The IIT Madras BS Managerial Economics (Managerial Economics) End Term paper sat on 13 Sept 2026, in the May 2026 term, set 1: 37 questions for 45 marks in 180 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Q1*=……..
Correct answer: 24
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Q2*=……………
Correct answer: 24
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
P*=............
Correct answer: 32
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
π1=………
Correct answer: 576
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
π2=…….
Correct answer: 576
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. Q1………..
Correct answer: 36
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. Q2………………
Correct answer: 18
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. P*=............
Correct answer: 26
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. π1…………
Correct answer: 648
Suppose two firms operate in a market and can produce at a constant average (and marginal) cost of AC = MC = $8. Let Q1 be the output of the first firm and Q2 be the output of the second. Market demand is given by Q1+ Q2 = 80 - P. Assuming that the firms are competing as per the Cournot competition, find out the equilibrium quantity for each firm, equilibrium price and profit (π1, π2) of each firm. Based on the above data, answer the given subquestions.
Now suppose that the two firms are competing in the Stackelberg manner where one of the firms makes its output decision before the other. Suppose Firm 1 is the Stackelberg leader (i.e., makes its output decisions before Firm 2). Calculate the equilibrium quantity for the firms, equilibrium market price and profits (π1, π2) of both the firms in equilibrium. π2………
Correct answer: 324
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Calculate the output level and price of dry cleaning if it is produced under competitive conditions without regulation. Q*=.............
Correct answer: 60
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Calculate the output level and price of dry cleaning if it is produced under competitive conditions without regulation. P*=.............
Correct answer: 90
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Determine the socially efficient price and output of dry cleaning. QS=.............
Correct answer: 30
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Determine the socially efficient price and output of dry cleaning. PS=.............
Correct answer: 120
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Determine the tax (per unit) that would result in a competitive market producing the socially efficient output. t=.............
Correct answer: 2
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Calculate the output and price of dry cleaning if it is produced under monopolistic conditions without regulation. Qm………….
Correct answer: 40
In a market for dry cleaning, the inverse market demand function is given by P = 150 - Q and the (private) marginal cost of production for the aggregation of all dry cleaning firms is given by MC =30 + Q. Finally, the pollution generated by the dry cleaning process creates external damages given by the marginal external cost curve MEC = 2Q.
Based on the above data, answer the given subquestions.
Calculate the output and price of dry cleaning if it is produced under monopolistic conditions without regulation. Pm…………
Correct answer: 110
Based on the above data, answer the given subquestions.
4
3
Correct answer
Based on the above data, answer the given subquestions.
What is the cost minimizing input combination if the firm wants to produce 720 units per year? L*= .............
Correct answer: 12
Based on the above data, answer the given subquestions.
What is the cost minimizing input combination if the firm wants to produce 720 units per year? K*= ..............
Correct answer: 3
Based on the above data, answer the given subquestions.
Find the expected value of return on investment A is ……….. (in $)
Correct answer: 250
Based on the above data, answer the given subquestions.
The expected value of return on investment B is ……….. (in $)
Correct answer: 250
Based on the above data, answer the given subquestions.
Jill has the utility function U=5I, where I denotes the payoff. What is Jill's expected utility from investment A is EU = ................
Correct answer: 1250
Based on the above data, answer the given subquestions.
Jill’s expected utility from investment B is EU = .............
Correct answer: 1250
Based on the above data, answer the given subquestions.
According to these preferences Jill will prefer
Investment A
Investment B
Jill is indifferent
Cannot be determined
Correct answer
Jill is indifferent
Based on the above data, answer the given subquestions.
Jill's preferences are
Risk averse
Risk loving
Risk neutral
Cannot be determined
Correct answer
Risk neutral
A monopolist faces the demand curve P=25-Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $5 per unit. Answer the given subquestions.
What are the monopolist’s profit-maximizing price and quantity? P*= ……
Correct answer: 15
A monopolist faces the demand curve P=25-Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $5 per unit. Answer the given subquestions.
What are the monopolist’s profit-maximizing price and quantity? Q*= ……
Correct answer: 10000
A monopolist faces the demand curve P=25-Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $5 per unit. Answer the given subquestions.
The resulting profit will be …………….
Correct answer: 100000
A monopolist faces the demand curve P=25-Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $5 per unit. Answer the given subquestions.
The firm’s Lerner index is …………….
Correct answer: 0.67 (accepted within ±0.01)
Inscript
Correct answer: 1
Select the option that describes an indirect network effect
The value of a product or service increases for one group of users as the number of users on a complementary platform increases.
The value of a product or service increases for an individual user as more people adopt the same product or service
A product is advertised through a television advertisement
A product is advertised on social media
Correct answer
The value of a product or service increases for one group of users as the number of users on a complementary platform increases.
A common resource is
Rival and non excludable
Nonrival and excludable
Nonrival and nonexcludable
Rival and excludable
Correct answer
Rival and non excludable
A monopolist never produces in
The elastic region of a market demand curve
The inelastic region of a market demand curve
The whole demand curve
None of these
Correct answer
The inelastic region of a market demand curve
If bad drivers can usually avoid being ticketed by the police, then insurance companies will
Use one’s driving record as a signal
Use one’s driving record as a screening device
Not be able to use one’s driving record as a screening device
Request driving records directly from the police and not the individual applicant
Correct answer
Not be able to use one’s driving record as a screening device
Choose the incorrect statement
Quasi linear preferences are linear in one good and non-linear in the other good
U=min{ax, by} represents complements
U= ax+by represents substitutes
If a person always chooses three units of one good for one unit of another good then they have leontief preferences
Correct answer
If a person always chooses three units of one good for one unit of another good then they have leontief preferences
Choose the correct alternative
The fraction of quantity tax paid by buyers rises as supply becomes more own- price elastic
The fraction of quantity tax paid by buyers rises as demand becomes less own price elastic
Both the fraction of quantity tax paid by buyers rises as supply becomes more own-price elastic and the fraction of quantity tax paid by buyers rises as demand becomes less own price elastic
None of these
Correct answer
Both the fraction of quantity tax paid by buyers rises as supply becomes more own-price elastic and the fraction of quantity tax paid by buyers rises as demand becomes less own price elastic
