**MEC 001 MICROECONOMIC
ANALYSIS**

**December 2019 Question
Paper**

**Time : 3
hours Maximum Marks : 100 **

**Note :
Attempt questions from each section as per instructions given. **

**SECTION A**

**Answer
any two questions from this section. **

**1. Discuss
the Stackelberg model for oligopoly markets. How does it compare with Cournot
model ? **

**2. Consider
the Pareto efficiency conditions for the provision of a public good. Show that
if the sum of the marginal rates of substitution adds up to more than the
marginal cost, then more of the public goods and less of the private goods
should be produced. **

**3. Consider
a pure exchange economy with 2 goods (X and Y) and 2 consumers (A and B) having
utility functions : **

**Consumer A :
UA = (XA) 2YA**

**Consumer A
is endowed with units (2, 6) of commodities X and Y respectively. Consumer B :
UB= XBYB. **

**Consumer B
is endowed with units (4, 2) of X and Y respectively. Compute the market
equilibrium price and quantity combinations of the consumer that will result in
efficient allocation of resources. **

**4. What do
you understand by a social welfare function ? What properties of social optima
would you consider necessary if such a function exists ? Discuss these
properties. MEC-001 2 **

**SECTION B**

**Answer any
five questions from this section. **

**5. Differentiate
between any two of the following : **

**(a)
,Homogenous and Hdmothetic production functions **

**(b) Pooling
and Separating equilibria **

**(c) Basing
point price and Limit price **

**6. Suppose
the consumer's preferences are given by the utility function U(xl, x2) = x ix12
'. The prices are p 1and p2respectively. The income is M. Find the ordinary
demand function and indirect utility function. **

**7. Explain
how Shepherd's lemma can be used to derive the production function from the
cost function. **

**8. Take a
consumer with a two :period horizon. Her utility function is given as U = c
1c2, where c1is current consumption and c 2is future consumption. Her current
income Yl= 10,000 and future income Y2= 5,250. If the rate of interest is known
to be 5% per annum, find the optimum consumption expenditures of the consumer. **

**9. Given the
following extensive form game : **

**(a) Find the
subgame perfect Nash equilibrium. **

**(b) Write
its normal form and solve for Nash equilibrium.**

**(c) Compare
the solutions of the game obtained in (a) and (b) above and state which of
these offers a better solution.**

**10. What
insight do we gain from the efficiency wage model developed by Shapiro and
Stiglitz ? Discuss its important conditions that help solve for equilibrium
conditions. **

**11. Consider
the Cobb-Douglas production function : Q = A Ka LO Show that : **

**(a) The
output elasticity with respect to each input is constant. **

**(b) It can
accommodate all types of returns to scale. **

**12. Write
short notes on the following : **

**(a)
Producer's Surplus **

**(b) Baumol's
Alternative Theory of the Firm **

**(c)
Hotelling's Lemma **

**(d) Second
Welfare Theorem**

** **

** **

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