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CHRIST (Deemed to be University),

Questions View-V Semester
Subject : ECO532N(MATHEMATICAL ECONOMICS)

U1--Equilibrium analysis in Economics- Definition of equilibrium- Solution of equilibrium - Single vs. multiple equilibrium - Partial vs. general
equilibrium. Application: single vs. multiple commodity markets- Linear Models and Matrix Algebra - Matrix algebra with special emphasis on
Cramer's rule- Applications: multiple commodity markets- Heckscher- Ohlin model - COMPARATIVE STATIC ANALISYS- Review of
comparative static analysis using IS- LM model

U1-T1-S1--Equilibrium analysis in Economics- Definition of equilibrium- Solution of equilibrium - Single vs. multiple equilibrium -
Partial vs. general equilibrium. Application: single vs. multiple commodity markets- Linear Models and Matrix Algebra - Matrix algebra
with special emphasis on Cramer s rule- Applications: multiple commodity markets- Heckscher- Ohlin model - COMPARATIVE STATIC
ANALISYS- Review of comparative static analysis using IS- LM model

1 Consider the ice cream market in Madison. In July, the ice cream 5.0 Medium Problem
market demand and supply curves are given by the following (Applying/Analysing) oriented
equations where Q is the quantity to ice cream units and P is the
price in dollars per unit of ice cream:
Demand: Q = 14000 – 10P
Supply: Q = 2000 + 20P
a) Find the equilibrium price and quantity of ice cream in July. [3]
b) Calculate the price elasticity of demand at the equilibrium price.
[2]
2 Given the two goods market model, 5.0 Medium Problem
The market I Market II (Applying/Analysing) oriented
Q d1
= Q s1
,Q =Q
d2 s2

Q d1 = 25 − 2P1 + P2 Q d2 = 20 + 2P1 − 2P2

Q s1 = −5 + 4P1 Q s2 = −10 + 5P2

Find equilibrium prices by using Matrix Inversion.

3 In a two industry economy, it is known that industry I uses 10% of 5.0 Medium Problem
its own product and 60% of commodity II to produce a dollar’s (Applying/Analysing) oriented
worth of commodity I; industry II uses none of its own product but
uses 50% of commodity I in producing a dollar’s worth of
commodity II; and the open sector demands $1000 billion of
commodity I and $2000 billion of commodity II.
a) Write down the input matrix, the Leontief’s matrix and the
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specific input-output matrix equation for this economy.

b) Find the solution output levels by Cramer’s rule.
4 Given the Market Model 5.0 Medium Problem
Qd=Qs (Applying/Analysing) oriented
Qd= 24-2P
Qs=-5+7P
Find the equilibrium values of P and Q by the method of elimination
of variables.
5 Solve the following Input-Output model (I-A)X=F by using Matrix 5.0 Simple Problem
Inversion. (Remembering/Understanding) oriented
1/5 0 1/8 1000
⎡ ⎤ ⎡ ⎤
A = ⎢ 1/4 1/10 1/4 ⎥ F = ⎢ 1200 ⎥

⎣ ⎦ ⎣ ⎦
1/10 1/5 1/10 1300

6 Solve the following national income model by Cramer’s rule. 15.0 Simple Problem
Y = C + 2500 − M (Remembering/Understanding) oriented
C = 25 + 0.8(y − T )

