Business Economics - BUST08005
Assignment Two 2025 (weight 50%)
This year’s second assignment comprises two tasks: a numerical problem and a 1000-word essay question. You must do BOTH of them. Use the knowledge acquired in class in combination with your own research.
PROBLEM (max 10 pages)
In early 2023, the clean-tech company Solora Energy launched its patented Solar Home Kit (SHK) in two neighboring countries with very different economic and demographic profiles.
• In Auroria (AU), a high-income, developed nation, households purchase SHKs as part of a
sustainability lifestyle. choice. Kits are often installed alongside existing grid connections, motivated by environmental awareness and government incentives.
• In Borealis (BO), a lower-income, developing country, SHKs provide essential off-grid electricity
access. Here, the kits are a basic necessity, enabling lighting, refrigeration, and mobile charging in rural areas with weak grid infrastructure.
To secure its license in Borealis, Solora agreed with the local government to enforce a strict ban on cross - border trade of SHKs.
The demand functions for the two markets (in millions of kits) are:
QBO=36-3PBO
QAU=48-2PAU
The total cost (TC), in millions too, depends on the total amount of units produced Q = QAU + QBO and also includes 50 million of fixed costs. TC follows the expression:
TC=50+4Q+Q2/12
i. Does Solora meet the conditions necessary to implement price discrimination between Auroria and Borealis? Explain. (10%)
ii. What is Solora’s profit-maximization strategy? State the prices and quantities for both markets, and compute the resulting level of social welfare. (25%)
iii. Are the prices derived above consistent with the elasticity rule for price discrimination? Comment on the results. (20%)
iv. Soon after launch, Solora suspects that corrupt officials in Borealis are hoarding entire shipments of SHKs to resell illegally in Auroria. To address this, Solora considers investing in border security. What is the maximum amount Solora should be willing to invest in additional monitoring? (25%)
v. Suppose Solora does not invest in security. A competitor, LumenPower, introduces its own patented solar kit. Consumers view both kits as identical, so the firms compete only on output, splitting demand at the same price. LumenPower’s cost function is: TC=50+4Q+Q²/36. Determine the equilibrium outputs and market shares of Solora and LumenPower. (10%)
vi. Explain what would happen to the market as described in part v) if it was suddenly discovered that 50% of the SHKs supplied by both companies are defective, producing significantly less electricity. Buyers, who are risk-neutral, cannot distinguish defective kits from functional ones, and their demand for reduced-functionality kits is: QAU=12-2PAU (10%)
You can scan your handwritten answers if you prefer. Please round your numbers to two decimals. Excellent answers always include five elements: A) the correct results, B) all workings, C) definitions of all relevant concepts, D) charts and diagrams when needed, and E) discussion of the results. Make sure you never go beyond the 10-page limit of the problem set.
WRITTEN ESSAY (2x500=1000 words)
For this assignment, you are required to connect recent news to the theoretical frameworks covered in class with Dr. Mustapha Douch.
You must identify two press releases or news articles (published in 2024 or later) :
1. One article that relates to Game Theory and Oligopoly.
2. One article that relates to Asymmetric Information and/or Network Economics.
You may choose news from anywhere in the world, but neither article may be one that was discussed in class. For each press release, you must write a 500-word discussion that:
• Explains the economic issues presented in the article.
• Establishes as many correct and relevant links as possible between the article and the theories discussed in class.
• Provides critical analysis supported by academic or textbook references.
The assessment will value relevance, originality, and quality of discussion, but a key focus will be the number of different, accurate theoretical links you can establish between the news item and the lecture content.
Finally, you must include a reference list with at least 10 sources in total, using the Harvard referencing format. Your references should cover both the press releases and the academic material used to support your analysis. If a press release title is not originally in English, provide an English translation. Always include a working link to each press release.
Finally, compile the two 500-word sections into a single 1,000-word essay, ready for submission alongside the problem set as one document.
Word limit: 1000 words (essay) + 10 pages (problem)
Deadline: 2pm on Friday, December 5th, 2025
Marking Rubric for the Written Essay
|
Criteria
|
Weight (%)
|
Excellent (70-100%)
|
Very Good (60-69%)
|
Good (50-59%)
|
Satisfactory (40-49%)
|
Needs Improvement (0-39%)
|
|
1. Selection and Relevance of
News Articles
|
25%
|
Two highly relevant, original, and timely articles (2024+); strong alignment with required topic pairs; clear scope for
multiple theory links; not previously discussed in class.
|
Articles mostly relevant and timely; minor gaps in
originality or topic coverage; generally suitable for
analysis.
|
Articles somewhat relevant but limited in scope; weak or partial connection to one of the topic areas.
|
Articles weakly relevant; originality limited;
minimal attempt to connect to required topics.
|
Articles largely irrelevant or
missing; fails to cover required topic pairs or repeats class
material.
|
|
2. Number and Accuracy of
Theoretical Links
|
35%
|
Numerous correct and well-explained
links between news and lecture content; demonstrates deep understanding of
Game Theory, Oligopoly, Asymmetric Information, and/or Network
Economics.
|
Several strong, mostly
correct links established; good understanding with minor errors or omissions.
|
Some links identified but superficial or partially
incorrect; understanding is limited.
|
Few links established;
vague, poorly explained, or containing multiple
errors.
|
Very few or no correct links; major misunderstandings of theory; fails to connect
articles to lecture content.
|
|
3. Depth and
Quality of Analysis (500 words per
case)
|
25%
|
Discussions are rigorous, insightful, and well-structured; issues clearly explained; analysis is critical and engaging;
arguments supported with references.
|
Discussions clear and
structured; relevant issues identified; analysis generally sound though minor
weaknesses in clarity or depth.
|
Discussions uneven; some
relevant points made but lack detail, depth, or clarity;
analysis often descriptive rather than critical.
|
Discussions weakly
structured; explanations incomplete or unclear; little evidence of critical analysis.
|
Discussions poorly written or incomplete; little or no
evidence of understanding; one or both cases missing.
|
|
4. Structure,
Presentation, and Referencing
|
15%
|
Document is well-organized, coherent, and professional; polished writing style; Harvard referencing fully correct and
consistent; at least 10 sources used; press releases linked and titles
translated where necessary.
|
Well-organized and mostly clear; minor referencing or formatting errors; sufficient sources; links provided.
|
Organization adequate but uneven; referencing
inconsistent; close to
minimum sources; some
missing details (e.g., links or translations).
|
Weak organization;
referencing incomplete or incorrect; fewer than 10 sources; clarity issues present.
|
Poorly structured; many
referencing errors or missing references; links not provided; difficult to follow.
|