Executive Summary & Overall Structure (10 Marks)
· You should give a short summary of the report that highlights key findings that a reader needs to know. You do not need to present a structure of the paper.
· Marks are given for overall structure which needs to be clear and well presented with relevant headings and subheadings to make it easy to navigate. You should not repeat the questions.
Question 1: Price Discrimination and Profit Maximisation (30 Marks)
You are running the price setting division of a train linen operator. You have been told to consider the costs and pricing of train tickets. Which type of cost are you most likely to need to consider and how does this influence your aims in terms of total sales.
Knowing that you have a range of consumers with a wide set of preferences both in terms of when they want to travel (work, leisure, off peak and on peak etc) and a range of demographic characteristics (Students, retirees, working people etc) which forms of price discrimination will be most efficient and how will you use price discrimination to maximise profit.
Question 2: Production decisions within a firm (20 Marks)
You are running a small firm that sells a small and intricate computer part. This requires both skilled labour and high levels of capital. You know that your firms Isoquant is .
Using this explain if your firm can benefit from economies of scale, is more Capital or Labour Intensive and if you know that your budget allows you to spend £2,000,000, each worker (unit of L) costs £40,000, and each machine you need (unit of K) costs £60,000 find your optimal allocation of recourses (level of L and K)
Question 3: Employee Compensation and Overtime pay. (20 Marks)
Using game theory explain why price setting duopolies look more like perfect competition than a quantity setting duopoly. This should include two normal form games. The quantity setting duopoly should show how they can generate monopoly profit when both are taking the Nash Equilibrium Strategy.
You should use pick numbers for payoffs that make logical sense.
Question 4: Consumer Choice and product differences (20 Marks)
You are trying to explain how consumers interrelated preferences for two goods you sell will effect their purchases. Explain in words (with use of Indifference curve diagrams) what consumers will purchase in the following cases; Perfect compliments, perfect substitutes, one good is a neutral good, and a simple Cobb-Douglas .

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