ECON 302 Intermediate Microeconomic Theory II Final Exam Version 1 tips actual tested questions and answers Concordia University
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Course
ECON 302 Intermediate Microeconomic Theory II
Institution
Concordia University (
)
ECON 302 Intermediate Microeconomic Theory II Final Exam Version 1 tips actual tested questions and answers Concordia University
Part 1: Analytical problems. Each problem is worth 30 points. In total 60 points for Part 1.
1. Two firms operate in a market where the inverse demand is given by p = 2...
ECON 302 Intermediate Microeconomic Theory II
Final Exam Version 1 tips actual tested questions and
answers Concordia University
, ECON 302 Intermediate Microeconomic Theory II Final Exam Version 1
tips actual tested questions and answers Concordia University
This is a 3.5-hour open-book take-home exam. Please answer all the questions
in Part 1 and Part 2. The total points is 100. Arrange your time properly. Make
sure you upload your complete answers in ONE PDF file on the Moodle site. Good
luck!
Part 1: Analytical problems. Each problem is worth 30 points. In total
60 points for Part 1.
1. Two firms operate in a market where the inverse demand is given by p = 240 — 2Y. Their
cost functions are c1(y1 ) = 0.5y21+1200 and c2(y 2 ) = 2y22+1200, correspondingly. Note
that the market quantity is Y = y1+y2. At any stage round your numbers to the second
decimal place if necessary.
Assume that the two firms decide their output simultaneously.
(a) State the maximization problem of each firm and derive their reaction functions.
(b) Find the optimal quantity that each firm produces, as well as the market quantity, the
market price, the profits for each firm, and the industry profit.
Assume now that the two Cournot competitors decide to collude and form a
cartel.
(c) State the maximization problem for the cartel and derive the first order conditions.
(d) What would be the output of each firm? What would be the cartel’s optimal quantity?
What is the market price? What is the industry profit?
Assume now that the two firms perform Stackelberg competition: firm 1 is
the first mover and firm 2 is the follower.
(e) Use backward induction to solve for the optimal output for each firm.
(f) What is the market price? Approximately what is the profit of each firm?
2. Consider a two-player game where the player A chooses “up” or “down” and player B chooses
“left” or “right” Their payo↵s are as follows: When player A chooses “up” and player B
chooses “left” they both get $6. When player A chooses “up” and player B chooses “right”
they get $2 (for A) and $4 (for B). When player A chooses “down” and player B chooses
“left” they get $1 (for A) and $6 (for B). Finally, when player A chooses “down” and player
B chooses “right” they both get $5. The two players decide simultaneously.
(a) Draw the strategic form game. Is there any dominant strategy? Justify your answer.
(b) Is there a Nash equilibrium in pure strategies? Justify your answer.
(c) Find the best response functions and the mixed strategies Nash Equilibrium if each
player randomizes over his actions.
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