Intermediate Microeconomics II: Market, Government and Welfare — DU B.A. (Hons.) Economics Previous Year Question Papers

1. A superspeciality hospital, the only one in a small hdian city, acts as a monopolist and charges patients using a two-part tariff. Patients must pay a fixed monthly fee, a,``to obtain a consultation card, after which they can visit doctors any number of times by paying a charge per-;isit. There are two types of patients: - Type 1 (insured patients) with demand: p] = 1,200 -10 q] - Type 2 (uninsuredpatients) with demand: P2.= 1,100 I 10 q2 L where g denotes the. number of visits per month. The marginal cost per visit is constant at MC = 1,000. 6 (a) Assuine that the hospital can distinguish between the two types of patients (by accurately verifying their insurance status). Find the optin}.al two-part tariff (a, p) for each type o,f patient, and the total profit earned. (b) (i) Suppose the ho.spital ,cannot distinguish betwee,n patient type,s, and serves both types of patients. Find the uniform Oi two-p.art tariff (a, p) and the .profit earned. (ii) Find the optimal two-part tariff (a, p) and the profit earned. Expl.aim, by calculating the average price paid by each group, that the optimal two-part tariff scheme reflects s`econd degree price discrimination. 2. (a) Assume that Ranbaxy, a pharmaceutical giant, produces Atorvastatin, a medical drug, for the domestic market (D), and exports (F) i.e., for India and the US respectively. Ranbaxy behaves like a third-degree' price discriminator: it is a inonopolist in India and a price taker in the Its demand function for Atorvasta+tin in India is QD = 5.7 -PD, Where QD and t PD represent the quantity demanded and the price charged in India. In the US, the price per unit of the drug (in Re terms) is Rs.1.30 and the quantity sold is QF. Ranbaxy's marginal cost is 0.1Q (Where Q = QD + QF). (i) Find the quantities of the drug sold and the prices charged in India and the US. Draw a diagram depicting the aggregate market demand (ii) Calculate the deadweight loss in each of the two markets. Qualitatively, do the prices charged correspond to the .underlying elasticities in the two markets? The coastal town of Ratnagiri is known for its fishing industry, particularly for high-value seafood such as prawns. The loca,1 Port Authority regulates the number of fishing boats operating in these waters. It costs €2000 per day to operate a fishing boat. If there are (x) boats operating in a day, the total revenue from prawns (in rupees) is (i) Find and graph the average revenue and the marginal revenue per boat. If fishing licenses are issued free of charge, how many boats will. operate in the competitive e,quilibrium? (ii) What would be the number of boats that maximise t.otal profits? Does your answer illustrate the importance of defining property rights for common pool resources'? (iii) Suppos.e Lthe `Port Authority" wants to restrict entry to the profit-maximising number of boats. What should be the license fee (t) charged per boat? (9+9) 3. Consider an exchange economy with two agents, Alpha and Beti, and two goods,