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Kathmandu University School of Management EMBA End-Term Examination (Spring 2020)

This document contains an end-term examination for an ECO 501 Managerial Economics course. It consists of 3 questions testing concepts related to monopoly, oligopoly, antitrust policy, and market structures. Question 1 has 5 parts asking about monopoly profit maximization, market power, and monopolistic competition. Question 2 has 4 parts on oligopoly, collusion, and price leadership. Question 3 has 6 parts covering antitrust laws, mergers, trade policy, price floors, and types of goods. The exam tests a range of economic principles through short answer questions.

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Sailesh Dahal
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135 views

Kathmandu University School of Management EMBA End-Term Examination (Spring 2020)

This document contains an end-term examination for an ECO 501 Managerial Economics course. It consists of 3 questions testing concepts related to monopoly, oligopoly, antitrust policy, and market structures. Question 1 has 5 parts asking about monopoly profit maximization, market power, and monopolistic competition. Question 2 has 4 parts on oligopoly, collusion, and price leadership. Question 3 has 6 parts covering antitrust laws, mergers, trade policy, price floors, and types of goods. The exam tests a range of economic principles through short answer questions.

Uploaded by

Sailesh Dahal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Kathmandu University School of Management

EMBA End-Term Examination (Spring 2020)

Course: ECO 501 - Managerial Economics Time: 1 hr 45 mins


Semester: I Full Marks:40

Instructions: You must answer all THREE questions. Read each question carefully before
attempting to answer it. These are short answer questions (can be answered in maximum 4/5
sentences). Please write clearly so that your answers are effortlessly readable. Show calculation
wherever required. Please don’t waste time writing irrelevant things! ALL THE BEST!

Question One:
a) On what portion of demand curve, does a monopolist produce and why? (2)
b) What is meant by market power and how do monopolist and monopolistically competitive
firms exercise market power? (2)
c) For a good produced by a monopolist firm, price elasticity of demand is given to be -2,
marginal cost for the firm is Rs. 50, what price will maximize its profit? What will be the mark-
up in this case? (3)
d) How would a monopsony labor market differ from a perfectly competitive labor market? (3)
e) Can you apply the equilibrium determined in the model of monopolistic competitive market
to restaurant market in Nepal? Explain briefly in what way. (3)

Question Two:
a) Could existence of economies of scale and scope in production help create an oligopoly
market structure? Provide a brief argument. (3)
b) Collusive agreement, despite being profitable for firms in an oligopolistic market, tends to
break down. Why? (3)
c) What is the difference between theory and practice regarding how quota is determined in a
collusive agreement? (3)
d) Suprimo steel is the largest steel factory in a country, and it is also the price leader. The
demand curve for the industry’s output is given by: P = 300-Q; (P, Q are price and quantity
demanded).
Total amount supplied by other firms is given by Q R = 49 P. Suprimo’s marginal cost is given
by: MC= 3Qs. What output level should Suprimo produce to maximize its profit? (4)
Question Three:
a) Do we need antitrust laws? What do you speculate will happen in absence of such laws? (3)
b) Cement industry in a country has Herfindahl-Hirschman index (HHI) of 1800. If two large
firms currently with individual market share of 15 and 10% respectively are allowed to merge,
by how much will HHI increase? (2)
c) Does import change consumer and producer surpluses? If tariff is used to curtail imports how
will it affect social welfare? (3)
d) A government imposes price floor to help producers. Two ways of implementing price floor
are: (i) force producers to produce only what is demanded at price floor, (ii) let producers
produce at the price floor and government purchase the excess supply. How would social
welfare change in both cases relative to that given by competitive market? Explain briefly
without a graph. (3)
e) Which of the following goods/services are: public goods, common property goods, marketable
public goods, and private goods? And why? (3)
i) Chitwan National Park ii) community forest iii) cinema hall iv) Side walk
v) Dish TV vi) EMBA at KUSOM

The End

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