10we303mt - University of British Columbia Department of...

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University of British Columbia Department of Economics Economics 303 (001 & 002): Intermediate Microeconomics II Winter Session Term II, 2010 M. Vaney Midterm Examination Monday, February 8, 2010 NAME:_________________ Time Allowed: 75 Minutes Total Marks: 50 STUDENT NUMBER:__________________ ANSWER ALL PARTS OF THE EXAMINATION. PART A: Answer any two questions . Each question is worth 5 marks. Provide short, clear answers to the following: 1. In the N -°rm Cournot model with market inverse demand p = A ° bq and all °rms with the same constant marginal cost, c; the equilibrium output of a °rm is q c = A ° c b ( N + 1) and the industry output is Q c = N ( A ° c ) ( N + 1) b Write the expression for price, p c and explain why the N -°rm model of Cournot oligopoly can be thought of as encompassing both the model of monopoly and the model of perfect competition. 1
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2. If two °rms repeat the following simultaneous game for an in°nite number of periods, calculate the minimum discount factor that will sustain cooperative behaviour f M; M g by the °rms when they both adopt grim-trigger strategies.
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