EPBM 5 Micro Q Paper

8/3/2019 EPBM 5 Micro Q Paper

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20/07/2007 14:25 91-124-3061412 M C K I N S E Y & C O . I N D I A P A G E 02/58

h~dian lnstitute. of Management Calcutta


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(Tw o m arks each,_.-~( 40" r n arks]

i, T he eq uation of th e d eman d function for potatoes is Q d ; : : : 50 - gp afld the equation of thesu p pl y curve for p otatoes is Q~:;:- 1~:5 + 1O~flce is in rupees 'pe;ton and quantity is in:ons. "l ,,:}\ ~., "/ ;....----t .(a) The equ ilibrium price in the market for potatoes w-ill be R s. -: and theequ ilibrium quantity w il~ be tons o f po ta toes'"ex t, th e g ov erru nen t imposes a price floor of R s. 4.75 for potatoes and ag rees to p urch aseas m any tons of potatoes as the growers wit! sell to it at a price ofR s.4. 75.

e (b) A fter the government im poses th e price floor. i t \ .. ..l l h av et o purchase to ns o fpotatoes. (6 marks)'2 . The-demand function fora good X is Q d = : 60 - 2.P - 51\1..where M is the (average)consu m er income. Then g ood X is (normaVinferior) .

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). .}.~q,~::~~ong,'a d emand c urv e, 'q u an tity 'd emand ed 'd ec re as es ";8 percent w hen priceincr~(lO!perCent. . ". '.' . . '}'.' .> . . g 1 0(a) ~tr~,p.rige-e\asticity of demand is _--------'

~:~.~~:. . ', f, .(b) ~ ";_ vellth e p ric e elastic ity c alc ulated in p art (a), demand is ----___,tf-'.t~t ~(el~dihe1astic/unitary elastic) along this portion of the demand cu rve. /'(4 marks)

4 . Saif has the option of either ru nning his own pan shop or being employed as a supervisorin A rnie's factory . The table below Lists the various costs and revenues for [he tw o optionsin a:.given,p:riod of time:

: Fi"';t.'~nij:Im(Self"emJ)lovment as a Pan shoo ownerv"~ R e v e , ' r u e . . C o s t sRev en u e from sales of pan J 500 PansCapi ta l cos ts) .' ; )I a; r evenue 1500 \ Total costs

1 6 0 ,9(

",._ ,250'Second option: Employment as a supervisor in Arnir's factory \ J O O '\''SataN 169,0 Travel COStS'. : :, The opportuni ty cost of eruploy rnent as a supervisor for Saifis R s. _:.t} Ernp loyment a s a su perv isor g enerates ali economic (profit/loss) of'(5 for Saif, .~ ., ~ n~ (6 ma rk s)

/1 r W~ f( /,:..J, k' ...." bf',(0 l 7 \ ~ V) '01 ," f .~1,.1 ,. ' . _ "


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2~/~7/2~~7 14:25 9 1 - 1 2 4 - 3 f l 0 1 4 1 2 M C K I N S E V & C O . I N D I A

5. Fi ll thebl :~;)\ .: s in the table below: (1/2 mark for eac h blank . J l;i:~rl\S)

6. A firm's production function is g iven by Q = 6KOj.L( '~, where K c;ieno,es cap ital and Llabor. Cnpital I: ' [lxed at 16 unirs in the sh ort ru n, th e price of c . t p i t : 1 . l is R sAO per unit a . . ' 1 Cthe price of labor is Rs.5 per unit. ..(a) The fixed cost of produc tion is Rs. -'---

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(b) The short run total cost ofprodu 6ng 480 units of ou tput is Rs. ...;__(4 marks)7. Suppose that you own the XYZ Co, and produce and sell safeLy-pin~ in a p erfe ctlycompetitive market: Currently you produce 2000 packets of safety-pins and s~Uit~~':ii\:the market a t the prevailing price of Rs.S per packet. Your company incursa t o 1 a f ' b c i ' . s t . o f . R s.12,D OO and a fixed cost ofRs.4000. . . .(a) If yo 11 continue to produce 2000 packet's, your _ ! - - J ~ L 0 ; . : . : : ; _ ~ { _ _ _ (protitlloss)~ij(tlt~'Rs, .I ~ I~\7'< (. . . I ".. "

