Econ 98-Chiu Economics Summary 1 Spring 2004 Name & SID: Date: Page 1 of 3 True, false, or uncertain. Only your explanations will be graded. Graphs are also encouraged, but your explanation is more important. Therefore please explain quickly and accurately. 1. A typical monopoly creates a shortage in the market because it produces at the profit-maximizing output (MC=MR) rather than at the socially optimal output (P=MC). 2. The government should place an ad valorem tax (percentage per unit) on a typical monopoly in order to reduce the deadweight loss. Graph and explain. 3. Draw a typical monopoly graph. Explain why a monopoly creates a deadweight loss in the market. (Please do not write an essay.) 4. A perfectly competitive wheat firm is making positive profits in Stage 1. Explain (graphically and in words) why the firm will not make positive profits in Stage 2. (Do not write an essay.)Econ 98-Chiu Economics Summary 1 Spring 2004 Name & SID: Date: Page 2 of 3 What is wrong? List the mistakes. 5. Monopoly 6. Monopoly P Q MCAC MR=d=P* P Q MCAC MR DEcon 98-Chiu Economics Summary 1 Spring 2004 Name & SID: Date: Page 3 of 3 7. Perfect Competitive Firm in Stage 2 8. Natural Monopoly P Q MCAC MR D Pm P Q MCAC d=MR=P* P* Q*
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