M = 10 + 0.05Y

T = 0.25Y

7 In a three sector model, suppose the fundamental equations are: 15.0 Medium Problem
C=200+0.80Yd (Applying/Analysing) oriented
I= 250-7.2r
G=90
T=0.20Y
Ms=180
Md=0.2Y-2r
Find:
a) The equation for IS curve.
b) The equation of LM curve
c) The simultaneous equilibrium for the IS and LM curves by
Cramer’s rule.
8 At a price of €15, and an average income of €40, the demand for 5.0 Complex(Evaluating/Creating) Problem
CDs was 36. When the price increased to €20, with income oriented
remaining unchanged at €40, the demand for CDs fell to 21. When
income rose to €60, at the original price €15, demand rose to 40.
Find the linear function which describes this demand behavior.
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9 Consider the following demand and supply relationships in the 15.0 Medium Problem
market for golf balls: (Applying/Analysing) oriented
Qd = 90 − 2P − 2T and
Qs = −9 + 5P − 2.5R,
where T is the price of titanium, a metal used to make golf clubs, and
R is the price of rubber.
a) If R = 2 and T = 10, calculate the equilibrium price and quantity of
golf balls.
b) At the equilibrium values, calculate the price elasticity of demand.
c) At the equilibrium values, calculate the cross-price elasticity of
demand for golf balls with respect to the price of titanium. What
does the sign of this elasticity tell you about whether golf balls and
titanium are substitutes or complements?
10 The supply and demand function of a certain commodity are S= 50 + 15.0 Complex(Evaluating/Creating) Problem
2P and D=100 - 3P respectively. oriented

1. Calculate equilibrium price and quantity.

2. When an advalorem tax of 50% is levied, calculate the new
equilibrium price and quantity.
3. If a specific tax of Rs 5 per unit is imposed, calculate new
equilibrium values.

11 Find the equilibrium price and quantity for two substitute goods X 5.0 Simple Problem
and Y given their respective demand and supply equation as, (Remembering/Understanding) oriented
Qdx = 82 − 3P x + P y

Qsx = −5 + 15P x

Qdy = 92 + 2P x − 4P y

Qsy = −6 + 32P y

12 Find inverse of following matrices 5.0 Medium Problem

1 −1 2 1 0 0 4 −2 1 (Applying/Analysing) oriented
⎡ ⎤ ⎡ ⎤ ⎡ ⎤
L = ⎢1 0 3 ⎥M = ⎢ 0 0 1 ⎥N = ⎢ 7 3 0 ⎥
⎣ ⎦ ⎣ ⎦ ⎣ ⎦
4 0 2 0 1 0 2 0 1

Consider an economy where the government considers the removal

of investment subsidy as a programme for contraction. Using IS-LM
Model, discuss the impact of this policy on income, interest rate and
investment.
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13 In a three economy model, the economies being denoted by 1,2 and 15.0 Complex(Evaluating/Creating) Problem
3 respectively. oriented
Y 1 = C1 + (X 1 − M1 ) + 1000

C1 = 0.8Y 1

M1 = 0.2Y 1

X 1 = 0.15Y 2 + 0.1Y 3

Y 2 = C2 + (X 2 − M2 ) + 1200

C2 = 0.7Y 2

M2 = 0.18Y 2

X 2 = 0.12Y 1 + 0.15Y 3

Y 3 = C3 + (X 3 − M3 ) + 900

C3 = 0.75Y 3

M3 = 0.25Y 3

X 3 = 0.2Y 1 + 0.25Y 2

Find the equilibrium income using matrix inversion.

14 The demand and supply functions for a good are given as, 15.0 Complex(Evaluating/Creating) Problem
Demand function P = 450 − 2Q
d d
oriented
Supply function P = 100 + 5Q s

1. Calculate the equilibrium price and quantity. [4]

2. If the government provides a subsidy of Rs 70 per unit sold:

i. Write down the equation of the supply function, adjusted for

the subsidy. [2]
ii. Find the new equilibrium price and quantity by using matrix
algebra. [5]
iii. Outline the distribution of the subsidy, that is, calculate how
much of the subsidy is received by the consumer and the
supplier. [4]

15 An economy consists of two codependent industries - steel and 5.0 Complex(Evaluating/Creating) Problem
lumber. It takes 0.1 units of steel and 0.5 units of lumber to make oriented
each unit of steel. It takes 0.2 units of steel and 0.0 units of lumber to
make each unit of lumber. The economy will export 16 units of steel
and 8 units of lumber next month. How many units of steel and
lumber will they need to produce to meet this external demand?
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16 Prove how factor prices of 2 goods can be equalized in 2 countries 5.0 Medium Analytical
having same technology but different factor endowments and factor (Applying/Analysing)
intensity.

