**MEC
101 Solved Assignment 2021-22**

**MICROECONOMIC
ANALYSIS**

**Course Code: MEC 002**

**Assignment Code: MEC 002/2021-22**

**Total Marks: 100
**

*MEC 101 Solved Assignment 2021-22 : All assignments
are in PDF format which would be send on email/WhatsApp (9958676204) just
after payment.*

**SECTION A**

**Answer
all questions from this section.**

**2×20 = 40**

**1. (a)
“In terms of the type of good, that is whether a good is normal or inferior,
the relationship between the compensated and the uncompensated demand curves
varies,” Justify the statement graphically.**

**8**

**(b) A
consumer’s preferences over goods A and B is given by the utility function**

**U (A, B) = ****𝐴 1 2 ****𝐵 1 3**

**Let pA
be the price of good A, pB the price of good B and let consumer’s income be
given by I.**

**6**

**(i)
Derive the indirect utility function**

**(ii)
What is meant by Dual problem in context of the Utility and Expenditure
optimisation exercise?**

**6**

**2. (a)
While modelling Insurance markets in presence of asymmetric information, a
Separating equilibrium is often preferred instead of a Pooling equilibrium.”
Justify the statement. Under what conditions, a separating equilibrium may also
not exist.**

**6**

**(b)
Given the von Neumann-Morgenstern utility function of an individual, U (W) = ****𝑙𝑛𝑊 where W
stands for amount of money and ln is the natural logarithm. Comment upon
attitude towards risk of such an individual with the help of a diagram.**

**6**

**(c) Now,
suppose this individual plays a game of tossing a coin where he wins Rs 2 if
head turns up and nothing if tail turns up.On the basis of the given
information, find**

**(i) The
expected value of the game.**

**4**

**(ii) The
risk premium this person will be willing to pay to avoid the risk associated
with the game.**

**4**

**SECTION B**

**Answer
all questions from this section.**

**5×12 = 60**

**3. (a)
Differentiate between the Cournot and the Stackelberg models of Oligopoly.Under
the Stackelberg assumptions, the Cournot solution is achieved if each firm
desires to act as a follower. Do you agree? Elaborate.**

**6**

**(b) A
monopolist operates under two plants, 1 and 2. The marginal costs of the two
plantsare given by**

**MC1 = 20 + 2q1 and MC2= 10 + 5q2**

**Where q1
and q2 represent units of output produced by plant 1 and 2 respectively. If the
price of this product is given by 20 –3(q1 + q2), how much should the firm plan
to produce in each plant, and at what price should it plan to sell the product?**

**6**

**4. (a)
Consider there are two firms 1 and 2 serving an entire market for a commodity.
They have constant average costs of Rs 20 per unit. The firms can choose either
a high price (Rs 100) or a low price (Rs 50) for their output.When both firms set
a high price, total demand is1000 units which is split evenly betweenthe two
firms. When both set a low price, total demand is 1800, which is again split
evenly.If one firm sets a low price and the second a high price, the low-priced
firm sells 1500 units, the high-priced firm only 200 units. Analyse the pricing
decisions of the two firms as a non-co-operative game and attempt the
following:**

**6**

**(i)
Construct the pay-off matrix, where the elements ofeach cell of the matrix are
the two firms’ profits.**

**(ii)
Derive the equilibrium set of strategies.**

**(iii)
Explain why this is an example of the Prisoners’ Dilemma game.**

**(b) What
is the Bayesian Nash equilibrium? How is it different from Perfect Bayesian
equilibrium?**

**6**

**5. What
is Kaldor’s compensation principle? How is it different from Hick's
compensation principle?**

**12**

**6. (a)
“Homothetic production function includes Homogeneous production function as a
special case.” Justify this statement.**

**6**

**(b)
Consider a production function: Q = f (L), where Q represents the output and L
is the factor of production. Let w be the per unit price of factor L and p be
the per unit price of output Q. Using the Envelope theorem determine the supply
function and the factor demand function.**

**6**

**7. (a)
What are the assumptions on which the First fundamental theorem of welfare
economics rests?**

**4**

**(b)
Consider a pure-exchange economy of two individuals (A and B) and two goods (X
and Y). Individual A is endowed with 1 unit of good X and none of good Y, while
individual B with 1 unit of good Y and none of good X. Assuming utility
function of individual A and B to be**

**UA = (XA) α (YA) 1−α and UB = (XB) β (YB) 1−βe**

**where Xi
and Yi for i = {A, B} represent individual i’s consumption of good X and Y,
respectively, and α, β are constants such that 0 < α, β < 1. Determine
the Walrasian equilibrium price ratio.**

**8**

MEC 101 Solved Assignment 2021-22, MEC 101 Solved
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*MEC 101 Solved Assignment 2021-22 : All assignments
are in PDF format which would be send on email/WhatsApp (9958676204) just
after payment.*

**MEC 101 Solved Assignment 2021-22 :-** Those
students who had successfully submitted their Assignments to their allocated
study centers can now check their Assignment Status. Alongside --assignment
status, they will also checkout their assignment marks & result. All this
is often available in a web mode. After submitting the assignment, you'll check
you MEC 101 Solved Assignment 2021-22 only after 3-4 weeks. MEC 101 Solved
Assignment 2021-22 it'd take 40 days to declare MEC 101 Solved Assignment
2021-22

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