economics resit Exam 2015 PDF

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Summary

economics seen exam 2015/16...

Description

Examination question paper: Reassessment from 2015/16 Module code:

EC6005 (RESIT)

Component number:

003

Module title:

Industrial Economics and Regulation

Module leader:

Chris Elven

Date:

February 2018

Duration:

3 Hours

Exam type:

Part Seen/Part Unseen, Closed

Materials supplied:

None

Materials permitted:

Calculator

Warning:

Candidates are warned that possession of unauthorised materials in an examination is a serious assessment offence.

Instructions to candidates:

Candidates will be required to answer ALL questions from Section A and TWO questions from Section B.

Do not turn page over until instructed © London Metropolitan University

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Section A – Seen part

[40% of the marks are available here.]

Answer ALL of the following: Suppose that demand in a particular industry is given by Q = 400 – P. Consumer are price-takers. Firms have a marginal cost c=20. 1. Suppose firms operate in a competitive market. What is the equilibrium quantity and price? [5 marks] 2. Suppose there is a monopoly. (i) What is the equilibrium market and price? Calculate the deadweight loss. [8 marks] (ii) Compare your answer to that of part 1 above. [2 marks] 3. Suppose there are 2 identical firms behaving in a Nash Cournot fashion. (i) Derive each firm’s reaction (or best response) function. [5 marks] (ii) What is the market equilibrium quantity and price, and the deadweight loss? Compare your answer to those of parts 1 and 2 above. [5 marks] 4. Now suppose that there are two countries, each with 2 firms behaving in a Nash Cournot fashion in the industry under consideration. Suppose that the two countries form a common market, that is, a market without any trade barriers between them. Suppose furthermore that international transport and distribution costs are negligibly small, and that there are no taxes. (i) Derive the new reaction function of each firm. [4 marks] (ii) What is the market equilibrium quantity and price, and the deadweight loss? Compare your answer to those of parts 1, 2 and 3 above. [5 marks] (iii) Suppose now that international transport and distribution costs are positive and significant. How does this affect your answers to parts (i) and (ii) immediately above? [3 marks] (iii) Suppose now that one country is very large and the other very small, as reflected in the size of demand (and that international transport and distribution costs are once again negligible). How does this affect your answer to parts (i) and (ii) immediately above? [3 marks]

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