question archive ECON 7110: CONSUMER AND FIRM BEHAVIOUR Problem Set 2 (15%) Due: 4pm, Monday, September 20th, 2021 Questions 1) Educational production a) Write down your personal production function for this course; ????(????, ????, ????, ????) ∈ [0,100] where ???? ∈ [0,11] is the number of lectures you attend/watch, ???? ∈ [0,11] is the number of tutorials you attend/watch, ???? ∈ [0,80] is the effort hours you put into doing individual assignments, and ???? ∈ [0,20] is your individual effort hours in doing the group assignment
ECON 7110: CONSUMER AND FIRM BEHAVIOUR Problem Set 2 (15%) Due: 4pm, Monday, September 20th, 2021 Questions 1) Educational production a) Write down your personal production function for this course; ????(????, ????, ????, ????) ∈ [0,100] where ???? ∈ [0,11] is the number of lectures you attend/watch, ???? ∈ [0,11] is the number of tutorials you attend/watch, ???? ∈ [0,80] is the effort hours you put into doing individual assignments, and ???? ∈ [0,20] is your individual effort hours in doing the group assignment
Subject:EconomicsPrice:13.86 Bought3
ECON 7110: CONSUMER AND FIRM BEHAVIOUR Problem Set 2 (15%) Due: 4pm, Monday, September 20th, 2021 Questions 1) Educational production a) Write down your personal production function for this course; ????(????, ????, ????, ????) ∈ [0,100] where ???? ∈ [0,11] is the number of lectures you attend/watch, ???? ∈ [0,11] is the number of tutorials you attend/watch, ???? ∈ [0,80] is the effort hours you put into doing individual assignments, and ???? ∈ [0,20] is your individual effort hours in doing the group assignment. For simplicity, assume the start-up pitch group assignment grade only depends on your individual effort ????. (2 marks) Use the function you provide in 1a to answer questions 1b, 1c and 1d. b) What is the value of ????(0,0,0,0) (i.e., what mark do you get for doing nothing at all)? (0.5 marks) c) What is the value of ????(11,11, 80,20) (i.e., what mark do you get for studying as hard as possible? (0.5 marks) d) Does your production function exhibit increasing, decreasing or constant returns to scale (at all or some output levels)? Explain. (2 marks) 2) Pricing a) Provide a real-world example of group (third-degree) price discrimination (with a hyperlink to the example). Discuss what prevents re-sale in your example (i.e., why people who pay a lower price can’t buy and resell the good to people who face a higher price). (2 marks) b) Provide a real-world example of a seller offering a “decoy option”. Discuss how you expect the demand for the other options to change if this decoy option was removed from the market by the seller. (2 marks) c) Provide a real-world example of the “retention-based pricing” idea suggested in the tweet below or discuss why we don’t see many examples of such pricing schemes. (1 mark) The University of Queensland Brisbane QLD 4072 Australia T F +61 7 334 670 64 +61 7 3365 7299 E W k.kalayci@uq.edu.au http://kenankalayci.com/ ABN: 63 942 912 684 CRICOS Provider 00025B 3) Suppose the demand for a new technology, on which the manufacturer has a monopoly, is given by: Q(P, A) = (200 − 2P) × A0.5 where Q is output per period, P is the price, and A is the advertising expenditures. Production costs are given by: C(Q) = 40Q Calculate the profit-maximising price, advertising level, and profits for the firm. (3 marks) 4) Information goods, such as books and video games, exhibit experience good characteristics which can lead to market failures. Using a specific example of an information good, explain how experience good characteristics can lead to a market failure and discuss existing solutions that address the market failure. (2 marks) 2
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Question 1
- g( I, t, e)
Where;
I is the number of lectures €[0,12]
T is the number of tutorials €[0,12]
E is the study effort €[0,100]
F(I, t, e)= (100/3*I/12) + (100/3*t/12) + 100/3*e/12)
F(I, t, e )= 100/3 [(I+t/12) + (e/100)]
- g(0,0,0)
I= t= e= 0
G(0,0,0) =0
- g(12,12,100)
= 100/3 (2+1)
=100
- Multiply every input by α where α>1
F(αI, αt, αe )= 100/3α [(I+t/12) + (e/100)]
F(αI, αt, αe )= αF(I, t, e)
The function exhibits a constant return to scale
Question 2
- Third degree Price discrimination is a selling strategy where customers are charged different prices for the same product by a monopoly. For example, The Microsoft Office Schools edition is available for lower prices to educational institutions than other random users. Re-sale of the product by the consumers who get it a lower price to those who get it at a higher price is prevented by ensuring there is no seepage between the elastic sub-market and the inelastic sub-market.
- The decoy effect is used to make pricing between the least expensive item, the middle-priced item, and the most expensive item uneven. For example, a small drink goes for $3.50, middle sided $4.75 and the large one goes for $4.95. Consumers tend to pick the large drink since it has the lowest cost per ounce. If the decoy option was removed, the demand for the products would increase since because there will be little to no difference in the products.
- Starbucks is popularly known for its customer reward programs. The program enables customers to earn free food and drinks and also receive personalised orders.
Question 3
40Q = (200-2P)*A0.5
40(200-2P)*A0.5) = (200-2P)*A0.5
8000-80P =200-2P
P=95.12
Question 4
Information goods refer to goods people used as references when making decisions about a specific product in the market. These goods lead to market failure in the case where the information they have provided is or incorrect. When buyers and sellers don't have all the correct information they may buy or sell a product at a higher or lower price than what would be reflective of its true benefit or cost.
