1630242170 1 call 29th June exam solutions

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BUSINESS AND INDUSTRIAL ECONOMICS [G-O] Final exam June 29th 2021 NAME AND SURNAME ________________________________________________________________ Multiple choice questions 1) Suppose a competit ive selection model (i.e. Jovanovich, 1982) where the θ parameter that estimates the value of a firm’s own productivity is in the interval [1; 10]. Total cost for each single firm is TC = (4q 2)/2θ. Which is the optimal quantity level that the least efficient firm will produce? a) (1/2)p. b) (1/4)p. BONUS c) (1/8)p. d) Data are insufficient to answer. 2) Suppose the following numbers regarding the consumers’ willingness to pay (WTP) for Sony’s Playstation4 (PS4) and P laystation5 (PS5), and consider (for the sake of simplicity) that all development costs are sunk and costs of production are zero. -Low-end users are 80 million and have (on average) WTPs for PS4 = 800$ and PS5= 1100$ -High-end users are 20 million and have (on average) WTPs for PS4 = 1200$ and PS5= 2200$. Evaluate the following statements. a) Selling the 2 products simultaneously (i.e. versioning) for a price of 800$ for PS4 and 1800$ for PS5 is the most profitable strategy. BONUS b) Selling the 2 products simultaneously (i.e. versioning) for a price of 800$ for PS4 and 1900$ for PS5 is the most profitable strategy. c) Selling the 2 products simultaneously (i.e. versioning) for a price of 800$ for PS4 and 2200$ for PS5 is the most profitable strategy. d) Selling only PS4 at a price of 800$ is the most profitable strategy. 3) Villagers graze their cows in a park. The milk production function in liters is given by the following expression: 10c – c 2 where c is the number of cows. The cost of a cow is equal to 2$, while the price o f 1 liter of milk is equal to 1$. Please , assuming sequential entry, indicate how…