Fall 2012 Marks: 80 Time: 2 hours
The examination is out of 80 marks. You have 2 hours to complete it – please note the value of each section and plan your work accordingly. This is your opportunity to demonstrate your knowledge and understanding of the material. A premium will be placed on the clarity of the exposition.
Question 1 (10 marks) Copy the following table in your examination booklet, complete it, and answer the accompanying questions: (1 mark) Output (Q) 106 107 108 109 110 Total Revenue 2250 2390 2520 2640 2750 Marginal Revenue 150 Marginal Cost 100 110 120 130 140
a) At what level of output are the firm’s profits maximized? Please explain your answer (the explanation should include the definition of “marginal revenue” and “marginal cost”). (6 marks) b) When the firm produces 106 units of output, its total cost is $1,400. What is the firm’s profit for the level of output determined in part (a)? (3 marks)
Econ 3030Y – Practice Midterm Examination – Fall 2012
Question 2 (10 marks) Rare-earth elements are used in iPods, Blackberries, high-fidelity speakers, MRI machines, night-vision goggles etc. The demand for these innovative products is expected to increase. China, the dominant supplier, is raising export taxes and lowering export quotas (the maximum amounts Chinese producers are allowed to export) to conserve rare-earth output for domestic requirements. Given this information and holding everything else constant, explain and graphically illustrate the impact of these factors on the North-American equilibrium price and quantity of rare-earth elements. You must clearly identify the initial equilibrium, the new equilibrium, and properly label both axes and all lines in your graph.
Question 3 (10 marks)
The Vancouver 2010 torchbearer red mittens sold by the Hudson’s Bay Company for $10 per pair are the must-have mementos of this year’s...