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ADVANCED MICRO ECONOMICS:-

(C) Markets Structure

1. "Under monopolistic competition a firm enjoys monopoly power without enjoying

Monopoly profit." - Explain. (2017)

2. How. Chamberlin uses planned sales curve to explain equilibrium of a firm and
group when the entry of firms is permitted ? (2017)

3. Derive the expansion-path for a firm operating with the Cobb-Douglas Production
Function. (2017)

4. State Bain’s limit price theory. (2016)

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5. Explain kinked demand curve theory with the help of diagram. (2016)

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6. Write on Prisoners’ dilemma and Nash equilibrium. (2016)
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7. What is a Lemon Market? What is the role of signaling and screening in
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it? Explain. (2016)

8. What is asymmetric information? How could it lead to adverse selection

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and market failure? Discuss. (2016)

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9. Under perfect competition, in the short run, find out graphically,

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without using average cost curve, the conditions in equilibrium for the
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existence of (i) normal profit, (ii) supernormal profit and (iii) loss. (2015)

10. Explain the backward sloping supply curve of labour a choice between
income and leisure.

11. Explain how Nash equilibrium provides a solution to the problem of

strategic interdependence among firms in an oligopolistic market. (2015)

12. What do you mean by existence and uniqueness of equilibrium in a

market? Examine these concepts in a market where both demand and
supply curves are downward sloping. (2014)

13. Examine the relationship between own and cross price elasticities for a
compensated demand function. (2014)
14. Discuss the cobweb model of dynamic equilibrium with lagged
adjustment. Explain how the existence of a stable equilibrium depends
on the nature of the demand and supply curves. (2014)

15. “The conventional analysis of profit maximization breaks down if the

entrepreneur sells his output and possesses a production function which
is homogenous of degree one.” Explain. (2014)

16. Consider a perfectly competitive exchange economy with no production,

and two different goods 1 and 2. Let p1 and p 2 be the prices of the goods.
The economy is populated by two people A and B. A’s initial endowment
of the two goods is given by w1
A 
, w A2 , and B’s initial endowment is

 w , w  . A can choose any bundle  x , x  and B can choose any bundle

1
B
2
B
1
A
2
A

 x , x  . In this pure exchange economy write out the conditions for a

1
B
2
B

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Walrasian equilibrium. Show that for such an economy for any

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equilibrium set of prices that the absolute price level is indeterminate.

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(2013)
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17. Under Bertrand price competition with homogeneous products in an
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oligopoly demonstrate how is the equilibrium price that will prevail

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arrived at? (2013)

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18. Let the market demand curve for carbonated water be given by
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9Q
P  20  where P is the price and Q is the market output. Let there be
2
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two firms producing carbonated water, each with a constant marginal

cost of INR, 2 or c1  c2  2 .

What is the market equilibrium price and quantity when each firm
behaves as a Cournot duopolist? What are the firms’ profits?

What is the market equilibrium price and quantity when each firm
behaves as a Bertrand duopolist? What are the firms’ profits? (2013)

19. Suppose an industry is characterized by the following three conditions :

(i) there are a large number of small firms, each producing a
differentiated product and facing a downward sloping demand curve; (ii)
each firm ignores the effects of tis action on the decisions taken by other
firms; and (iii) new firms producing close substitutes for the product of
the existing firms can enter the industry. Then derive the equilibrium
conditions of an individual firm and of the industry. (2013)
20. “Validity of Marshall’s equi marginal utility depends on the assumption
of unitary elasticity of the marginal utility curves of the commodities
under the budget.” Clearly explain this assertion. (2012)

21. Show how price output decision is taken by duopolists, taking into
account, their mutual reaction. Under what condition will the duopolistic
market be in equilibrium? (2012)

22. “If firms produce differentiated products it is neither possible to identify

the industry nor possible to draw its supply curve.” Discuss and show
how Chamberlin handles the problem. (2012)

23. Is rent a surplus? Give reasons in support of your assertion and point
out the difference between ‘rent’ and ‘quasi-rent’. (2012)

