.EIDEF R'S '1 PME ' :DE' CfAI. COLLEGE OF MANAGEMENT ICIENCES DEPARTMENT OF ECOMOMICS AND R !NESS STUCIES COURSE CODE /TITLE Eel 420 fwv,•riced Micro i'dcvnaAvetc Yizeory II SECOND SEMZ1TER EXAM,NATICNS 2016/2017 SESSION INSTRUCTION3 ATTEMPT ANY THREE QUESTIONS TIME ALLOWED 2 HOURS 1. (a)Using as example a t 'Giza welfare policy issue that you have studied, den 1st -ate how ht following welfare criteria tisted bc.now could he useful in making decision on td (i) Jeremy 13enthmu edict )11 (ii) The.Kaldor-Ilit.ks con stens tittn criteria (b)- What difficulties arise :, oftlie criterion :et a guide in tinikittg stciai etision? (20 rlrks) 2.Suppose that a student want lytty a ,-.!teond, hand laptop. Sit.t1t ;30-WS that of the available used laptops are good laptops and the others are "Ictitons' i.e bad ones. lent is willing to pay #50,000 for a good 'glop t•ipl #10.01M for a lemon.Finalh., assume Iii-' the seller values the:laptop at #5,000 if it r tt lemt and fi:t0,-100 if it is not a lemon. (a) Assume that this buye, canntn distinguish the goo .t laptops from Lad cies i ow much world the.student be willing to 1-y for any laptop? - 20 t arks) (b) What types of aptops will he )lfered tin sale in the market at the rt'od in pat t a? (d) Explain two gc vernm t policies that can ensure goad products wilt be in market. 3 Suppose.that tilt' wage ale is #I6 per hour and the price of its otiact is #2. Dallies for output abd labour are intinits pc - horn. (a) Find the profit-ma' : sizirsg quantity cflabour. • (b); Suppose that the price of the product remains #2 but that the wareicreases to #21. Find the new profit-maximizing level L. (c)': Suppose that tie price of the product. increases #3 and the wage remain at #16 per hour.Find the new profit maximising L. (d) Suppose that the price of the product remains #2 and the wage at #16 , but that there is a , •• technological breakthrough that increases output by 25% for any given level of labour. Find the new profit-Maximising L. (20 marks) 4. Theo telecommunications firms simultaneously decide whether to pursue local or global networking strategies. If one firm chooses a local strategy, their net revenues art' $3 billion per year if its rival chooses the same stn#egy in a different part of the world, but loses $1 billion per year :if the other firm goes global. To this case the rival would earn $5 billion per year. If both firms choose a global strategy, then competition between the firms in the single global market redube the total net revenue to 010 industry to $2 billion per year, both firms earning had' the industry prolits. Required: (a) Pre- ent the pay•toff matrix of this game. (b) Does each -player have a dominant strategy 7 If so what is it? (c ) What will each do based on Nash equilibrium solution strategy? .A) marks) yen that a monopolist is faced with the-following demand and cost funct'o • P = 4800-0.5u and 'IC= 50000+600q+0.5(12 Investigate the impact of the following tax schemes on the opt,: nal output, price and profit of the. producer , hence advice on the scheme that should be tidcpted if the government indent is use the tax to reduce optimal output and consume 6tn (i) A lump sum tax o, (ii) A 40% prnfit tax (iii) 300 naira tax per unit Page 1 Page 2