U2--Optimization of functions of one variable - Main concepts- First- derivative test or first order conditions- Second- derivative or second order
conditions (sufficient condit ions) Applications: Profit maximization (one product) under: - perfect competition - monopoly. - Cournot
competition (duopoly)- Optimization of functions of more than one variable- The differential version of optimization conditions- Extreme values
of func tion of two variabl

U2-T1-S1--Optimization of functions of one variable - Main concepts- First- derivative test or first order conditions- Second- derivative or
second order conditions (sufficient condit ions) Applications: Profit maximization (one product) under: - perfect competition - monopoly. -
Cournot competition (duopoly)- Optimization of functions of more than one variable- The differential version of optimization conditions-
Extreme values of func tion of two variabl

17 A monopolist discriminates prices between two markets – 1 and 2 and 15.0 Complex(Evaluating/Creating) Problem
his AR functions are given by, AR = 55 − 4Q , AR = 25 − 3Q .
1 1 2 2
oriented
The total cost function is given by C = 20 − 5Q + 2Q where 2

Q = Q1 + Q2 .

a) Find the profit-maximising output to be sold in the two markets.

b) Show that the market with higher elasticity of demand has lower
prices and vice versa.
18 Given a demand function in the form, 15.0 Simple Problem
F (Q , P , P , P , Y ) = 6P Q + 3Q − 2P + 4P − 5Y where Q
1 1 2 3 1 1 1 2 3 (Remembering/Understanding) oriented
1

is quantity demanded, P , P , P are prices of good 1, good 2 and good

1 2 3

3 respectively and Y is income. Find,

a) Own price elasticity.
b) Cross Price elasticities.
c) The income elasticity at point (Q , P , P , P , Y ) = (4, 2, 2, 1, 12)
1 1 2 3

19 Assume the demand and supply function for a product are D(Q) =(Q- 5.0 Medium Problem
2 2
2a) and S(Q) =Q where a>0 is a parameter. Compute Consumer and (Applying/Analysing) oriented
Producer Surplus.
20 Given the short-run total cost function C = 2Q − 15Q + 30Q + 16 , 5.0 Medium
3 2
Problem
a) Find out the level of output at which AVC is minimum and also show (Applying/Analysing) oriented
that MC=AVC at that level of output. b) Show that when output Q=4, the
AC is minimum and MC=AC. [3
+2]
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21 The total cost of a firm is given by C = 50000 − 15Q + 5Q . 2

5.0 Medium Problem
a)Find the level of output at which the slope of AC curve is equal to (Applying/Analysing) oriented
zero.
22 Given the TC function C = 1000 + 10Q − 0.9Q + 0.04Q . Find the
2 3
15.0 Medium Problem
rate of output that leads to minimum AVC. (Applying/Analysing) oriented
a) Suppose T C = F + 2Q . Find F such that the firm breaks even at
2

P=100.
b) Now suppose T C = 50 + 2Q . Will the firm ever shut down?
2

23 Derive the consumption functions given, 5.0 Complex(Evaluating/Creating) Problem

a) MPC= y 1
1

with aggregate consumption 100 when income is zero.

−
3
oriented
4

24 Provide a mathematical proof for, MC=AC, when AC is minimal by 5.0 Simple Descriptive
using quotient rule of differentiation. (Remembering/Understanding)
25 Given the demand and average cost function of a monopolistic firm as 5.0 Simple Problem
P = 32 − 3Q, AC = Q + 8 +
5
, what level of output maximises (Remembering/Understanding) oriented
Q

total profit and what are corresponding values of TR, AR, and MR?
26 A monopolist faces the following demand curve Q = . Its
144

