Final-f02 - Department of Economics University of California Economics 121 FINAL EXAM Fall 2002 Prof Woroch GENERAL INSTRUCTIONS Write your name on

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Economics 121 Page 1 Final Exam Department of Economics Fall 2002 University of California Prof. Woroch Economics 121: FINAL EXAM GENERAL INSTRUCTIONS : Write your name on the front of each blue book that you use. Please write clearly. The exam has four parts with some choice. All together there are 200 points. Point assignments are given in the instructions for each part. I. TRUE or FALSE or UNCERTAIN and EXPLAIN : Choose 4 of the following 5 statements, decide whether each is true or false or uncertain, and then explain the reasoning behind your answer. Each is worth 12 points for a total of 48 for this part. 1. “Learning by doing” gives rise to a scale economy in the production of a single product. 2. A potential entrant may find it profitable to enter a Cournot oligopoly even when it has higher marginal cost than all incumbent firms. 3. Suppose that N firms are located along the Hotelling line and compete on price as usual. If two of those firms merge, then the profit of each of the N – 2 non-merging firms will rise . 4. It would not be profitable for Microsoft to require PC makers like Dell Computer to purchase all of their pointing devices (computer mice and track balls) from Microsoft because the product market for pointing devices is highly competitive. 5. We the U.S. government to succeed in forcing the Bayer to sell its patented, anti-Anthrax drug, Cipro, at production cost, society would be better off because the increase in consumer welfare would far outweigh reduced profits of Bayer. II. SHORT ANSWER : Choose one of the following two questions , and answer its various subparts briefly . Either question is worth 30 points. 1. Consider the standard Dixit model of strategic entry deterrence: a single incumbent, threatened by a single potential entrant facing fixed costs, makes irreversible investment in capacity, with the two firms engaging in quantity competition should entry occur.
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This note was uploaded on 05/05/2008 for the course ECON 121 taught by Professor Woroch during the Fall '07 term at University of California, Berkeley.

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Final-f02 - Department of Economics University of California Economics 121 FINAL EXAM Fall 2002 Prof Woroch GENERAL INSTRUCTIONS Write your name on

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