ECON 342 Exam 1 with Answers (Penn State)
ECON 342 ECON342 Exam 1 Answers (Version 3) (Penn State University)
1. (40 Total Points) Suppose there are two firms operating in a market. The firms produce identical products, and the total cost for each firm is given by C = 8qi, i = 1,2, where qi is the quantity of output produced by firm i. Therefore the marginal cost for each firm is constant at MC = 8. Also, the market demand is given by P = 80 –3Q, where Q= q1 + q2 is the total industry output.
2. (20 Total Points) Suppose in the short run a perfectly competitive firm has a fixed cost , F = $392. The firm’s variable cost of production is given by TVC = 5q +2q2, where q is the quantity of output that the firm produces. The marginal cost of the firm is given by MC = 5 + 4q. The market demand for the good is given by Qd = 355 - 4P, where Qd is the total quantity demanded and P is the price of the good. Also, the market supply is given by Qs = -128 + 3P.
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