Microeconomics

O.P.
Jindal Global University

Jindal School of Banking & Finance
Re-sit Examination
Course Name : Microeconomics

Course Code : BF-C-ECO-101
Programme : B.Com. 2019
Time Allowed : 3 Hours
Maximum Marks : 50 Marks
This question paper has three (3) printed pages (including this page).
Instructions to students:
 This is a take-home examination.

 Please do not write your name, JGU Id or any identification text inside your submission
document.
 Please ensure that your submission strictly adheres to JGU plagiarism/ Similarity
guidelines.
 Ensure the submissions are done in a compatible file format adhering to the guidelines
provided in the question paper regarding file format and name of the document.
 Please follow the instructions provided in the question paper regarding name of the
document/ folder to be submitted. In case there is no instructions kindly follow the format
provided below:
<JGU ID>_<Name>_<Surname>_<Course Name>_<Programme>_<Batch>
For Example:
20172291_Ram_Khandelwal_Introduction_to_Sociology_BBA_2017
 Kindly adhere to the duration/timelines of the examinations. Submission outside the

permitted time-window may attract marks based penalty, grade drop or non-evaluation.
JSBF [Re-sit Examination – December’2020 – January’2021] Page 1

Part 1: Short Answer Questions. Answer any four. [4×2.5 = 10 Marks]
1. What is rationality according to Economists? What is the use of this concept in Consumer
Behaviour?
2. Suppose the government is trying to decide whether to tax insulin (essential medicine for
diabetic patients) or tax luxury cars. Discuss pros and cons for each in the context of
elasticity.
3. How is a common property resource different from a public good? Explain with an example
the concept of a “tragedy of commons”.
4. Discuss why in context of information asymmetry the problem of a market for used cars.
5. Using the concept of a Nash Equilibrium explain why a cartel is likely to fail.
Part 2: Numerical Problems. Answer any four. [4×10 = 40 Marks]
1. Consider a market where the demand curve is given by p=55-0.5Q.

a) Suppose there is a single firm in the market which has a marginal cost of 5 per unit.
Find out the monopoly output, profit and price. [3 Marks]
b) Next suppose that there are two firms in the market, each with marginal cost equal to
5. Find the reaction functions of the two firms. [3 Marks]
c) Calculate Cournot equilibrium price, quantities and profits. Argue that this is a Nash
Equilibrium of the Cournot game. [4 Marks]
2. Consider a perfectly competitive market where the demand and supply are given by:
𝑄 𝑑 = 75 − 3𝑝, 𝑄 𝑠 = 2𝑝
a) Calculate equilibrium price and quantity for this market. [2 Marks]
b) If the government wants to increase quantity traded in the market to 50, what sort of
intervention should it do and by what amount? [2+2 = 4 Marks]
c) Calculate the deadweight loss due to this intervention. [4 Marks]
3. Consider a consumer choosing between two goods X and Y. The prices of the two goods
are both 20 and the consumer has a total income of 6000 rupees.
a. Depict the budget constraint on a properly labelled diagram. Draw indifference curves
representing the preferences of the consumer following standard assumption. Depict
the optimum choice. [3 Marks]

b. Next, suppose that the price of the good X rises to 40. Depict the new budget constraint
and optimum. [3 Marks]
c. Argue how the income and substitution effect will influence the demand of X assuming
that X is an inferior good. What can you say about total price effect? [4 Marks]
4. Consider a market with the following demand and supply curves:

𝑄 𝑑 = 500 − 15𝑝 𝑄 𝑠 = 10𝑝
a. Calculate equilibrium price and quantity. [2 Marks]
b. At the equilibrium, find the elasticity of demand and supply and compare. [4 Marks]
c. At this equilibrium, calculate the producer’s surplus, consumer’s surplus and total
surplus. [4 Marks]
5. A competitive firm can make profits/losses in the short-run but not in the long-run. –
Explain. [10 Marks]

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O.P.

Jindal Global University

Course Name : Microeconomics

 This is a take-home examination.

<JGU ID>_<Name>_<Surname>_<Course Name>_<Programme>_<Batch>

 Kindly adhere to the duration/timelines of the examinations. Submission outside the

JSBF [Re-sit Examination – December’2020 – January’2021] Page 1

Part 2: Numerical Problems. Answer any four. [4×10 = 40 Marks]

1. Consider a market where the demand curve is given by p=55-0.5Q.

JSBF [Re-sit Examination – December’2020 – January’2021] Page 2

4. Consider a market with the following demand and supply curves:

JSBF [Re-sit Examination – December’2020 – January’2021] Page 3

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