Section A
Q1.
(a) Show that the ordinary demand curve will have a greater demand elasticity than the compensated demand curve.
(b) Discuss the Lerner Index of monopoly power.
(c) Illustrate graphically the effects of advertising on price and output in monopolistic competition.
(d) Distinguish between Partial Equilibrium and General Equilibrium Approaches.
(e) "The social optimal output occurs where Marginal Social Benefits (MSBs) equal Marginal Social Costs (MSCs)." Examine the statement.
(f)
Solve the following 2 × 2 game: Player A
B1 B2
Player B A1 2 3
A2 4 -1
(g) Show that T_{SS} = E_{SS} + R_{SS}.
