ECON 102 at PSU EXAM 2 Solution

(12 Points)
You are operating a firm in a perfectly competitive market. In the short run, you have fixed costs of $30. Your variable costs are given in the following table:

Complete the following table:

2. (10 Points)
A monopolist faces a demand curve given by:

A) (2 points) What quantity should the monopolist produce in order to maximize profit?

B) (2 points) What price should the monopolist charge in order to maximize profit?

C) (2 points) How much profit will the monopolist make?

D) (2 points) What is the deadweight loss created by this monopoly (hint: compare the monopoly outcome with the perfectly competitive outcome).

E) (2 points) If the market were perfectly competitive, what quantity would be produced?

3. (6 Points)
List the three conditions that must be met in order for a firm to successfully engage in price discrimination.

4. (12 Points)
Suppose a competitive firm can sell its output for $6 per unit. The following table gives the firm’s short run production function.