# 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 = 8q_{i}, i = 1,2, where q_{i} 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= q_{1} + q_{2} 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 +2q^{2}, 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 Q_{d} = 355 - 4P, where Q_{d} is the total quantity demanded and P is the price of the good. Also, the market supply is given by Q_{s} = -128 + 3P.