ECON 100C
Problem Set 2 Solutions:
Monopoly vs. Perfect Competition & Intro. to Price Discrimination
Prof. Levkoff
Part I. Evaluate the validity of each of the following statements. Be sure to clearly
accompany your explanation using graphs and equations
ECON 100C Midterm Exam 1
Name_
Prof. Levkoff
Seat#_
Fall 2013
PID#_
Version A Solutions
Date_
Directions: You will have the entire lecture to complete the exam after everyone has
been seated and the exam distributed. The exam is 9 pages front and back. Ad
ECON 100C
Prof. Levkoff
Problem Set 1 Solutions
Part I. Evaluate the validity of each of the following statements.
a) Because the invisible hand guides the market equilibrium to an allocation that
maximizes total surplus, government intervention isnt need
110A Macroeconomics
Fall 2011
Problem Set 3
(Due: Tuesday Oct. 18th 2011)
Part I: True, False or Uncertain?
Briefly motivate your answer.
1. Money is a liability for the central bank.
2. When the propensity to consume increases and investment decreases, t
ECON 100C
Prof. Levkoff
Problem Set 6 Solutions:
Oligopoly
Part I. Evaluate the validity of each of the following statements. Be sure to clearly
accompany your explanation using graphs and equations where appropriate.
a) The Lerner index for a firm in the
Econ 100A
Problem Set1
(Math Review1, Consumer Preference)
1. Find the first and second derivatives for the following functions of x.
(a) f(x) = a+bx+cx2 +dx3 (b) f(x) = ln(4x3)
2. Let z = 4x4y35x2y+xy2
(a) Derive the first and second partial derivativ
ECON 100C Final Exam
Name_
Prof. Levkoff
Seat#_
Spring 2014
PID#_
Version A/B Solutions (Wednesday)
Date_
Directions: You will have the entire lecture to complete the exam after everyone has
been seated and the exam distributed. The exam is 12 pages front
4 points correctly taking the first order conditions and computing the
profit maximizing price in case II
2 points correctly identifying case I as the profit maximizing solution
#2) (40 points) Consider a duopoly market with two firms selling identical pr
Part I. Evaluate the validity of each of the following statements. Be sure to clearly
accompany your explanation using graphs and equations where appropriate. Points
are awarded for the quality / completeness of your explanation (28 points):
a) (7 points)
7 points for correctly associating BOS with output setting and MP with price
setting games for the sequential cases
c) (7 points) In this course, weve discussed two notions of efficiency: Pareto efficiency
and Marshallian surplus. An improvement in Pareto
d) (7 points) Because the static cartel model predicts a breakdown from the collusive
arrangement in a fashion similar to that of the prisoners dilemma, we should not expect
to see cartels sustained in practice.
ANSWER: False. The static model predicts a
ANSWER (Version A):
Step 1 C dominates B. Eliminate B.
Step 2 Y dominates Z. Eliminate Z.
Step 3 C dominates A. Eliminate A.
Step 4 Y dominates W. Eliminate W.
The game is reduced to
Player 1
Player 2
C
14, 8
6, 10
X
Y
D
4, 10
16, 4
NO PARTIAL CREDIT HERE
SCORING RUBRIC
(FOR TA USE ONLY)
Total Score_/100
Part I Total:_/30
Part II Total:_/70
a) _/10
#1) Total_/30
b) _/10
a)_/10
c) _/10
b)_/20
#2) Total_/40
a)_/10
b)_/10
c)_/10
d)_/10
9
b) (10 points) Calculate the level of output for each firm to set that would maximize
the joint profit of the firms if they were to merge and attempt to form a cartel
(hint: you should solve a maximization problem here since the monopoly
output for each f
2 points by showing that total profits are higher for both in the joint profit
max solution
2 points arguing that both firms have an incentive to deviate from the
cartel
4 points prove this analytically EITHER by showing that the best response
to the join
maximizing price to charge using the first order conditions (hint: you should
consider multiple cases here). Is the second order condition satisfied? Explain.
ANSWER: Under uniform pricing, we must consider two cases:
Case I: exclude the European market b
d) (6 points) Given your answer from c), if the monopolist can discriminate each
market segment a second time by charging another price along the residual
demand curves for each market segment, calculate the prices to charge in each
residual market segmen
profit maximization problem and derive the profit maximizing 3rd degree prices to
charge in each market. Show that your solution is the same regardless if you
write the profit function out as functions of the prices charged in each market
segment or as a
ECON 100C Midterm Exam 2
Name_
Prof. Levkoff
Seat#_
Spring 2014
PID#_
Version A Solutions
Date/Time_
Directions: You will have the entire lecture to complete the exam after everyone has
been seated and the exam distributed. The exam is 8 pages front and b
Part I. Evaluate the validity of each of the following statements. Be sure to clearly
accompany your explanation using graphs and equations where appropriate. Points
are awarded for the quality / completeness of your explanation (30 points):
a) (10 points
Total Score_/100
Part I Total:_/30
a) _/10
Part II Total:_/70
#1) Total_/35
b) _/10
a)_/5
c) _/10
b)_/10
c)_/10
d)_/10
#2) Total_/35
a)_/5
b)_/12
c)_/12
d)_/6
10
c) (10 points) The Folk Theorem argues that in infinitely repeated games, any strategy
combination can be supported as a subgame perfect Nash equilibrium.
ANSWER: This is true with the qualification that: 1) all players are sufficiently
patient in discou
2 points correctly identify different entry fees that correspond to the
consumer surplus of each type
4 points correctly calculate the solution above
b) (20 points) If instead, the monopolist is forced to charge all consumer types
the same entry fee and m




/
/
.
#2) (21 points) Consider a monopolist selling two differentiated, but substitutable
products. The (direct) demand for each product is given by
,
100
100
and
,
, where and are nonnegative parameters.
The marginal cost of producing product 1
0, then
ANSWER: If ,
100
100
and
Case I: exclude low type. Sell only to type 2.
Set p*=10 and extract total consumer surplus be the entry fee (and profit)
of $14016.67.
Case II: sell to both.
First note that
surplus in this case.
$
.
is determined by the
3 points correctly finding the profit maximizing total quantity
If students assumed they split the 45 cattle equally to 22.5, that is fine
award full credit.
Suppose now that Anna has a head start on Bob, and is able to show up at the herding
grounds fir