ECO100术语测试2答案2007年12月7日.pdfVIP

ECO100TermTest2(December7,2007)

Answers

I(a)SeeDiagram14.5(a),page307oftextforthesituationoftheprofit-

makingfirm.

(b)Becauseexistingfirmsaremakingeconomicprofits,newfirmswillenterthe

industry,causingthesupplycurvetoshiftrightwardandmarketpriceto

fall.Inthelong-termequilibrium,therepresentativefirmwillearnzero

economicprofits,sopricewillequal(minimum)ATCwhichis10.(Remember

thattheMCscheduleintersectstheATCscheduleattheminimumpointon

theATCschedule.)

(c)(i)marketpriceisunchanged

(ii)thefirm’slevelofoutputisunchanged,sinceitsMCscheduledoes

notchange

(iii)thefirm’sATCwillfall,sinceATC=AVC+AFCandAFCwillfall

(iv)thefirm’slevelofprofitswillincrease,sincePisunchanged,qis

unchanged,andATCfalls

II(a)TheMCschedulewillshiftdownward,sotheprofit-izinglevelofoutput

willriseandpricewillfall.SeeFigure15.5,page328oftextforthe

determinationofthemonopolist’slevelofoutput.

(b)No.Atthemonopolist’s(new)levelofoutput,price(thewillingnessofbuyers

topay)willexceedmarginalcost.SeeFigure15.8,page332intext.

(c)MR=price=50,untiloutputreachestheperfectlycompetitivelevel.The

profit-izingmonopolistwillproducethesamelevelofoutputasa

perfectlycompetitiveindustry(whichexceedsthelevelofoutputthe

mon