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Econ 313: Advanced Microeconomics Question Paper

Econ 313: Advanced Microeconomics

Course:Bachelor Of Science (Economics & Statistics)

Institution: Chuka University question papers

Exam Year:2012

CHUKA UNIVERSITY

COLLEGE

UNIVERSITY EXAMINATIONS

FIRST YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF SCIENCE (ECONOMICS & STATISTICS)

ECON 313: ADVANCED MICROECONOMICS

STREAMS: BSC. (ECON & STATS) TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 8.30 A.M – 10.30 A.M.
INSTRUCTIONS:

Answer question One and any other Two questions.
Do not write on the question paper.

Question One (Compulsory)

(a) Discuss the properties of cost function. [5 marks]

(b) Prove the following claims mathematically.

Marginal Cost (MC) curve cuts Average Cost (AC) curve from below and at its minimal point
[4 points]

The oligopolistic joint output is higher than the monopolistic output
but lower than competitive output. [6 marks]

(c) Distinguish between Cournot model and Stackelberg model. [5 marks]

(d) With aid of diagrams discuss the 1st and 2nd welfare theorems showing clearly
the distinction between the two. [10 marks]

Question Two:

Suppose that the consumer’s preferences can be represented by the following utility function:

U = ?x_1?^a ?x_2?^(1-a)

Calculate the Marshallian demands for this consumer. [6 marks]

Derive the indirect utility function for this consumer and state the properties.
[4 marks]

Calculate the expenditure function for this consumer. [5 marks]

Calculate the Hicksian demands for this consumer. [5 marks]

Question Three:

Three oligopolists operate in a market with inverse demand given by P = a-Q where
Q = q1 + q2 + q3. Each firm has a constant marginal cost of production C and no fized cost.

Suppose the three firms simultaneously choose quantities. Find the equilibrium quantities, prices and profits. [10 marks]

What would be the equilibrium quantities if the firms choose their quantities as follows?:

first firm 1 Choose q1, then firm 2 and 3 observe q1 and then simultaneously choose q2 and q3 respectively. [10 marks]

Question Four:

Given the firm’s production function as Y=A? L?^a K^(1-a). Assume that the firm seeks
to minimize costs of producing the level of output Y. Derive the minimum cost.
[10 marks]

Using the concept of duality, recover the underlying production function. [10 marks]

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Econ 313: Advanced Microeconomics Question Paper

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