Busi – 1023 competitive market final exam questions

BUSI – 1023 Final Exam Questions

· Worth 35% of final grade

ANSWER ALL 4 QUESTIONS

Question 1

Use the following table for this question.

Number of Workers

Marginal Product

Total Product

Average Product

1

12

2

16

3

14

4

13

5

10

a. Fill out the columns of the Table.

b. With which worker do diminishing returns occur?

c. Graph the marginal and average product curves.

Question 2

Examine the following information about XYZ Incorporated.

Number of Workers

Output

MP

VC

FC

TC

AVC

AFC

ATC

MC

0

0

0

110

1

12

30

2

31

60

3

41

90

4

50

120

5

58

150

6

64

180

7

67

210

a. Fill out the columns of the Table.

b. The firm is operating in the short run. How can you tell?

c. What is happening to marginal product? Why? At which output level is marginal product greatest?

d. Compare the MP with the MC. What is your observation?

Question 3

The below graph shows a monopolist that faces a market demand according to his cost functions. Answer all following questions:

a. Define Monopoly and explain the barriers of entry to such market.

b. What is the production level that will maximize profit (or minimize loss) for the monopolist. Explain.

c. Calculate the monopolist’s total revenue (TR) at the production level that will maximize profit (or minimize loss).

d. Calculate the monopolist’s total cost (TC) at the production level that will maximize profit (or minimize loss).

Question 4

The Following table shows total cost (TC) of a kid selling lemonade, where the lemonade market is considered “Competitive” market. Answer all following questions:

Quantity of Output

Total Cost $

0

5

1

8.5

2

15

3

22

4

30.5

5

45.5

a. What are the conditions of Perfect Competition?

b. What does “Price Taker” mean?

c. If the market price is $8.50, what is the profit-maximizing output? Explain.

d. If the market price is $8.50, calculate the economic profit (loss)?