Econ XXXXXXXXXXAssignment Three Due: November 28, 2012 Name:_________________________________ Student Number: _________________________________ Name:_________________________________ Student Number:...

Econ XXXXXXXXXXAssignment Three Due: November 28, 2012 Name:_________________________________ Student Number: _________________________________ Name:_________________________________ Student Number: _________________________________ Name:_________________________________ Student Number: _________________________________ Please write your answers to the following questions directly onto this assignment, staple your pages together, and submit it to me on Nov. 28, 2012 at 4:00pm. No exceptions will be made for the following two rules. Failure to adhere to these rules will result in a grade of zero for all students whose names appear on the assignment: 1. No assignments will be accepted once the class has begun at 4:00. 2. A maximum of three people can work together on one assignment A. Indicate if the following statements are true (T) or False (F) and explain your answer. No diagrams are needed to answer these questions. 1. In the long-run equilibrium, each firm in a perfectly competitive industry will choose the plant size associated with minimum long-run average cost. T F _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 2. Over the output range where total revenue is decreasing, marginal revenue is positive. T F _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 3. Perfectly competition is always more efficient than monopolistic competition. T F _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ 4. For colluding duopolists in a non-repeated game, the equilibrium is always for both firms to cheat. T F _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ _________________________________________________________________________________________________ B. Answer the following questions in the space provided. Please be certain to illustrate your answers with the appropriate diagram(s) and show all of your work. 1. A single priced monopolist is the only seller of yolos in Canada. The firm’s total costs (TC) and its demand schedule (P and QD) are given in the table on the following page along with the graph plots. a) Complete the table, calculating the firm’s total revenue (TR), marginal revenue (MR), marginal cost (MR), profit, and average total cost (ATC). Do not forget that MR and MC must be written between the lines. b) On the graph plot the demand curve, marginal revenue curve, marginal cost curve and ATC cost curve. Indicate the point at which the firm produces and illustrate the firm’s profit. c) Imagine that demand for this firms output is now P=19-0.5QD, will this firm remain open? Use the second graph plot to illustrate your answer. [Hint: You do not need to draw all of your curves on this plot to prove your point – just two] P QD TR MR TC MC ATC Profit XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXXPrice Quantity Price Quantity 2. Consider a single firm in a monopolistically competitive industry. In the space below illustrate the following four scenarios (with four graphs) and answer the final question. a) A firm making an economic profit. b) A firm making an economic loss that will cause a shut down. c) A firm making an economic loss that will not shut down. d) A firm that is monopolistically competitive in the long run. e) How does the firm in part c) ultimately end up being the firm in part d)? _________________________________________________________________________________________ _________________________________________________________________________________________ ___________________________________________________________________