Sample Exam 4 Answers
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1 |
A |
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11 |
B |
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2 |
B |
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12 |
C |
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3 |
C |
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13 |
D |
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4 |
D |
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14 |
C |
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5 |
D |
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15 |
B |
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6 |
B |
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16 |
B |
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7 |
A |
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17 |
C |
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8 |
B |
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9 |
C |
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10 |
C |
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18. Monopoly
a) P = 30; Q = 10
b) Profits = $100
c) No change in price or output is expected since the property taxes are a fixed cost.
19. This is a Coase Theorem question. What is the most efficient solution to the noise problem? Private bargaining should be able to achieve this outcome no matter who owns the property rights.
20. It all has to do with the demand curves facing the firms. Competitive firms are price takers. This means that their MR equals the market P. Since profit maximization requires MR = MC, the competitive firm produces where P = MC. For the monopolist, however, P > MR. Profit maximization, therefore, requires that P > MR = MC.
21. Immunization provides people with an external benefit. Consequently, if people paid for their shots out of their own pockets, then not enough people would go get shots from society’s point of view. Some sort of subsidy would be required to encourage more folks to get shots.
22. Nonrivalry and nonexclusivity imply the existence of a potential free-rider problem