Question;QUIZ 3Please put your answers to multiple choice questions in the proper cell of the Excel file under thelink Quiz 3 MC Answer Sheet and provide your answers to short-answer questions/problems in aseparate Word file. Not following these instructions will result in a 5 point penalty! Turn inSunday, February 24th, 16,both via your assignment folder by Wednesday, November20132011. Late submissions areaccepted with 10 pt. penalty for every day the submission is late. Late submissions should be senteither via private message on WebTycho or via e-mail. Good luck!!!MULTIPLE CHOICE QUESTIONS (2 pts. EACH)1. Characteristics of a perfectly competitive market includeA. The absence of transaction costsB. Differentiated productsC. Few sellers, some with a large market shareD. All of the above2. Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined asat prices below $4 and zero for prices above $4. Zach's demand for milk isdefined asat prices below $5 and zero for prices above $5. If the market pricefor milk is $4.50, market demand isA. ZeroB. 1.5C. 1D. 103. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function isat prices above $0.50 and zero at prices below $0.50. Mega Cow's supplyfunction isat prices above $0.33 and zero at prices below $0.33. At a price of$0.45A. Milky Moo is the only supplier of milkB. Mega Cow is the only supplier of milkC. Both Milky Moo and Mega Cow supply milkD. Neither Milky Moo nor Mega Cow supply milk4. With free entryA. The long run market supply curve is horizontal at the market priceB. The long run market supply curve is vertical at the market priceC. The short and long run market supply curves are the sameD. A and D5. The market demand for milk is. Additionally, suppose that a dairy's variablecosts are(where Q is the number of gallons of milk produced each day), its marginalcost isand there is an avoidable fixed cost of $50 per day. In the long run there is freeentry into the market. Suppose the demand for milk doubles. If in the short run the number offirms is fixed and their fixed costs are sunk, what is each of the active firms' profit per unit in theshort run equilibrium?A. $4B. $20C. $24D. $106. A monopoly market isA. A market with many sellersB. A market with a single sellerC. A market with a few sellersD. B and C7. Suppose Kate's Great Crete (KGC) has annual variable costs ofandmarginal costs of, where Q is the number of cubic yards of concrete itproduces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC's demandfunction is. What is the profit maximizing sales quantity?A. 20B. 2,000C. 8,000D. 08. A firm's markup over its marginal cost is greaterA. The more elastic is the demand curveB. The less elastic is the demand curveC. The lower its fixed costsD. The lower its average costs9. The Solo Coal Mine is the only employer in the small town of Way out there. The marketsupply of coal miners isand, where W is the annualwage of a coal miner and Q is the number of coal miners. What is the profit maximizing numberof coal miners for the coal mine to hire?A. 100B. 150C. 50D. 233.3410. A market is a natural monopoly whenA. A good is produced most economically by several firmsB. A good is produced most economically by one firmC. The government grants a firm a patent on a goodD. The firm's average cost function is everywhere upward sloping11. Price discrimination is based on observable customer characteristicsA. When a firm can distinguish consumers with a high versus low willingness to payB. When a firm offers a menu of alternatives, designed so that different customers will makedifferent choices based on their willingness to payC. A monopolist knows perfectly the customer's willingness to pay for each unit its sells and cancharge a different price for each unitD. B and C12. A movie monopolist sells to students and adults. The demand function for students isand the demand function for adults is. The marginalcost is $2 per ticket. Suppose the movie theater can price discriminate. What is the monopolist'sprofit from students?A. $400B. $2400C. $2500D. $013. Mixed bundlingA. Is the practice of selling several products together as a packageB. Is the practice of selling the same good to different types of consumers at different pricesC. Is the practice of selling several products together as a package while also offering thoseproducts for sale individuallyD. Is the practice of selling goods in bulk at a reduced per unit price14. With a two-part tariffA. Consumers simply pay a fixed fee if they buy anything at allB. Consumers pay a fixed fee if they buy anything at all, plus a separate per-unit price for eachunit they buyC. Consumers pay a fixed fee if they buy anything at all, plus an annual fee for the right topurchase anythingD. Consumers simply pay a fee for the right to buy anything15. At the Nash equilibrium of an oligopoly marketA. Only one firm is able to earn profitsB. Each firm is making a profit-maximizing choice, regardless of the choices of its rivalsC. Each firm is making a profit-maximizing choice given the choices of its rivalsD. Each firm produces the same quantity16. A residual demand curveA. Shoes the relationship between the market price and the quantity demanded by consumers ateach priceB. Shows the relationship between a firm's output and the market price given the prices chargedby the firm's rivalsC. Shows the relationship between a firm's output and the market price given the outputs of thefirm's rivalsD. Shows the remaining demand for a good after a firm's rivals have sold their output17. Kate and Alice are small-town ready-mix concrete duopolists. The market demand function iswhere P is the price of a cubic yard of concrete and Qd is the number ofcubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot modeldescribes the competition in this market. What is Alice's inverse residual demand function?A., Where the term in parentheses is constantB., Where the term in parentheses is constantC., Where the term in parentheses is constantD., Where the term in parentheses is constant18. Kate and Alice are small-town ready-mix concrete duopolists. The market demand functioniswhere P is the price of a cubic yard of concrete and Qd is the number ofcubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot modeldescribes the competition in this market. How much does Alice produce in the Nashequilibrium?A. 2,000B. 1,333.33C. 800D. 4,00019. Suppose the daily demand for Coke and Pepsi in a small city are given byandwhere QC and QP arethe number of cans Coke and Pepsi sell, respectively, in thousands per day. P C and PP are theprices of a can of Coke and Pepsi, respectively, measured in dollars. The marginal cost is $0.45per can. If PC = $0.60, what is Pepsi's demand function?A.B.C.D.20. Firms engage in tacit collusion whenA. They predict what the other will do and attempt to undercut themB. They collude without communicating, sustaining a price above the noncooperative price thatwould arise in a single competitive interactionC. They communicate to reach an agreement about the prices they will chargeD. They communicate what type of good they will produceSHORT ANSWER QUESTIONS / PROBLEMS1. (10 points) Suppose the wiz-pop market is in long-run equilibrium. Suddenly, fixed costsdecrease, although variable costs remain unchanged. Discuss the short-run and long-run changesin market equilibrium.2. (10 points) After Apple introduced its new iPhone, the price of standard cell phones rose. Aconsumer advocacy group that has long claimed that standard cell phone producers are colludinglike a monopolist asserts that this is further evidence of that fact. Youve noticed that theelasticity of demand for standard cell phones increased after Apples entry. Does this shed anylight on the groups claim?3. (20 pts.) Suppose Always There Wireless serves 100 high-high demand wireless consumers,each of whose monthly demand curve for minutes of wireless service isand300 low-demand consumers, each of whose monthly demand curve for minutes of wireless is, where P is the per-minute price in dollars. Its marginal cost is $0.25 perminute. Suppose Always There Wireless charges $0.25 per minute.a. How many minutes will high-demand consumers purchase?b. How many minutes will low-demand consumers purchase?c. How much can Always There Wireless charge as a fixed fee without losing the low-demandconsumers?d. What are the profits from sales to each of the low-demand consumers?4. (20 pts.) a. Define the Bertrand model and its assumptions. Explain why the model predictsthe perfectly competitive outcome despite the number of sellers. Discuss the limitations of themodel.b. Compare and contrast the Bertrand and Cournot models of oligopoly. Your discussion shouldinclude assumptions made, goals of the firms and the resulting outcomes.
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