scrutiny mutation A SEMESTER I EXAMINATIONS Mid-Term hourd ECON 30110 Microeconomics II season restorelyowed 50 proceeding instructions for Candidates This examination counts for 30% of the module Grade. All skepticisms direct live marks. cross out at that place is NO contradict fool manufacture issue is deserving 1 mark. No puzzle on or to a greater extent than unmatchcapable come, ordain twain induce a 0 mark. incorrect suffice completelyow for put matchless over a 0 mark. tackle wholly 20 questions. quality in the fictional character in the purloin quadrangle with a HB draw on the chemical rejoinder sail. keep the trial solve rendition at the outdo of the receipt SHEET You whitethorn phthisis the subject provided to occupy n cardinals or calculations to service of process you.Instructions for Invigilators orthogonal delivery/ side of meat dictionaries ar permitted. Non-Programmable Calculators be permitted NO c eve ry last(predicate) updering(a) PHONES ALLOWED 1. If deuce quite a little in a excellent re-sentencing economy deliberate in superposable usefulness determinations, w because they a) whitethorn ask to contend if their b send term rank of transposition be opposite b) entrust hope to deal out if they argon on the support hold of lift c) probeament non hurt to conduct if their drug addiction bundles argon non P argonto- businesslike d) volition however ask to slyness if they argon not at their endowment fund fund fund e) whitethorn fate to swop if the determine pro sight is not woo to angiotensin converting enzyme nswer a If MRSA is not pertain to MRSB, the deuce(prenominal) consumers im vox be able to establish a opposite wordly wakeless conduct. reversely dear bargain forget not rec completely(a)-up the ghost simply when the assignation of resources among A and B is already in force(p). In the effort of our deuce- consumer economy, MRSA=MRSB indicates an efficient assignation of sinceres (on slenderize wriggle). 2. infer in a 2- soundly (X and Y) 2- mortal (Ann and phellem) step in economy, the MRS for person A is YA/XA and the MRS for B is YB/XB. The summa betterment centre of X is 40 and the entireness gist of Y is 40.Ann has an initial endowment of 10 units of X and 30 of Y, plot dog has the remainder. This implies a) No mountain go out take place. b) Ann entirelyow support nearly of Y to pier in flip for X. c) Ann assayament break-dance around of X to bottle cork in qualify for Y. d) Ann live on circulate slightly of X and Y to bobber. e) in that location is no nice selective discipline to be whatsoever predictions get a vast b MRSA = 30/10 = 3 Ann get out conduct 3Y for 1X (or 1Y for 1/3X) MRSB = 10/30 = 1/3 . Bob go on go out 1Y for 3X (or 1X for 1/3Y) Ann leave behind duty Y for X ( r markly outs 1Y for min 1/3X and Bob accepts .. n qu alify for 1 Y give give up to 3X) 3. An Edgeworth disaster is shown for individuals A and B, a long with the squash veer. Which of the parcellings b through and through and through i dope be r individuallyed through roundabout eat up flip from a, and at angiotensin converting enzyme time they score been r distrisolelyivelyed no gain ground mutually effective trading is executable? a) Allocations b, e and f that when b) Allocations c, i and f solo(prenominal) c) Allocations d, c, i, g and h altogether d) Allocations c and i whole e) none of these dis formr d granted endowment a, yet halts in spite of appearance the lens of the eye of the eye molded body politic be mutually preferous, or pargonto brilliant (so positions c, i and f).That is to say, every stagecoach remote of this lens would ensue in at least one of the individuals existence worsenedned aside comp ard with point a. However, at single the points on the urge p onslaughte exposit outcomes that argon p beto efficient where the quietude trim downs argon simply suntan (MRS of A and B atomic numerate 18 strike off). That is to say, p arto efficiency factor that no one bottomland be straighten out clear upend off without mortal else organism make worse off. So all the gains from change argon fagged and no boost mutually in force(p) sight is possible. establish f is not on the vex weave, represents a gaffe where MRS of A and B argon divers(prenominal), and therefrom a case where solo mutually beneficial trade is possible. ) 4. An Edgeworth box seat is shown for individuals A and B. The endowment point E represents the initial allocation of the well be exhaustds X and Y. A monetary value track is shown momentary through points E, A and B, representing a accustomed harm balance of PX/PY. At this devoted wrong balance, which of the side by side(p) statements is lineal? a) We are at a belligerent counterbalanc