Econ 315 Final Exam Study Guide

There are 25 Scantron questions: each question is worth 3 points.

There are three short-answer questions worth 45 points in total.

You will need the following for the exam: Scantron 882, picture ID, pencil, eraser, and a calculator.

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

Note that most of the material on the final will have been covered after 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. Optimal pricing using a commodity bundling pricing strategy – information not seen yet

8. Given demand function and external/internal cost functions, determine the socially efficient level of output – information not seen yet

9. Given MC and price elasticity, find profit-maximizing price; formula required MC = MR = P (1+E)/E

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. Predict the outcome under a Bertrand oligopoly given demand and cost functions

12. Influences on mark-ups for oligopolies

13. General observations and predictions of the Sweezy model of oligopoly

14. Contestable markets – conditions, outcomes

15. Identification of opportunity cost in a given scenario

16. Strategic decision involving marginal benefits and marginal costs

17. Supply/demand analysis: make prediction on future equilibrium price and quantity

18. Income elasticity of demand calculation

19. Optimal input usage comparing wage and VMPL

20. Strategic decision on input usage; key concept: MPL/w vs. MPK/r

21. Profit-maximizing price determination given inverse demand function and cost function

22. Calculation of AVC. Key formulas: TC = TFC + TVC; AVC = TVC/Q

23. Application of shut down rule: compare P and AVC

24. Relation of optimal prices in two different markets for a firm given price elasticities of demand; key formula: MC = MR = P(1 + 1/Ed)

25. Price elasticity, change in price, effect on total revenue

Short Answer Section

26. (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

27. (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

28. (25 points) Demand and cost information provided. Determination of output, price, profit, and consumer surplus under the following pricing strategies: first degree price discrimination, second degree price discrimination, block pricing, and two-part pricing.