Professional Documents
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Name:
INSTRUCTIONS:
1. This is a closed book examination.
2. The use of calculators, and a double-sided A4 paper of personal handwritten notes is
allowed.
3. Discussion and material transfer are strictly prohibited.
4. Please submit both the exam paper and the answer sheet.
Problem 1 (20 marks): The demand and supply functions of a good are given by
Problem 2 (20 marks): A firm charges different prices for its good to its domestic and
export markets. In the domestic market its demand function is given by 𝑝𝐷 = 20 − 2𝑞𝐷
while in the export market its demand function is given by 𝑝𝐸 = 15 − 1.5𝑞𝐸 . The total
cost function is 𝑇𝐶 = 5(𝑞𝐷 + 𝑞𝐸 ).
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a) What level of output should the firm sell in each market in order to maximise profit?
b) What price will the firm charge in each market if it is to maximise its profits?
Problem 3 (20 marks): The inverse demand and supply functions for a good are given by
1
𝑝 = 100 − 𝑞𝐷 and 𝑝 = −20 + 𝑞𝑆
2
where 𝑝, 𝑞𝐷 , 𝑞𝑆 denote the price, quantity demanded, and quantity supplied, respectively.
a) Sketch graphs of these functions on the same axes with quantity on the horizontal
axis and price on the vertical axis.
b) Find the consumers’ surplus and the producers’ surplus at the equilibrium point.
Problem 4 (20 marks): A store discounts commodities 𝑐1 , 𝑐2 , 𝑐3 , 𝑐4 , 𝑐5 by 25% at the end of the
year. The values of stocks (in dollars) in its four branches 𝐵1 , 𝐵2 , 𝐵3 , 𝐵4 prior to the discount are
given in the table below
𝑐1 𝑐2 𝑐3 𝑐4 𝑐5
𝐵1 12 5 72 15 7
𝐵2 10 7 62 10 9
𝐵3 15 4 60 13 7
𝐵4 20 5 64 12 6
Using matrices, estimate the value of stock in each of 𝐵1 , 𝐵2 , 𝐵3 , 𝐵4 after the discount.
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Problem 5 (20 marks): A phone company decides to launch two models of a phone,
Phone1 and Phone2. The cost of making each device of type Phone1 is $120 and the cost
for Phone2 is $160.
The company recognizes that this is a risky venture so decides to limit the total weekly
production costs to $4000. Also, due to a shortage of skilled labor, the total number of
phones that the company can produce in a week is at most 30. The profit made on each
device is $60 for Phone1 and $70 for Phone2.
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