(b) You should _;_._----------------(c ontinu e to produce 2 000 p ackets/sh ut dow n p rodu ctio n) (6 mr::r& ,s} .." . .3 . Two computer firms A and B are planning [0 mark et n etwork systems for ~fficeinformation management. E ach firm can develop either a high-quality system (H) or.a low -quality (L) one. The resu lting profits to each firm for th e alternativ e strateg ic" are (th e firstnum ber in each cell refers to A's payoff):

. '

\ Firm B II, II H L\H .1 00.30)\ (50)5)Firm A L I (~O,60) (20.20),

The two Nash equilibria for this game are __ ---,- and _------- (4 marks)


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'31-124-3651412 M C K I N S E Y & C O . I N D I A PA GE 65/5820/07/2067 14:25+ .:}:'-t'

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f . It is kno, v r. that one Out J; every three computers is defective The defective ones,how ever, cannot be identified except by those w ho ow n them . R isk-neu tral buy ers areready to pay a max im um ofR s.:'O .OOO f or a non -def ec ti ve computer if they are sure of theq uality . In the: absence of verifiabi l i ry of quality , the m arket price of any com puter isRs.2$;OOO.H ow m u< ;:h are the bu yers ready . to p< l:' for a defective com pu ter if its quality can beveri fied atthe time of purchase? ' _. -------,---- , (2 m arks)

It), A monopolist faces th e demand [11I1CIion P :< 5 0 ... 0 .1 Q. hi s (',II!'t is c , 5(1) : + Q . 11 'forced to follow Me pricillg l ii s p ri ce 'w i ll b e ,. ,._ ._ _ .'~ ,, _. _. _., .. ' . . , ,: a nd (ll.npul w ill 1;(;----- ..--~.11::Wij~e T (for True) or F (for False) in ink against each of tnestatements below , N o6x,phi&t\otds required, ' . r, .' .( 8. }:; it ::, ~! t: l~ ;P .~ fi odSare sho rt enough and buyers can rationally anticipate the seller's .. . .' :_b~~Yi6r,.amonopolist selling a durable good will end up with a price equal to M e.;.:.. . (TfF)(b ) A'-k!i i :m'opohst will p ra ctic e p erfe ct p ric e d is crim in atio n when she know s the, : ' '. d i$ f u b u ~ i o nof buyer types, bu t not d eman d c urv es o f in div id ual buyers,.....~::.:~~'. (TIF) . (2 marks)


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M C K I N S E Y & C O . I N D I A

(to marks)"r:il '4!' ill surance gil.'l.!s1'l:.fJP/t UII i}lCl,,,'II '(' ,10 (:(.1111111;1(U'S(JII, r:,\pe(;i((/~r !llhcy areoperatins; t1/crifillg business (Inti decu! then Ihi!)o'd tathe: have I J / ~ , cashfrom thet ns ur an ce p ro ce ed s all fhl:! hili/dings than the Dllildill,f!5 'hI!JII,H!I\'~s, Akll~F- perhaps most,police tnvestigauons ofarson arc tilt: J't!S/f{1 of leadsfron. suspicious insurance (n(jIJSfr.;-S,, \101e ge1f(!rc.-!ly, insurance mC iY el /( ;oto' (lg. !. r i skier behavior, such ( IS s /oppyfirej)rere/l1ioll, Foresample. the expectatio.: thatjedera! government di;;(ISIl11' (lid will comeseems 10 enconrog the residents (~f:\-ICilibll" C.t/tlornia to let !;)/(s}/I'S LInd frees grow nea:(heir houses, rnij'illg {he risk ' .} J/ in :: , "Idelltiry in economic terms the problem noted in the passage given above. Disc,llSS{he prnblcn: ini110re general terms rind its soiuuons. Confine your answer to thispage, otherwise marks will be deducted. '

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EPBM 5 Micro Q Paper

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