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Econ 345: Economics And Industry Question Paper

Econ 345: Economics And Industry

Course:Bachelor Of Economics And Mathemetics

Institution: Egerton University question papers

Exam Year:2011

QUESTION ONE
a) Distinguish between the following concepts.
i. Firm and industry
ii. Market conduct and market performance
iii. Lateral diversification and diagonal diversification
iv. Business to business markets and business to consumer markets
v. Industrial economics and industrial efficiency.
b) The transaction cost theory proposed by Ronald Coase has played a significant role in the field of industrial economics. Explain this theory using relevant examples.
c) Mathematically show how the dead weight loss can be measured in a monopoly market.
QUESTION TWO
A manufacturer is planning to make two products using three outputs; labour, machine and raw materials. One unit of product requires one man hour, one machine hour and two units of raw materials. One unit of product two requires three man hours, one machine hour and one unit of raw materials. Total amount of inputs are fixed and given as eighteen man hours, eight machine hours and fourteen units of raw materials per day. The manufacturer expects Kshs. 10 and Kshs. 20 as price for the two products in the market and will actually be able to sell them.
Required:
i. Find the most efficient level of output of the two products.
ii. Explain the concept of a kinked demand curve and show how it can be used to demonstrate the behavior of an oligopolistic. Use illustrations where possible.
QUESTION THREE
a) Suppose a monopolist faces to markets with demand curves given by:
D1(P1) = 100 – P1
D2(P2) = 100 – 2P2
Assume that Marginal cost = 20 and if it can price discriminate.
i. What price should it charge in each market I order to maximize profis?
ii. What happens if it cannot price discriminate?
iii. If (ii) above is true, then what price should it charge?

b) Explain the measures put in place by the government to protect local industries.

QUESTION FOUR
a) The table below shows eight firms with their actual sales.
Firm Actual sales in millions (Xi) Market share for firms in percentage
1 2
2 4
3 8
4 1
5 5
6 6
7 10
8 12

Required:
i. Determine the market share for each firm in percentage.
ii. Assume firms 3, 5, 6 decide to merge to be one, find the concentration ration.
iii. Clearly distinguish industrial economics from micro economics.

b) Explain the elements of a planning process at the firm level.

QUESTION FIVE
a) Explain the property rights theory and show how this theory can be used to achieve the objectives of Kenya Vision 2030 of enhancing investment in Kenya.
b) Using illustration explain the interaction of the features of a market structure.

Econ 345: Economics And Industry Question Paper

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