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AMI810S-ADVANCED MICROECONOMICS-1ST OPP-JUNE 2022 |
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n Am I BI A u n IV ERs ITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF MANAGEMENT SCIENCES
DEPARTMENTOF ACCOUNTING,ECONOMICSAND FINANCE
QUALIFICATION:BACHELOROF ECONOMICS
QUALIFICATION CODE: 07BECO
LEVEL: 8
COURSECODE:AMl8105
COURSENAME: ADVANCED MICROECONOMICS
SESSION:JUNE 2022
DURATION: 3 HOURS
PAPER:THEORY
MARKS: 100
FIRSTOPPORTUNITYEXAMINATION QUESTION PAPER
EXAMlNER(S) MR. PINEHASNANGULA
MODERATOR: Dr Ernest Ngeh Tingum
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLEMATERIALS.
1. Scientific calculator
2. Pen and Pencil
3. Ruler
THIS QUESTION PAPERCONSISTSOF_ 4_ PAGES{Including this front page)
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QUESTION ONE
[25 MARKS]
A bicycle manufacturing company is considering how to allocate a N$15 million advertising
budget between two types of tournaments: NPLfootball game and Namibian newspaper
game. The following table shows the new bicycle that are sold when a given amount of
money is spent on advertising during an NPLfootball game and a Namibian newspaper game.
Let P be the amount of money devoted to advertising on NPLfootball games, Tthe amount of
money spent on advertising on Namibian newspaper game, and C(P,T)the number of new
bicycle sold.
Total spent
New sales from NPL New sales from
Total Sales
(Millions)
football game
Namibian
newspaper game
N$0.00
0
0
N$3.00
4
15
N$6.00
11
21
N$9.00
16
27
N$12.00
26
31
N$15.00
31
34
i) What is the objective function for this problem?
[1 mark]
ii) What is the constraint?
[1 mark]
iii) Write a statement of the constrained optimization problem.
[2 marks]
iv) Calculate total sales associated with each spending on NPLfootball games and
Namibian newspaper game.
[6 marks]
v) Considering the inforn,ation in the table, how should the manufacturer allocate its
advertising budget?
[S marks]
b) The demand function for beef is P = 100 - 0.SQ and the supply function for beef is P = 90
+ 0.SQ2• Use integration to calculate consumer's surplus and producer's surplus. [10 marks]
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QUESTION TWO 2
[25 MARKS]
You have a choice to make between clothing (C) and food (F), the price of cloth is N$45.00
per cloth and the price of food is N$30.00 per kg. Your utility function is U(F, C) = zo{Fc
and your income is N$30000.00.
a) If the price of food increases from N$30.00 to N$40.00 while the price of cloth and income
remain the same, construct demand curve for food. Use a clear labelled graph to present
your answer. Let food be on the x-axis.
[12.5 marks]
b) If the price of cloth increases from N$45 to N$55.00 while the price of food and income of
consumer remain the same N$30 and N$30000.00 respectively, construct demand curve
for cloth. Use a clear labelled graph to present your answer. Let food be on the x-axis.
[12.5 marks]
QUESTION THREE
[25 MARKS]
A homogeneous products duopoly faeesa market demand function given by Q = 50 - 0.2P.
Firm A marginal cost is N$15.00 and firm B marginal cost is N$15.00.
a)
i. What is Firm A's profit-maximizing quantity, given that Firm B produces an output of
45 units per year?
[2.5 marks]
ii. What is Firm A's profit-maximizing quantity when Firm B produces 40 units per year?
[2.5 marks]
b) Derive the equation of each firm's reaction curve and then graph these curves.
[5 marks]
c) What is the Cournot equilibrium price and quantity per firm in this market?
[5 marks]
d) What would be the equilibrium price in this market if it were perfectly competitive?
[5 marks]
e) What would be the equilibrium price in this market if the two firms colluded to set a
monopoly price?
[5 marks]
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QUESTION FOUR
[25 MARKS]
Consumers derived utility from consuming good x and good y. Utility function is UX,Y) =
20x0-4yo.4 good y is a composite good (Py= N$1}, the price of good x is (Px =N$10.00) and
consumer income is (I= N$S00}. Government would like to increase the consumption of good
x with 60 per cent. Government can achieve this objective by either giving cash subsidy or a
voucher that can only be used in the purchasing of good x. Government can only spend
N$300.00.
a) Use a well labelled graph to represent the above information.
[S marks]
b) Calculate optimal combination of good x and goody associated with each option. Which
option will you recommend and why?
[10 marks]
c) If government has only N$200.00 to spend to increase the consumption of good x,-which
option will you recommend?
[10 marks]
All the best