School of Economics, University of Sydney
ECON5026
PRACTICE MID SEM TEST – PART A (MCQ/FILL IN THE BLANK Q’S)
PART A
Multiple choice and Objective part
Question 1
Which of the following statements provide appropriate comparison of pricing under first
degree price discrimination and perfect competition when marginal cost is constant?
(a) Both competitive and first degree price discrimination entails Price= Marginal cost for
all goods sold.
(b) In perfectly competitive market the last unit of the good is sold at Price=Marginal cost
whereas in first degree price discrimination Price = Marginal cost for all goods sold.
(c) In perfectly competitive market Price= Marginal cost for all goods sold; whereas in
first degree price discrimination Price=Marginal cost for the last unit of the good sold.
(d) In both perfect competition and first degree price discrimination Price > Marginal cost
for all goods sold.
Question 2
Suppose that an investor can yield (X) three possible cash flows: $320, $200 or $40. The
probability of each outcome is 2/8, 5/8 and 1/8, respectively. What is the expected value
[E(X)] and standard deviation [SD(X)] of the investment?
(a) E(X) = 1800.23 and SD(X) = 1400
(b) E(X) = 210 and SD(X) = 81.853
(c) E(X) = 13027 and SD(X) = 156.934.
(d) E(X) = 184.8 and SD(X) = 114.138
Question 3
Which of the following statements is not correct?
(a) When dominant strategies do not exist, the concept of a Nash equilibrium is useful in
predicting the outcome.
(b) A dominant strategy exists when it is optimal for a firm to choose that strategy no
matter what its rival does.
(c) Coordination can prove more difficult in cases where precommitment communication
is costly and/or there are many players.
(d) In a mixed strategy Nash equilibrium, players do not randomise over pure strategies.
Question 4
Which of the following is not an example of transaction cost?
(a) Costs of learning product characteristics.
(b) Costs of hiring new employees.
(c) Costs of negotiating and drafting contract for sellers.
(d) Search costs for customers.
Question 5
Both Mercedes Benz and BMW, the two popular automobile manufacturing companies have recently
made a move to manufacture fully electric cars. Alternatively, they can just stick to their hybrid
models. Suppose they have the following payoff as they compete in the market,
Mercedes
BMW
Hybrid Fully Electric
Hybrid -100, -100 200, 0
Fully Electric 0, 150 0, 0
Which of the following options convey the pure strategy equilibrium in this game?
(a) One pure strategy is that both Mercedes and BMW manufacture hybrid vehicles.
(b) One pure strategy is that both Mercedes and BMW manufacture fully electric.
(c) One pure strategy is that Mercedes manufactures fully electric and BMW manufactures
Hybrid.
The other pure strategy is that Mercedes manufactures Hybrid and BMW
manufactures fully electric vehicles.
(d) One pure strategy is that both Mercedes and BMW refrains from manufacturing given the
negative and zero payoffs.
Question 6
Which of the following is an appropriate expression for total surplus?
(a) Total surplus = Price – Total Willingness to Pay
(b) Total surplus = Price – Marginal Cost
(c) Total surplus = Total Willingness to Pay – Marginal Cost
(d) Total surplus = Total Willingness to Pay – Price
Question 7
Which of the following is not a feature of the Stackleberg model?
(a) Firms are involved in price competition.
(b) a leader is able to commit to output before the follower(s).
(c) Firms produce identical products.
(d) Followers choose output to maximise profits after observing the leader’s output.
Question 8 (Fill in the blank question)
The demand for good X is given by P= 500 – 3Q, where Q is the market quantity, and P is the
market price. Production of good X involves costs of C = 100 + 20q, where q is firm output. If
a single firm operates in the market, then the profit-maximising price and quantity of the
monopolist are
and
, respectively.
Question 9
Suppose Burger King is located at kilometre zero and Pizza hut is located in at Kilometre M.
Both these restaurants are located on either end of a road that is K kilometres long.
Restaurants’ location is fixed, and they can only affect price. There are 100 customers spaced
equally along the road. Assume cost of travelling per kilometre = t, the cost of a meal at
Burger King= PB and the cost of a meal at Pizza Hut = PP
Based on the above information, which of the following expressions correctly shows the
location (x) of the marginal customer who remains indifferent between the two shops.
(a)
= ାಳିು ଶ௧
(b)
= ଶାಳାು ଶ
(c)
= ସ − ುିಳ ଶ௧ .
(d)
= ଶ + ುିಳ ଶ௧ .
Question 10 (fill in the blank/ drop down question)
Consider that a cable television company needs to decide about its monthly subscription for its
movie channels for two types of families, for families with dependent children (D) and for
families with no dependent children (N). Suppose the television company faces the following
inverse demand functions:
PD=28−4Q
PN=48−8Q
Where Q represents the number of movie channels watched each month. Further, assume that
the marginal cost of provision of the access to view the channels is zero.
If the television
company can identify two types of buyers (the families) with the information about whether
the families possess dependent children collected, then for an all or nothing deal, the television
company should charge the families without dependent children (N) and families with
dependent children (D) a monthly subscription price of
and
,
respectively.
-:End of Document:-
School of Economics, University of Sydney
Sample Descriptive questions
Question 1
Suppose you have been investing in a bundle of selected stocks (Y). You are aware of your expected
returns [E(Y)] and investment volatility measured by standard deviation () such that () = $1000 + . For any given value of
= $500, explain your certainty equivalent and risk premium?
(Use an appropriate fully labelled diagram in your answer).
[6 Marks]
Question 2
Consider that a firm embarks on a month-long sales campaign with flexible pricing options
for LED televisions and sound systems. There are four customers with valuations for each
of these products as indicated in the table below:
Customer LED Televisions Sound System
Wang 1300 500
John 1000 1000
Khan
500 1200
Jessica 1600 1000
The marginal and average cost of making a LED television is $900, and the marginal and
average cost of making a sound system is $600.
Explain the optimal pricing strategy of the firm if:
(i) there is no budling
(ii) bundling of the two products
(iii)
a mix or optional bundling.
How much profit will the company make in each case?
(Show your work detail.)
[7 Marks]
-: End of Document:-
51作业君版权所有