2
15.0 Medium Problem
1
p
(Applying/Analysing) oriented
AV C = Q and its TFC= rupees 5. What are profit maximising price
2

and quantity? Suppose the government regulates the price to the no

greater than Rs 4 per unit, how much will the monopolist produces?
27 An entrepreneur uses one input to produce two outputs subject to the 15.0 Medium Problem
production relation X (Applying/Analysing) oriented
= A(Q + Q ) where a and b > 𝟏. He buys the input and sells the
a
1
b
1

outputs at fixed prices. Express

his profit-maximizing outputs as functions of the prices. Prove that his
production relation is
strictly convex for Q1 and Q2> 0.
28 The market demand curve for a homogeneous product is given by 5.0 Complex(Evaluating/Creating) Problem
P = 160 − Q. There are two firms selling it, each with a constant MC oriented
of Rs. 10. Find the output of the two firms and the equilibrium price if a)
they act independently b) they collude with each other sharing the
market equally.
29 A firm has the production function Q = 2K L and the price of the 5.0 Medium
1

2
1

4
Problem
product P=4 and its input prices are P = 4 and P = 1. Find out the a) (Applying/Analysing) oriented
k L

Profit maximising output.

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30 Given the demand function P = 20 − Q and the total cost function 15.0 Medium Problem
C = Q + 8Q + 2. Answer the following questions:
2
(Applying/Analysing) oriented
a) What output maximises total profit and what are the corresponding
value of price, profit and total revenue?
b) What output maximises total sales and what are the corresponding
value of price, profit and total revenue?

U3--Lagrange- multiplier method- First- derivative test or first order conditions- Second- derivative or second order conditions. Applications:
Utility maximization and consumer demand (two goods, one period)- Utility maximization and consumer demand (one goods, two periods)-
perfect access to international capital markets. - financial autarky. Welfare implications

U3-T1-S1--Lagrange- multiplier method- First- derivative test or first order conditions- Second- derivative or second order conditions.
Applications: Utility maximization and consumer demand (two goods, one period)- Utility maximization and consumer demand (one
goods, two periods)- perfect access to international capital markets. - financial autarky. Welfare implications

31 A monopolist firm produces two commodities x and y whose 15.0 Simple Problem
demand functions are X = 72 − 0.5P x and Y = 120 − P y . (Remembering/Understanding) oriented
The combined cost function is C = X2 + XY+ Y2 +35, and maximum
joint production of and is 40. Find the profit maximising level
of output , price and profit by using Lagrangian method.
32 Find out the extreme values of the function 10.0 Medium Problem
y = x − 2x x + x subject to 4x − 2x = 10 and
3 2
1
1 2
2
2 1 2
(Applying/Analysing) oriented
2

2x + 3x = 25 and test whether this function will be maximised

1 2

or minimised.
33 The production function of a firm is given by Q = 10L K . 10.0 Medium
5

9
4

9
Problem
The cost function is given by C = 4L + 5K . Find least cost (Applying/Analysing) oriented
capital-labour ratio.
34 Define convex and concave functions with suitable examples. Medium 5.0 Interpretative
(Applying/Analysing)
35 Maximise Y = 2x + 2x x − 3x subject to 3x + 5x = 9. 5.0 Medium
2
1 1 2
2
2 1 2
Problem
(Applying/Analysing) oriented
36 Maximize the utility function U=XY subject to the budget 15.0 Medium Application
constraint 100 - XPx -YPy=0 . Find the optimal values of X and Y (Applying/Analysing)
in terms of prices and show that these demand functions are
homogeneous of degree zero in prices and income.
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37 Find the extreme value of the function Y = x 3 2

1
− 2x1 x2 + 20 5.0 Complex(Evaluating/Creating) Problem
2

subject to 2x + 2x = 96 .
1 2
oriented
38 Maximise y = 4x − 5x x + 2x subject to 2x
2
1 1 2
2
2 1
10.0 Medium
+ 6x2 = 22 Problem
and 5x + 5x = 25.
1 2
(Applying/Analysing) oriented
39 The production function for a product is given by Q = 100K L, 10.0 Complex(Evaluating/Creating) Problem
the price of capital is Rs 120 per unit and price of labour is Rs.30 oriented
per unit. What is the minimum cost of producing 10,000 units of
output?
40 Define Strictly Concave and Convex with suitable examples. 5.0 Simple Interpretative
(Remembering/Understanding)
41 Suppose the utility function of Swati is U = x y , the price of 15.0 Medium
2