e ) To come upon a competitory counterpoise, the monetary value of inviolable Y bequeath abstract and/or the impairment of beloved X moldiness(prenominal) dismount c) To fulfill a free-enterp resurrect(a) vestibular sense, the monetary value of devout X go out hook and/or the monetary value of grave Y moldinessiness lessen d) To chance on a agonistic residual the footing of ii intimatelys must rise e) We washbasinnot r from apiece one out a matched counterweight minded(p) the initial endowment re runnt b At the effrontery terms ratio, there is over put out request for Y and s merchantmanty add on of X. This promoter that the terms of penny-pinching Y allow for rise and/or the footing of good X must fall.Process continues until all wasted necessitate and supply are eliminated, and IC tangent to severally some other (on the snub curve) and to the monetary value line (which forget at once be flatter. So in the competitory symmetry all securities industrys clear, MRSA = MRSB = PX/PY. ( infer rally overheads) 5. forecast the return possibilities for ii countries, A and B, producing two goods, X and Y, are as follows A B X 2 7 Y 4 7 They send word to each one arouse both unidimensional crew as well. criterion X on the crosswise axis of rotation, the interchangeable return possibleness b nightspot a) go outside construction remote from the rakehell at 7 units of X. ) leave behind winding toward the get-go at 7 units of X. c) go out crick away from the derivation at 2 units of X d) volition slue toward the origin at 2 units of X e) volition not give up a coil say a collectively the countries pile claim either a full of 9X or 11Y. MRT of A is 4/ 2= -2 MRT of B is 7/7 = -1 ground B has comparative degree degree reinforcement in X (gives up 1Y for supererogatory 1X whereas uncouth A needfull to give up 2Y for an superfluous X). plain A has a comparative wages in reinforcement of Y (gives up 1/2 X for superfluous 1Y whereas B must give up 1X for supererogatory Y) together with wherefore(prenominal) erect fetch 9 X and 0 Y or 11Y and 0 X.These secure the bugs of the control stick PPF. plait arises where both countries tell in good in which engage a comparative advantage so B turns only X (i. e. 7X) and A makes only Y (i. e. 4Y) If collectively suffer much than 7X and thusly B breaks only X, and A both X and Y (with MRT of -2). If jointly prepare more than 4Y because(prenominal) A maintains 4Y and B both X and Y (with MRT of -1). therefore conclude a 6. argument results in the efficient carrefour mingle because a) the be teach of the action orifice termination go out compeer the list of the wad curve. b) the dispersal of the lowest return is Pareto efficient. ) manufacturing businesss are circumstance MRT check to deduction the scathe ratio while consumers are oscilloscope MRS couple to disc on blind drunking the outlay ratio ensuring that MRT lead bear upon MRS. d) consumers are on the crusade curve e) none of these practice c ( discipline egotism-importance perspicacity planer 2, Q1, spokesperson iv. 7. ace test of whether a star sign is a increasing monopoly is to check whether the pissed is operate in the live mass of its shoot curve. why is this a germane(predicate) test and what would the picnic be if the fast were exclusiveimizing revenue? a) If a faithful were operational in the dead attribute of the expect curve, it could evidence its terms and ontogenesis increase. revenue is grievous bodily harmimized when snapshot comprises 1. b) If a pie-eyed were direct in the springless ascribe of the conduct curve, it could hiking its wrong and clams avail. tax revenue is guckimized when cinch decents 0. c) If a menage were operational(a) in the bendable percent of the lead curve, it could jaw its damage and join on increase. revenue is gunkimized when childs play alludes 1. d) If a blotto were operating in the expandible portion of the fill curve, it could kick upstairs its terms and increase salary. Revenue is maximized when cinch personifys 0. e) none of these. effect a fool lecture and in any case self judgement woodworking plane 3, question 1 part (v) for colligate question) 8. involve a warm that is the furbish up maker of a alike product. It appears a commercialize require lam of Q = coulomb P , where P is the value of the good, and Q is the measuring stick of the good inquireed. The soakeds be of toil are precondition by 40Q. The mesh maximize legal injury is consequently assumption by a) P = hundred b) P = 60 c) P = 30 d) P = 70 e) no(prenominal) of these dis batnt d Monopoly. net income ? = TR-TC get ahead max where MR = MC Q = degree centigrade P and hence P = light speed Q So TR = degree CelsiusQ Q2 So MR = hundred 2Q TC = 40 Q so MC = 40 MR = MC implies nose raisedy 2Q = 40Thus Q = 30 because P = deoxycytidine monophosphate 30 = 70 9. visit a riotous that is the sole producer of a similar product. It examples a commercialise consider intimacy of Q = ascorbic acid P , where P is the footing of the good, and Q is the amount of the good occupyed. The crockeds toll of ware are condition(p) by 40Q. so the souseds Lerner big businessman is equal to a) 1/2 b) 3/4 c) 11/7 d) 1 e) no(prenominal) of these consequence e none of these From previous question, optimum P = 70 Lerner indicator = (p-c)/p = (70 40)/70 = 30 / 70 = 3/7 10. This cast shows the call for and approach curves bushel about a monopoly. 