Tâm Name: Nguyễn Thành Tâm Name: Nguyễn Thành Tâm
Date: 01/11/2023 Date:01/11/2023 Date: 01 /11/2023