24. Derive Marshall’s welfare economics from his concept of consumer

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surplus after explaining consumer’s surplus along with the underlying

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assumptions. (2012)

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25. What is prisoner’s dilemma? How is it related to a strictly dominant
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industry? (2012)
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26. The ‘Non-rival nature’ of social goods consumption has important

bearing on efficient resource allocation. Explore the problem with the
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examples and diagrams (2011)

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27. A Supply curfe is not used to determine the equilibrium price and
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quantity in a market under monopoly because

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(i) a supply curve derived by using relevant cost curves in a market

under monopoly may give more than one price for different
quantities and also more than one quantity for the some price’ and

(ii) for determining profit maximizing price and quantity of a

monopolist, supply curve is not necessary. Explain (i) and (ii) above
with graphical illustration. (2010)

28. State and explain the Law of Equi-marginal Utility and also state clearly
the limitations of this law. (2010)

29. What are the ways in which a perfectly competitive market may become
imperfect? Examine whether advertisement helps as imperfectly
competitive market become a perfectly competitive one. (2010)
30. Demand for light bulbs can be characterized by Q = 100 – P, where Q is
millions of boxes of lights sold and P is the price per box. There are two
producers of lights having identical cost functions :

1
Ci  10Qi  Qi2 (i = 1, 2)
2
2
Q   Qi  Q1  Q2
i 1

(a) Unable to recognize the potential for collusion, managers of the two
firms act as short-run perfect competitors. What are the
equilibrium values of Q1 , Q2 and P? What are each firm’s profits?

(b) Manager of each firm independently recognizes the oligopolistic

nature of light bulbs industry and plays Cournot. What are the

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equilibrium values of Q1 , Q2 and P? What are each firm’s profits?

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(c) Suppose Firm I guesses correctly that Firm II has Cournot
conjectural variation, so it plays Stakelberg. What are the
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equilibrium values of Q1 , Q2 and P? What are each firm’s profits?
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(d) If the managers of two firms collude, what are the equilibrium
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values of Q1 , Q2 and P? What are each firm’s profits? (2009)

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31. “ A dominant firm acts as a price leader and other firms adjust their
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outputs accordingly.” Comment. (2009)

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32. “The prevalence of excess capacity is the direct consequence of the

existence of mono-polistic competition”. Elaborate the given statement.

(2008)

33. What are backward-rising input supply curves? Illustrate with the help of
suitable examples. (2007)

34. With the help of suitable diagrams, elaborate Cournot model. What is the
significance of reaction curves in the model? (2007)

35. What is meant by oligopoly? In what respects is it different from other

forms of market? Show that an oligopolist may face a kinked demand
curve. (2005)
36. Oligopoly firms often have a strong desire for stability, particularly with
respect of prices’. Illustrate the statement with the help of examples
generally found in the market. (2003)

37. What is a value-added tax? On what grounds is it generally considered

superior to the conventional commodity taxes? (2003)

38. ‘A monopolist can either decide the output of his product or the price of
the product but not both.’ Explain and illustrate. (2002)

39. Explain oligopoly. Does the Sweezy’s kinked demand curve solution offer
a satisfactory explanation of price-output decisions under oligopoly?

(2001)

40. What are the competitive and what are the monopolistic elements in

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monopolistic competition? Explain fully. (2000)

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41. Illustrate Kinky demand curve and bring out its implication for pricing

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under conditions of oligopoly. (1999)
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42. Perfect competition may be myth but competitions is a reality in every
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type of market. Discuss this statement. (1998)

43. What is pure competition? How does it differ from perfect competition?
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(1997)
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44. Differentiate between imperfect competition and monopolistic

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competition. Explain the role of selling costs under monopolistic

competition. (1997)

45. Explain why the price in competitive markets settles down at the
intersection of demand and supply curves. “ A very good harvest tends to
lower the income of farmers.” Illustrate this proposition using a supply
demand diagram. (1996)

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