Assume that there are four firms supplying a homogenous product. They have identical cost functions given by C(Q) =40 Q. If the demand curve for the industry is given by. find the equilibrium industry output if the producers are Cournot competitors. What would be the resultant market price? What are the profits of each firm?

Actuarially Fair Premium

Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future
earning will be Rs 25. There is a belief that she may fall ill with probability of
2/3 while the probability of remaining in good health is 1/3
    

 Let her utility function be given as U(y) = y^(1/2)

suppose that an insurance company offers to fully insure sita against loss of earnings
caused by illness against an actuarially fair premium.
(a) Will Sita accepts the insurance. Explain.
(b) What is the maximum amount that Sita would pay for the insurance?

Discuss the approaches adopted by Pigou and Pareto for analyzing the problem of welfare economics.

Actuarially Fair Premium

Discuss the approaches adopted by Pigou and Pareto for analyzing the problem of
welfare economics

Consider the pay-off matrix of a game given below:

(a) Find all the Nash equilibrium of this game. Which player(s), if any, would have a
dominant strategy?
(b) Suppose that player 1 moves first by choosing either A or N. Players 2 observe
player 1’s action and then choose I or, O. For every action combination, the
4
player’s pay-offs are the same as in the above pay-off matrix. Draw a tree of this
new game. How many strategies does player 1 have and what are they? Find all the
sub-game perfect equilibria of this game.