3
1

3
Problem
commodity x is Rs 10 per unit and the price of y is 15 Rs per unit. (Applying/Analysing) oriented
How many units of the two commodities will swati buy given that
her income M is equal to Rs 450.
42 Find out whether the function f(x)=12x5-45x4+40x3+5 is concave 10.0 Medium Problem
or convex or neither of them. (Applying/Analysing) oriented
43 A consumer has Cobb-Douglas type utility function 15.0 Complex(Evaluating/Creating) Problem
U = AX Y
α
where X and Y are the amount of goods X and Y.
β
oriented
His budget constraint is given by M = XP + Y P . Find X and x y

Y which will maximise the utility subject to the budget constraint.

44 Given U = √− x x and 5x + 2x = 500 , find optimal
−−−
1 2 1 2 10.0 Simple Problem
quantities of x and x .
1 2
(Remembering/Understanding) oriented
45 A producer desires to minimise the cost of production C=16K + 10.0 Medium Problem
4L subject to the given production function Q = 5K L . Find (Applying/Analysing)
1

2
1

2
oriented
the equilibrium combination of inputs in order to minimise the
cost of production when Q=40.
46 A producer desires to minimise his cost of production C=2L+5K 10.0 Simple Problem
subject to the satisfaction of the production function Q=LK. Find (Remembering/Understanding) oriented
the optimum combination of L and K in order to minimise cost of
production when output is 40.

U4--Uncertainty and consumption under capital markets imperfections- Applications: Utility maximization and consumption under uncertainty
of output path and incomplete markets. Certainty equivalence and precautionary savings- Multiple agents optimization- Application: Optimal
taxation. Exogenous government spending- Benevolent government
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U4-T1-S1--Uncertainty and consumption under capital markets imperfections- Applications: Utility maximization and consumption
under uncertainty of output path and incomplete markets. Certainty equivalence and precautionary savings- Multiple agents
optimization- Application: Optimal taxation. Exogenous government spending- Benevolent government

47 Discuss the first and second order conditions for a local maxima 5.0 Simple Descriptive
and minima. (Remembering/Understanding)
48 A firm faces the production function Q = 120L + 200K − L2 − 5.0 Complex(Evaluating/Creating) Problem
oriented
2K2 for positive values of Q. It can buy L at £5 a unit and K at £8
a unit and has a budget of £70. What is the maximum output it
can produce?
49 Consider an economy with two consumers, two public goods, one 10.0 Medium Descriptive
ordinary good, one implicit production function, and a fixed (Applying/Analysing)
supply of one primary factor that does not enter the consumers’
utility functions. Determine the first order conditions for a Pareto
optimal allocation. In particular, what combinations of RCSs must
equal the RPT for the two public goods.
50 a) A firm sells two competing products whose demand schedules 15.0 Complex(Evaluating/Creating) Conceptual
are q1 = 120 − 0.8p1 + 0.5p2 and q2 = 160 + 0.4p1 − 12p2 How
will the price of good 2 affect the marginal revenue of good 1
b) Derive the four second-order partial derivatives for the
production function Q = 6K + 0.3K2L + 1.2L2 and interpret their
meaning
51 A firm operates with the production function Q = 4K0.6L0.5 and 5.0 Medium Application
can buy K at £15 a unit and L at £8 a unit. What input (Applying/Analysing)
combination will minimize the cost of producing 200 units of
output? use the Lagrangian method
52 Explain external economies and diseconomies mathematically. 15.0 Simple Problem
(Remembering/Understanding) oriented
53 Explain Lindahl Equilibrium. 5.0 Medium Descriptive
(Applying/Analysing)
54 Classify the stationary values of the function f(x)= X3- 3X2 + 5 as 15.0 Medium Interpretative
local Maximum, local Minimum and inflexional values. Also, (Applying/Analysing)
explain whether the function is strictly increasing or not, give the
reason
55 Assume that the cost functions of two firms producing the same 15.0 Medium Problem
commodity are C1 = 2
2
q
1
+ 201q − 21q q2, C 2 = 3 q
2
2
+ 60 q . 2 (Applying/Analysing) oriented
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Determine the output levels of the firms on the assumption that

each equates its private MC to a fixed market price of 240.
Determine their output levels on the assumption that each equates
its social MC to the market price.

