Economics exam (HSS 301) from BUTEX's 2024 Level-3 Term-I finals, built around numerical problems: consumer and producer surplus with price floors, U-shaped cost curves, monopoly profit maximization, and long run supply analysis.
Level-3 Term-I, Final Exám-2024
Subject: Economics (Code: HSS 301)
Time: 3.0 Hrs. Full Marks: 72
(Use separate answer script for Part: A and Part: B)
(All parts of a question must be answered consecutively)
Part: A
(Answer any three questions)
1. (a) A market of Ice cream consists of 10 buyers each having an identical demand function:
10Q + 4P - 40 = 0 and of many sellers having the market supply function: 3Q - 20p + 40 = 0.
(a) Calculate the maximum possible consumer surplus, producer surplus and total surplus in this market.
(b) If the authority floors the price at $4, then calculate the deadweight loss from the market.
(c) Due to an addition of various flavors, now people want to buy ice cream more. On the other hand, due to a worse communication system, transportation costs have increased. Explain the impact of these situations on the market equilibrium graphically.
[4+4+4=12]
2. The total cost function of a firm is: TC = 1250 + 3 + 50q.
(a) Why is average total cost curve U shaped? At which production quantity will the average total cost be minimum and how much will the minimum cost be?
(b) “The portion of MC curve above AVC curve represents short run supply curve of the firm”-Justify.
(c) “Getting bigger is cheaper at first but getting even bigger is expensive for a firm” – Explain with the ideas of returns to scale and economies of scale.
[4+4+4=12]
3. P = 65 - 2.5Q is the demand facing a monopoly and is the cost of that firm