EC 2804 – MICRO ECONOMIC THEORY – II

Date : 17/04/2008 Dept. No. Max. : 100 Marks

Time : 1:00 – 4:00

PART – A

Answer any FIVE questions in about 75 words each. (5 x 4 = 20 marks)

What is meant by zero sum game?
Are price and output under Oligopoly indeterminate? Why?
List out the factors which Bain considers as barriers to the entry of new firms.
Distinguish between Pareto efficiency and Pareto optimality.
List out the important features of technology matrix.
What do you understand by free rider problem
Write a short note on Rawl’s Maximin welfare criterion.

PART – B

Answer any FOUR questions in about 250 words each. (4 x 10 = 40 marks)

“Managers seek to maximize balanced growth rate” – Discuss.
Explain a dominant strategy? How can firms decide about the optimal choice of a strategy in the absence of dominant strategy?
Illustrate the price and output determination under price leadership.

Given the transaction matrix find out the technology matrix.
If the final demands for agriculture and industry change to 150 and 300 respectively, estimate the total outputs of agriculture and industry required to meet the new inter-industry demand and the new final demands assuming that technology matrix remain same.

Does perfect competition always ensure Pareto optimality and maximum social welfare? – Discuss.
Bring out the influence of externalities in economic efficiency.
Briefly explain the Arrow’s theory of social choice.

PART – C

Answer any TWO questions in about 900 words each. (2 x 20 = 40 marks)

Briefly explain the W.J. Baumol’s maximization model of Oligopoly with advertisement expenditure, overhead cost, choice of output and input combinations and sales maximization.
Elucidate the Neumann-Morgenstern game theory with an illustration and bring out its criticism.
Elaborate the conditions of Pareto optimality and its criticism.
Critically examine the Kaldor-Hicks-Scitovsky’s compensation principle.