U5--Case Study

U5-T1-S1--Case Study

56 a) Find the point elasticity of demand given by Q = K/Pn, where K and 15.0 Medium Case
n are positive constants. (Applying/Analysing) Study
(i) Does the elasticity depend on the price in this case? (3)
(ii) In the special case where n=1, what is the shape of the demand
curve? (2)
(iii) What is the point elasticity of demand? (5)
b) Assume that an entrepreneur’s short-run total cost function is C =
q𝟑 − 10q𝟐 + 17q + 66.
Determine the output level at which he maximizes profit if p = 5.
Compute the output
the elasticity of cost at this output. (5)
57 A monopolist faces demand from two groups of consumers. 15.0 Medium Case
Demand from class 1 is given by: Q1=20 – P (Applying/Analysing) Study
Demand from class 2 is given by: Q2=22 – (1/2)P
A monopolist has costs given by:
TC=10 + 0.5Q2
MC=Q
The firm is able to price discriminate between the two markets.
a) Which group of customers has the more elastic demand curve? [2]
b) Which group do you expect will pay a higher price? [2]
c) What is the equation for Marginal Revenue for each class of
consumers? [2]
d) What quantities will the monopolist sell in the two markets? [5]
e) What price will the monopolist charge in each market? Are the
optimal prices in each class consistent with your prediction in part (b)?
[4]
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58 a) A monopoly can sell in two separate markets at different prices (in 15.0 Simple Case
£) and faces the marginal cost schedule MC = 1.75 + 0.05q The two (Remembering/Understanding) Study
demand schedules are p1 = 12 − 0.15q1 and p2 = 9 − 0.075q2 What
price should it charge and how much should it sell in each market to
maximize profit? (10)
b) Find the profit-maximizing output for a firm with the total cost
function TC = 4 + 97q − 8.5q2 + 1/3q3 and the total revenue function
TR = 58q − 0.5q2. (5)
59 In a Keynesian macroeconomic system, the following relationships 15.0 Complex(Evaluating/Creating) Case
and values hold: Y = C + I + G + X − M Study
C = 0.8Yd , M = 0.2Yd , Yd = (1 − t)Y , t = 0.2, G = 400, I = 300 , X =
288
What is the equilibrium level of Y ? What increase in G would be
necessary to increase Y to 2,500? If this increased expenditure takes
place, what will happen to (i) the government’s budget surplus/deficit,
and (ii) the balance of payments?
60 A local microbrewery has total costs of production given by the 15.0 Simple Case
2
equation TC=500+10q+5q . This implies that the firm's marginal cost (Remembering/Understanding) Study
is given by the equation MC=10+10q. The market demand for beer is
given by the equation QD=105 – (1/2)*P.
a) Write the equations showing the brewery's average total cost and
average variable cost and average fixed cost, each as a function of q.
Show the firm's MC, ATC and AVC on one graph. [3]
b) What is the breakeven price and breakeven quantity for this firm in
the short run? [3]
c) What is the shutdown price and shutdown quantity for this firm in
the short run? [4]
d) If the market price of the output is $50, how many units will this
firm produce? [2]
e) Given a market price of $50, how many firms are in this market? [3]
61 Suppose Charter Communications is a monopolist in providing cable 15.0 Medium Case
television services to local consumers in Madison. The market demand (Applying/Analysing) Study
curve faced by Charter Communications is P = -Q + 30, and Charter’s
cost is given by TC=Q2/2 + 20, and Charter Communication’s
marginal cost is given by MC=Q.
a) What is the equation for Marginal Revenue for this monopolist? [1]
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b) Draw the Demand curve, Marginal Revenue curve, and Marginal

