1. Determine whether each statement beiow is true or false or uncertain and justify your answer (15p) a) "it is impossible for isoquants to be linear and downward sloping b) "Monopoly power must be thought of in a static context." c)"Competitive firms are price makers. 2. The owner of firm XYZ desires to minimize costs of production of a given level of output (e). The following diagram represents the isoquant curve (the dark curve labeled as q") and the isocost lines the three paralel straight- lines) of firm XYZ. In order to fulfil his/her desire the owner must select which point (A on the diagram? Why not any other point? Explain. (15p.) 3. Refer to the following figure. (15p.) SRUC LRMC LRAC OUTPUT a) At P= S80, find the profit maximizing level of output for this competitive fim in the short run. b) At P= S80, how much is profit in the short run? C) Determine the profit-maximizing level of autaut in the long-nan. 4. LARA is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve, total cost curve and marginal cost curve are given as follows: (15p) P- 12-Q [or, Q- 12-PI TR - 120-0 MR - 20-20 TC- 20-5Q MC - 8Q a) Find the profit-maximizing level of output for LARA b) Find the level of profit e) Should LARA exit the industry in the LR.? Why? Why not? S. A monopolist has set her level of output to maximize profit. The firm's morginal cost is $100, and the price elasticity of firm's demand is 5.0. (20p) a) Determine the firm's profit maximizing price b) Calculate and interpret Lerner's Index for this monopolist 6. Suppose your firm develops a new pharmaceutical product that may be used to reduce blood cholesterol levels, so the firm is the monopoly selier of this drug. If the elasticity of demand for this new product is 4, what markup (as % of the price) should your firm use to set the profit-maximizing price for the product? (20p)