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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
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.