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IEC820S-INDUSTRIAL ECONOMICS-2ND OPP-JAN 2025 |
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nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ECONOMICS HONOURS
QUALIFICATION CODE: 08BECH
COURSE CODE: IEC820S
LEVEL: 8
COURSE NAME: INDUSTRIALECONOMICS
SESSION: JANUARY 2025
PAPER:THEORY
DURATION: 3 HOURS
MARKS: 100
SECOND OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER(S) Ms K. Kavezeri
MODERATOR: Dr E. Tingum
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Pens/pencils
2. Calculator
3. Ruler
THIS QUESTION PAPER CONSISTS OF 4 PAGES (including this front page)
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QUESTION 1 [25 MARKS]
1. If the firm's total cost function is C - 50 + 6Q + 2Q 2 , derive:
a) The firm's marginal cost function
(1)
b) The firm's average cost function
(1)
2. Consider two identical firms (no. 1 and no. 2) that face a linear market demand curve. Each
firm has a marginal cost of zero and the two firms face demand:
P = 50 - 0.SQ,
where Q = Q1 + Qz.
a) Find the Cournot profit maximizing quantity for each firm.
(12)
b) Compute the resulting market price and total output.
(3)
3. An oligopolist faces a kinked demand curve with segments given by:
P = 100 - Q and P = 120 - 2Q.
The firm has a constant marginal cost,
MC= N$45.
Determine the profit-maximizing level of output and price at the "kink" of the demand curve.
(3)
4. Briefly explain why monopolies are economically inefficient.
(2)
5. Define Industrial Economics.
(2)
6. What is the dilemma in the prisoners' dilemma?
(1)
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QUESTION 2
[25 Marks]
1. In a perfectly competitive market, industry demand is:
P = 850 - 2Q,
and industry supply is:
P = 250 + 4Q.
(a) Determine the industry price and output under perfect competition.
[6]
(b) Now suppose that all the firms collude to form a single monopoly. (There is no change
in the demand or cost conditions of the industry). What price and total output would the
monopoly set?
[7]
(c) Compare the monopoly outcome with the competitive outcome in part (a) and (b)
above.
[2]
2. Why do monopolistic competitors have a tendency to advertise much more than perfectly
competitive firms?
[S]
3. What are the assumptions of the kinked demand curve model? What is its main conclusion
about oligopoly behavior?
[S]
QUESTION 3
[30 Marks]
1. Your firm produces two products, the demands for which are independent. Both products
are produced at zero marginal cost. You face four consumers (or groups of consumers)
with the following reservation prices:
Consumer
Good 1 {N$)
Good 2 (N$)
A
25
100
B
40
80
C
80
40
D
100
25
(a) Consider three alternative pricing strategies: (i) selling the goods separately; (ii) pure
bundling; (iii) mixed bundling. For each strategy, determine the optimal prices to be
charged and the resulting profits. Which strategy would be best?
(11)
(b) Compare pure bundling and mixed bundling.
(4)
2. Discuss the three broad forms of price discrimination.
(15)
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QUESTION 4
[20 Marks]
1. Two major networks are competing for viewer ratings in the 8:00-9:00 pm and 9:00-10:00
pm slots on a given weeknight. Each has two shows to fill these time periods and is
juggling its lineup. Each can choose to put its "bigger" show first or to place it second in
the 9:00-10:00 pm slot. The combination of decisions leads to the following "ratings
points" results:
Network 2
First
Second
Network 1
First
Second
20,30
15, 15
18, 18
30, 10
(a) Define and find the Nash equilibria for this game, if both networks make their decisions
at the same time.
(5)
(b) Suppose the network managers meet to coordinate schedules and Network 1 promises
to schedule its big show first. Is this promise credible? What would be the likely
outcome?
(5)
2. Discuss the Bertrand and Stakelberg models of oligopoly.
(10)
TOTAL = 100 MARKS
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