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ECO100 Term Test 2, 2012 Answers

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University of Toronto St. George
James Pesando

Professor James Pesando Economics Eco100 Term Test 2 Marking Scheme – November 30, 2012 Note: on all questions, 1 mark deducted for minor mistakes/errors. This includes, but is not limited to: • Incorrect additions to graphs that were not required in the question Question 1: (20 points) 1a) 7 marks - 7 marks for complete and correct graphs - 1 mark deducted for each error 1b) 7 marks - 7 marks for complete and correct graphs - 1 mark deducted for each error 1c) 6 marks - 2 marks for P=12 - 4 marks for a correct explanation of, ATC increases  firms making losses  firms exit  LR profits = 0 Question 2: (21 points) 2a) 8 marks - 5 marks for correct graph (including clear labels of Pc, Pm, Qc, Qm, SS, DD) - minus 1 mark for an incorrect ATC if added to the graph (not required) - max 3 marks awarded if monopoly and competitive outcomes are not on the same graph - 3 marks for explanation; P> MR for monopoly, P=MR for competitive, profit maximize by setting Q where MR=MC 2b) 5 marks - MR, MC are the same (2 marks), therefore Q same (1 mark) - it is not AE (1 mark) because, [some definition of AE; eg. P=MC] (1 mark) 2c) 8 marks - 5 marks for correct graph (including Pc, Qc=Qm, SS, DD, MR=price ceiling) - minus 2 mark fo
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