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Hbc 2241: Intermediate Microeconomics Question Paper
Hbc 2241: Intermediate Microeconomics
Course:Bachelor Of Commerce
Institution: Multimedia University Of Kenya question papers
Exam Year:2013
MULTIMEDIA UNIVERSITY OF KENYA
FACULTY OF BUSINESS, BACHELOR OF COMMERCE
SECOND YEAR FIRST SEMESTER
HBC 2241: INTERMEDIATE MICROECONOMICS
QUESTIONS
1. Two firms face the demand function P(Y) = a - bY and each firm has a constant marginal costs, c. Solve for the Cournot equilibrium output
2. Consider an industry with two firms each having marginal costs equal to zero with the demand curve P(Y) = 100 – Y. where Y= y1 + y2 is total output.
a. Find the competitive level of output
b. If each firm behaves as a Cournot competitor, what is firm 1’s optimal choice given firm 2’s output
c. Calculate the Cournot equilibrium amount of output
d. Calculate the cartel amount of output for the industry
3. Consider the game shown below:
Player B
Left Right
Top 2, 2 -1, -1
Botttom -1, -1 1, 1
Player A
a) Calculate all the pure strategy equilibria of this game
b) Do any of the pure strategy equilibria dominate any of the others?
c) Suppose that Row moves first and commits to either Top or Bottom. Are the strategies described above still Nash Equilibria
d) What are the subgame perfect equilibria of this game
4. Consider the game shown below:
Player B
Left Middle Right
Top 1, 0 1, 2 2, -1
Middle 1, 1 1, 0 0, -1
Bottom -3, -3 -3, -3 -3, -3
Player A
a) Which of Row’s strategies is strictly dominated no matter what Column does?
b) Which of Row’s strategies is weakly dominated?
c) Which of Column’s strategies is strictly dominated no matter what Row does?
d) If we eliminate Column’s dominated strategies, are any of Row’s strategies weakly dominated
5. Differentiate between WARP and SARP
6. Use suitable diagrams to distinguish between the Slutsky and Hicksian Substitution effects
7. Use a suitable diagram to show that unlike a perfectly competitive firm, a monopolist does not lead to Pareto efficient allocation of resources
8. Veronica’s utility function is U(x,y) = x2y. She has an income; M of = $ 240 and faces prices Px = 8 and Py= 2. If the price of y increases to 8 and her income remains unchanged, Calculate the numerical values of the substitution and income effects
9. Given the direct utility function U (x, y) = xy2 and the budget constraint P1.x + P2.y = M; where Px and Py are respectively the prices of the two goods x and y, and where M is the consumer’s income. Derive the indirect utility and expenditure functions as a function of Px, Py and M ; Px, Py and U respectively . Then calculate the level consumption of both goods and the level of utility achieved by this consumer if prices and income are as follows: Px = 2; Py = 3; and M = 9 . Find the values of x*, y* and ? in both cases . What is the relationship between the ?’s found for the indirect utility and expenditure functions
10. A Monopoly firm produces two goods for which the demand functions are given as: P1=36 - 3Q1, and P2= 40 - 5Q2. The joint cost function for production of these goods is given as: C = Q21 +2Q1Q2 + 3Q22. Find The quantities of the goods and their price that maximize the profit of the firm and the maximal profit realized
11. What are the Nash equilibrium of the following game after one eliminates dominated strategies.
Player B
Left Middle Right
Top 3, 3 0, 3 0, 0
Middle 3, 0 2, 2 0, 2
Bottom 0, 0 2, 0 1, 1
Player A
12. A price discriminating monopolist firm having distinct markets for which the demand curves are give as Q1= 32 – 0.4P1; Q2=18 - 0.1P2, where Q1 and Q2 are output quantities sold in the two markets at P1 and P2 prices respectively. The firm produces at a single plant with the cost function given as C = 50 + 40Q. Compute The profit maximizing equilibrium position of the firm and the price elasticity of demand for each of the two markets
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