Description
BECC -115 INTERMEDIATE MICROECONOMICS
Tutor Marked Assignments
Course Code: BECC-115
Assignment Code: Asst /TMA /2025-26
Total Marks: 100
Assignment 1
Answer the following Descriptive Category questions in about 500 words each. Each question carries 20 marks. Word limit does not apply in case of numerical questions. 2×𝟐𝟎 = 𝟒𝟎
1. (a) What role does the marginal utility of income play in the Lagrangian formulation of consumer equilibrium?
(b) Consider a consumer’s utility function � �(𝑥1,𝑥2) = 300 +√𝑥1 +√𝑥2 Assuming price of good x1 and good x2 to be p1 and p2, respectively and income of the consumer be M. Determine the optimal choice of consumption of goods x1 and x2.
(c) Compare and contrast the effects of an income tax and a commodity tax on consumer equilibrium.
2. (a) Consider a market for cars that initially has only one firm operating as a monopolist. The firm has a linear cost function given by 𝐶(𝑞) = 2𝑞, and the market demand is represented by the inverse demand function 𝑃(𝑄) = 9 − 𝑄, where 𝑄 denotes the total quantity sold in the market. Based on the above information, answer the following:
(i) Determine the price that the monopolist will charge and the quantity of cars it will sell. Based on this output and cost structure, calculate the profit earned by the monopolist
. (ii) Now suppose a second firm, with an identical cost function, enters the market, forming a Cournot duopoly. Determine the Cournot equilibrium output for each firm
(iii). Analyze the Stackelberg duopoly scenario, where the first firm acts as the leader and the second as the follower. Find the Stackelberg equilibrium output for each firm.
(iv)Calculate and compare the profits earned by each firm under both the Cournot and Stackelberg models.
(v)Evaluate which of the three market structures—monopoly, Cournot duopoly, or Stackelberg duopoly—would be preferred by consumers, and explain your reasoning.
(b) “Monopolistic competition leads to excess capacity.” Discuss with the help of a diagram.
Assignment 2
Answer the following Middle Category questions in about 250 words each. Each question carries 10 marks. 3×𝟏𝟎 = 𝟑𝟎
3. (a) Write the general form of a Cobb-Douglas production function. How do you derive the profit function from it?
(b) Determine the profit function, the supply function, and the (unconditional) input demand functions for a perfectly competitive firm with a production function � �(𝑥1,𝑥2) = √𝑥1𝑥2 𝑥1+1
4. (a) What is the Rawlsian (minimax) social welfare function? How does it differ in philosophy and outcome from utilitarian welfare functions?
(b) What is a Transformation Curve? How does it represent trade-offs in the allocation of resources between the production of two goods?
5. (a) State the Coase Theorem. How can private bargaining be a solution to externalities? Under what conditions will it work effectively?
(b) A firm produces 100 units of output. The marginal private cost (MPC) is constant at ₹20. The production generates a marginal external cost (MEC) of ₹10 per unit. The marginal benefit (MB) to consumers is ₹30 per unit.
i) What is the socially optimal level of output?
ii) Calculate the Pigovian tax that would internalize the externality.
Assignment 3
Answer the following Short Category questions in about 100 words each. Each question carries 6 marks. 5×𝟔=𝟑𝟎
6. What are the key properties of the profit function? Explain the concept of convexity in this context.
7. Under what circumstances can a firm in perfect competition continue producing even when it is making losses in the short run?
8. What is non-price competition?
9. Discuss any one real-world application of game theory in economics or business.
10. Why do firms in monopolistic competition earn only normal profits in the long run?
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