33. Elven and maximizes utility (and no sources of market failure are present),

Question

33. Elven and maximizes utility (and no sources of market failure are present), then a. an efficient mix of output is guaranteed. b. efficient exchange is guaranteed. c. efficiency in production is guaranteed. When each firm takes prices as given and maximizes profit and also each consumer takes prices as d. a and b only. e. a, b, and c are correct 34. When the non-price discriminating monopoly with MC-10+Q facing the demand curve P-100-2Q maximizes profits, the resulting consumer surplus is a. $600 b. $324 c. $300 d. $224 e. none of the above. 35. Suppose two firms each have MC-$15 and engage in Bertrand completion, then the price each sets will a. be different. b. be the same and be more than $15. c. be the same and be less than $15. d. be the same and equal $15. e. be indeterminate without more information.

Explanation / Answer

33) Option E.

This is because price is not determined by one agent but by the market which is always efficient unless there are market failures. There is both efficiency in allocation and in production in such a case.

34) Option B

Here MR is 100 - 4Q. Profit maximizing level is found to be MR = MC or 10 + Q = 100 - 4Q or Q* = 18 and P* = $64. Consumer surplus is = 0.5*(100 - 64)*18 = $324.

35) Option D

Here it is to be noted that these firms will engage in a price war and will reduce the price so much so that it will reach $15 which is the lowest possible as it is the marginal cost.

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