Other Economics Answers

W/t Kedija, the employee of CMN Agency, government owned, has worked 10 hours, 8 hours and 12 hours, during the holidays, after mid night on working days and weekends respectively in a given month. In the same month, she has earned a regular monthly salary of 1,120 BIRR as the result of working 140 regular working hours. Determine her gross overtime earnings for the month.

Explain the difference between" the national efficient level"for one country and the"global efficient level" for two countries (in bilateral agreements). Illustrate your answer by means of a graph

2) Suppose that consumers of a good can be represented by the demand function Q(P)=

50-P. The good is manufactured by an upstream monopolist with cost function C(Q)=

Q2 + 2Q + 10. A downstream monopolist resells the good to consumers (without further

production activity).

(a) Determine the industry outcome, profits and consumer surplus.

(b) Consider a vertical merger. Compare the industry outcome, profits and consumer

surplus to part (a).

(c) Suppose the upstream monopolist franchises the product to the downstream firm.

Which two-part tariff should the upstream monopolist choose? Determine the profits of the

firms.

1) Suppose that the demand function of an industry can be described by Q(P) = 1500-

3P. Assume there are two firms with cost function C(g) = 20g.

(a) Determine the equilibrium outcome and profits when firms set quantities sequentially

as in the Stackelberg model. Assume that firm 1 is the leader.

(b) Assume firm 1 is the incumbent in a monopoly market and firm 2 a potential entrant.

Entry implies a fixed cost of F = 300. Can entry be deterred? Will the incumbent firm deter

entry?

(c) Suppose entry implies a fixed cost of F = 30000. Will the incumbent firm deter

entry?

(d) What would firm 1 do if there were no threat of entry? What does this mean for the

incumbent's strategy in part (C)?

In a perfectly competitive industry, the market price is R20. An individual firm produces output at which MC = R25. What should the firm do to maximise profits or to minimise losses in the short run?

•  A. they should shut down.
•  B. they should increase production.
•  C. they should decrease production.
•  D. they should leave the output unchanged

If a perfectly competitive firm’s marginal cost is greater than its marginal revenue at its current level of production, what must the firm do to increase its profit?

A. Increase its output.

B. Decrease its output.

C. Increase the price of its product.

D. Reduce the price of its product.

Suppose there is a covered bowl with 3 red balls and 6 other balls, which could be black or yellow. The Decision Maker [DM] doesn’t know how many black or yellow balls there are, other than there are 6 in total. The DM will choose one ball from the bowl; each ball is equally likely to be chosen. The DM is offered a choice between Option A, which pays off LKR1000 if a red ball is drawn (0 otherwise) or Option B, which pays off LKR1000 if a black ball is drawn (0 otherwise). The DM says she prefers A to B. The DM is then offered a choice between Option C, which pays off LKR1000 if a red or yellow ball is drawn (0 otherwise), or option D, which pays off LKR1000 if a black or yellow ball is drawn (0 otherwise). The DM says she prefers D to C. Argue that these preferences are not consistent with the things you learned about decision making under uncertainty and the basics of the theory of expected utility.