Fall 2000
Answers to Midterm 3 - Fall 2000
1. B
2. A
3. B
4. A
5. B
6. C
7. C
8. E
9. D
10. E
11. D
12. E
13. E
14. C
15. C
16. C
17. B
Problem:
A. Q=40, P=$60
B. CS=$800 with monopoly. CS=$3200 with perfect competition
C. The good is underproduced and the outcome is not
allocatively
efficient. This creates a deadweight loss. DWL=$800.
D. Potential Profits of the monopolist=$600. Thus,
the firm will pay $600
for the license.
E. CS=$800+$600=$1400 with monopoly with auction proceeds
given to
consumers. Thus the ranking is: 1. perfect competition,
2. monopoly with
auction proceeds given to consumers, 3. monopoly