Cost curve for this monopolist in a graph. [3]
c) What is the monopolist’s profit-maximizing production quantity,
QM? What price, PM , will the monopolist charge? [3]
d) Compute the Consumer surplus, producer surplus and profits for the
monopolist. [5]
Now, suppose there is a technological change for the monopolist and
the result of this technological change is that the firm’s cost curves
change. Charter Communications total cost is now given by TC =
10Q, and its marginal cost is given by MC = 10.
e) What is the monopolist’s profit-maximizing production quantity
QM? What price, PM, will the monopolist charge? [3]
62 a) In a closed economy (i.e. one with no foreign trade) the following 15.0 Medium Case
relationships hold: (Applying/Analysing) Study
C = 0.6Yd , Yd = (1 − t)Y , Y = C + I + G I = 120, t = 0.25 G = 210
where C is consumer expenditure, Yd is disposable income, Y is
national income, I is an investment, t is the tax rate and G is
government expenditure. What is the marginal propensity to consume
out of Y? What is the value of government expenditure multiplier?
How much does government expenditure need to be increased to
achieve a national income of 700?
b) Given the following utility functions, how much of A will be
consumed if it is a free good? If necessary give answers in terms of the
fixed amount of B.
(i) U = 96A + 35B − 0.8A2 − 0.3B2
(ii) U = 72AB − 0.6A2B2
(iii) U = A0.3B0.4
63 An industry consists of two firms, each of which have variable costs of 15.0 Complex(Evaluating/Creating) Case
$10 per unit but no fixed costs. The industry demand curve is P = 70 - Study
Q.
a) Solve for the Cournot equilibrium. Solve for each firm's output, the
market price, and each firm's profits. [5]
b) Now suppose that firm 1 is a Stackelberg leader while firm 2 is a
follower. What will each firm produce, what will the price be, and
what profits will each firm earn? [5]
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c) What will happen if this market is "contestable"? What conditions

are necessary for contestability to be a real possibility? [5]

U6--Economic application of Difference equations and differential equations

U6-T1-S1--Economic application of Difference equations and differential equations

64 Write a note on Cobweb Model. (5) 5.0 Simple Descriptive

(Remembering/Understanding)
65 Explain diagrammatically Dynamic stability and the Time Path 5.0 Complex(Evaluating/Creating) Conceptual
of adjustment.
66 Mention the assumptions of the Dynamic model of market 5.0 Simple Descriptive
stability. (Remembering/Understanding)
67 Write a note on Harrod-Domar growth theory. 5.0 Medium Conceptual
(Applying/Analysing)
68 Write a note on Dynamic model of market stability. 5.0 Medium Conceptual
(Applying/Analysing)
69 What are the assumptions of Cobweb theory? 5.0 Medium Descriptive
(Applying/Analysing)
70 What are the main assumptions of Harrod Domar growth theory? 5.0 Medium Descriptive
(Applying/Analysing)
71 Diagrammatic representation of Cobweb model. 5.0 Complex(Evaluating/Creating) Interpretative

U7--Game theory and its applications- two person zero sum game, concept of nash equilibrium, method of dominance,

U7-T1-S1--two person zero sum game, concept of Nash equilibrium, concept of pure strategy and mixed strategy

72 Write a note on 5.0 Simple Descriptive

a) Pure strategy (Remembering/Understanding)
b) Mixed strategy
73 What do you mean by Nash Equilibrium and Dominant Strategy? 5.0 Medium Descriptive
(Applying/Analysing)
74 Is the Dominant Strategy same as the Nash equilibrium? Why is 5.0 Complex(Evaluating/Creating) Conceptual
an equilibrium stable in Dominant Strategies? 3+2
75 What is the problem of the prisoner's dilemma? 5.0 Medium Conceptual
(Applying/Analysing)