Econ 315 Final Exam Study Guide

There are 30 Scantron questions: each question is worth 3 points.

You will need a new Scantron 882 for the exam as some questions will be answered on the back side of the form.

The order of the material on your exam will differ from the order indicated below.

There are three short-answer questions worth 30 points in total.

Note that most of the material on the final has been covered since the second exam. Some of the material has not yet been covered since we still have four class meetings before the final exam. Where the material has not yet been covered it is indicated on the study guide.

Scantron Questions

  1. Peak load pricing analysis – information not seen yet
  2. Limit pricing analysis and outcome – information not seen yet
  3. Predatory pricing analysis – information not seen yet
  4. Rent seeking, general observations – information not seen yet
  5. Price matching strategy, motivations and outcomes – information not seen yet
  6. Penetration pricing, motivations and outcomes – information not seen yet
  7. Given demand function and external/internal cost functions, determine the socially efficient level of output – information not seen yet
  8. Given MC and price elasticity, find profit-maximizing price; formula required MC = MR = P (1+E)/E
  9. Compare/contrast perfect competition/monopoly/oligopoly
  10. Given information on an oligopolistic industry, relate market elasticity of demand and profit-maximizing markup factor. Formula required: P = NEm/(1 + NEm) x MC
  11. Given demand function and cost function, find per-unit price charged under a two-part pricing strategy
  12. Given a demand function and cost information, determine the firm’s price/quantity using a block pricing strategy– information not seen yet
  13. Predict the outcome under a Bertrand oligopoly given demand and cost functions
  14. Given cost information in a Cournot oligopoly, predict what will happen
  15. Second degree price discrimination profit calculation
  16. Influences on mark-ups for oligopolies
  17. Optimal pricing using a commodity bundling pricing strategy – information not seen yet
  18. General observations and predictions of the Sweezy model of oligopoly
  19. Contestable markets – conditions, outcomes, examples
  20. Deadweight loss in comparison of monopoly and perfect competition
  21. Given scenarios, identify opportunity cost
  22. Optimal action for a firm comparing marginal benefit and marginal cost
  23. Supply/demand analysis; make prediction on future equilibrium price and quantity
  24. Calculation using income elasticity of demand formula; Formula required: income elasticity of demand = (percent change in quantity demanded)/(percent change in income)
  25. Optimal input in the case of one variable input; compare VMPL with wage rate
  26. Optimal input use in case of two variable inputs; use ratio MPL/w and MPK/r
  27. Given inverse demand function and cost functions identify profit maximizing quantity and price
  28. Given total cost information, identify fixed and variable costs; key formulas: TC = TFC + TVC; ATC x Q = TC; AVC = TVC/Q;
  29. Graphical application of the shut-down rule
  30. Relation of optimal prices in two different markets for a firm given price elasticities of demand; key formula: MR = P(1 + 1/Ed) – information seen in class but some clarification to be provided

Short Answer Section

  1. (10 points) Cournot duopoly – determine reaction functions, output levels, equilibrium price and profits of each firm given market demand function and cost functions of each firm
  1. (10 points) Payoff matrix given. Determine Nash equilibrium/equilibria;determine secure strategy; determine dominant strategy; determine if/how collusion is possible in an infinitely repeating game, formula required: (profit from cheating – profit from collusion)/(profit from collusion – profit in Nash equilibrium) < 1/i; determine if/how collusion is possible with a finite game with a definite end; determine if/how collusion is possible with a finite game and an indefinite end
  1. (10 points) Compare/contrast the following pricing strategies: first degree price discrimination, second degree price discrimination, third degree price discrimination, block pricing, and two-part pricing. This question is conceptual: no calculations are required.