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# MEC-101/001: MICROECONOMIC ANALYSIS Solved Assignment 2019-2020

Course Code: MEC-101

Assignment Code: MEC-101/AST/2019-20

Maximum Marks: 100

Title Name |
## MEC-001 Solved Assignment 2019-20 |

University |
IGNOU |

Service Type |
Solved Assignment (Soft copy/PDF) |

Course |
MA(ECONOMICS) MEC |

Language |
ENGLISH |

Semester |
2019-2020 Course: MA(ECONOMICS) MEC |

Session |
2019-20 |

Short Name |
MEC-001 AND MEC-101 (ENGLISH) |

Assignment Code |
MEC-101/AST/2019-20 |

Product |
Assignment of MA(ECONOMICS) 2019-20 (IGNOU) |

Submission Date |
For July 2019 session, you need to submit the assignments by March 31, 2020, and for January 2020 session by September 30, 2020 for being eligible to appear in the termend examination. Assignments should be submitted to the Coordinator of your Study Centre. Obtain a receipt from the Study Centre towards submission. |

Note: Answer all the questions. While questions in Section A carry 20 marks each (to be

answered in about 700 words each) those in Section B carry 12 marks each (to be answered

in about 500 words each).

Section-A

1. (a) What are the assumptions on which the First fundamental theorem of welfare economics

rests?

(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− β

where Xi and Yi for i = {A, B} represent individual i’s consumption of good X and Y,

respectively. Determine the Walrasian equilibrium price ratio.

2. (a) Elucidate price and output determination under any two non-collusive models of

Oligopoly.

(b) Consider a market structure comprising two identical firms (A and B), each with the cost

function given by

Ci = 30Qi

, where Qi for i = {A, B} is output produced by each firm.

Market demand is given by

P = 210 − 1.5Q, where Q = QA + QB

(i) Find Cournot equilibrium.

(ii) What will be the outcome if the firms decide to collude? Compare it with the results

under the Cournot equilibrium.

4

SECTION B

3. What is meant by a Subgame Perfect Nash equilibrium? What will be the Subgame Perfect

Nash equilibria for the following game?

4. (a) A CES production function approaches a Cobb-Douglas production function as a special

case. Comment.

(b) Given the production function Q = F(P, R), where Q denotes output produced using

factors P and R. Assume v and s to be price of factor P and R, respectively. Using the given

information, represent the expression for the Shephard’s Lemma.

5. (a) What is meant by the Dual problem in context of the utility and expenditure optimisation

exercise?

(b) Derive the Hicksian Demand functions for good X and Y given the following utility

function:

U(X, Y) = √? + 2√?

6. What is a von Neumann-Morgenstern expected utility function? An individual’s von

Neumann-Morgenstern (vNM) utility function is given by

U(M) = √?

where M denotes money. Assume this individual has Rs 4 with him. A lottery ticket that will be

worth Rs 12 with probability 1

2

and zero otherwise is available in the market. What is the

maximum price he would pay to obtain it?

7. Write short notes on the following:

(i) Significance of Value judgments in Welfare Economics.

(ii) A. C. Pigou’s contribution to Welfare Economics.

MEC-001, MEC-01, MEC 001, MEC 01, MEC001, MEC01, MEC-1, MEC1, MEC