Question 17

In the
game of matching pennies, each player has a penny and must secretly turn
the penny to either heads or tails. They then reveal their choices
simultaneously. If the pennies match—both heads or both tails—player A keeps
both pennies, so he wins one from player B. If the pennies do not
match—one heads and one tails—B keeps both pennies, so she wins one from
A. For instance, If the pennies match, A wins one penny and B loses one,
so their payoffs are (1,-1). If they pennies don't match, A loses one and B
wins one, so their payoffs are (-1,1).

i.
Write down the payoff matrix for this game.

ii.
What is meant by Nash equilibrium?

iii.
Does this game has a pure strategy Nash
equilibrium/ equilibria? If not, then calculate the mixed strategy Nash
equlibrium.

Question
24

The
following five firms are in the sugar industry. Their sales are:

Firm A: sales= €35,000

Firm B: sales= €30,000

Firm C: sales= €25,000

Firm D: sales= €20,000

Firm E: sales= €15,000

There are
also 3 other firms in this market, which have 5% of the market each.

a)
Calculate the market share of firms A to E.

b)
Calculate the 3-firm concentration ratio.

c) Calculate
the Herfindahl index (or H-index).

Question 31

i)
Discuss all the make-or-buy fallacies.
[10 marks]

ii)
What is the difference between complete and
incomplete contracts? Explain all the factors that prevent complete
contracting. [10 marks]

iii)
What are the advantages and disadvantages of
using market firms? [5 marks]

Question 37

Suppose a firm produces two products, X and Y. The production
technology displays the following costs, where C(i,j) represents the cost of
producing i units of X and j units of Y:

C(0,50) = 100 C(5,0) = 150

C(0,100) =
210 C(10,0) = 320

C(5,50) = 240 C(10,100) = 500

i.
Does this production technology display
economies of scale? Why?

ii.
Does this production technology display
economies of scope? Why?

iii.
How can one achieve economies of scale in
purchasing?

iv.
Explain the relationship between economies of
scale and specialization.

v.
What is a learning curve?

Question
42

The market for study desks
is characterized by perfect competition. Firms and consumers are price takers
and in the long run there is free entry and exit of firms in this industry. All
firms are identical in terms of their technological capabilities. Thus the cost
function as given below for a representative firm can be assumed to be the cost
function faced by each firm in the industry. The total cost and marginal cost
functions for the representative firm are given by the following equations:

Suppose that the market
demand is given by:

i.
Find the
marginal cost and average total cost for the firm.

ii.
What is the long-run equilibrium price and
quantity in this market?

(Hint: in the long run MC= ATC)

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