Microeconomic Theory (ECST5101)
DIPET 2 in Economics - ECNT
Semester: First Semester
Level:
Year: 2019
Departaent: Economies Lecturer(s): Pr.Njimantedi G F
Semester:
First
Academie Year: 2018/2019
Course Title: Microeconomic Theory
School: HTTTC
Level: 400
Course Code:
Question One (30marks)
a) With the aid of suitable assumptions proof that the Ordinalists utility function is well
behaved and that the marginal rate of technical substitution for any two or more commodities
is equal to their price ratio. 10marks
b).
Algebraically justify that the utility of money is constant while the demand curve is
downward sloping and is half price of the same product at any given level of income
10marks
c).
If a consumer consumes two commodities and the price of one of the commodity changed
while the other remains the same. If the budget constraint is also fixed within the period
which this changes occurred.
d) Show that three different effects can be generated from such a situation
5marks
e) Graphically present the Hicksian, the Slukian and the Marshallianian demand curves and
explain the different between the Marshallianian and the compensated demand curve.
5marks
Question One 2Omarks
MTN has identified three distinct demands for its services
Weekends: Q
1
= 90 - 0.5
p
1
Feast Days: Q
2
= 35 - 0.25
p
2
2
Nights: Q
3
=
30 - 0.2p
Date: Hall: Time Allowed: 2hrs
Instructions:
Answer Question One (1) and any Two other Questions
REPUBLIC OF CAMEROON
Peace – Work - Fatherland
THE UNIVERSITY OF BAMENDA
P.O BOX 39, Bambili
www.schoolfaqs.net
TC = 25 + 20 Q, where Q = Q
1
+ Q
2
+ Q
3
a) Find the profit maximising output and price i) with Discrimination ii) without
Discrimination (10 Marks)
b) Find the price elasticity of demand in each market and hence show that the prices
charged are inversely related to price elasticity of demand. (5 Marks)
c) Show that MR.= p (1 -
)
, where PED=Price Elasticity of Demand (5 Marks)
Question Three 20marks
Two competing firms are contemplating of either maintaining their prices or increasing them.
Given that they both face a constant average cost of 20frs and maintaining their prices at 50frs
makes them to sell 50 units each while if they both increase their prices to 100frs, each of
them will sell 10 units. However, if one person increases the price while the other person
maintains it, the person that maintains the price sells 70 units while the person that increased
the price sells 5 units. Assuming that all the conditions of the Prisoners' dilemma hold,
a)
Construct the payoff matrix in terms of profits (10 Marks)
b)
Are there dominant strategies and nash equilibrium in the game? (5 Marks)
c)
Determine the optimal outcome of the game? (5 Marks)
Question Four (20marks)
a)
Explain the Marshallian welfare economics and examine the Marshall's tax-bounty
analysis in relation to aggregate economic welfare (10 Marks)
b)
Welfare criteria is analysed based on varied conceptions. Explain the following
criterions in relation to welfare
i )
P a r e t i a n c r i t e r i o n
i i )
Compensation or Kaldor-Hicks criterion
i i i )
Sci t o v s k y D ouble c r i t eri o n
i v )
Par eto i mp r ove me nt (2.5 Marks X 4=10Marks)
www.schoolfaqs.net
www.schoolfaqs.net