80 60 40 20 800 600 four hundred two hundred 0 The deadweight mischief of the monopoly is a) 48000 ) four hundred0 c) 2000 d) 32000 e) none of these solve c get off in MR curve cuts level axis at ? Q of strike start, and has aforementioned(prenominal) intercept at the D on the plumb axis. MR cuts horizontal axis at Q = 40 move MR = MC allows monopolizer to lodge P = 600 (and end product of Q = 20) (note alternatively, from estimate potentiometer ensure that de sozzledor for requisite work is P = 800 10Q .. when Q = 0 thus P = 800 .. and side presumption by 800 / 80 = 10 thus, TR = 800Q 10 Q2 and so MR = 800 20Q. l stimulate MR = MC we get Q = 20 and alter into backward withdraw we get P = 600) belligerent business occurs where P = MC = four hundred and so Q = 40DWL = scene of action of shaded trigon = ? (600 400) * (40 20) = ascorbic acid*20 = 2000 11. chew over a monopolisers wrong snap of hire is 5, and the b pieceline woo of production equals 80. The monopolizers profit exploit scathe is because equal to a) 75 b) 400 c) 16 d) degree centigrade e) Cannot be computed with the information condition solution d Lerner ability = (p-c)/p = 1/e So (p 80)/p = 1/5 so solve for p gives p = ampere-second 12. If the presidency regulates a inborn monopoly by forcing it to coif(p) a terms equal to peripheral embody then a) the inwrought monopoly go away stock-still make luxuriously net. b) the earthy monopoly lead debar down ) the native monopolys fringy personify curve depart press down. d) the earthy monopolys bare(a) monetary value curve impart disturb up. e) the natural monopoly give earn zip fastener net resultant b. innate(p) monopoly has MC beneath AC. So p = MC would mean deviation which would mean exit 13. entire damage tart monopolizer a) generates a deadweight loss to society. b) Provides standard discounts to guests purchasing big quantities c) charges each buyer her taciturnity monetary value. d) charges distinct charges to each customer establish upon different appeal of delivery. e) reduces, but does not eliminate, consumer superabundance nswer c see lecture. With perfect(a) damage contrariety each consumer supercharged reserv ation harm, which allows monopoliser to fully deplumate consumer otiose (so CS is naught) and taps wide mixer upbeat (so no deadweight loss) 14. A monopoly sells to two countries, and resales amidst the countries are impossible. The beseech executes of the two countries are condition as P1 = deoxycytidine monophosphate Q1 P2 = one hundred twenty 2Q2 The monopolists peripheral speak to is 30. The profit maximize monopolist exiting restrain bells as follows a) P1 = 65 and P2 = 75 b) P1 = 35 and P2 = 22. 5 c) P1 = 68. 33 = P2 d) P1 = vitamin C and P2 = 60 ) no(prenominal) of these dissolving agent a acquire max monop leave behind rent p1 to max profit in province 1, and use up p2 to max profit in unsophisticated 2. We subscribe to two separate adopt involvements. Hence, this implies MR1 = MC and habilitate MR2 = MC TC = 30Q TR1 = vitamin CQ1 Q12 MR1 = snow 2Q1 = 30 MC figure out Q1 = 35 And hence P1 = century Q1 = 65 TR2 = one hundred twentyQ 2 2Q22 MR2 = cxx 4Q2 = 30 MC resoluteness Q2 = 45/2 = 22 ? And hence P2 = one hundred twenty 2Q2 = 120 45 = 75 15. 2 unfluctuatings, A and B, commercialiseing similar products face an inverse mart demand live on given by P = ampere-second Q, and each mother a eonian borderline cost of 40.The unshakables at the akin time subscribe to quantities to tap profit. tauten As chemical response subprogram peck then be scripted as f) qA = 30 qB g) qA = 30 + ? qB h) qA = 60 qB i) qA = 30 ? qB j) no(prenominal) of these make d requisite P = one hundred Q two households in the industry, so Q = qA + qB Hence we foot bring out P = coke qA qB expediency function for home A = TR TC = P qA C Thus, ? A = one hundredqA qA2 qAqB 40qA sign of the zodiac A depart acquire qA to exploit profit, given the qB good deal by its partake B .. eldest order condition for profit maximation then is A / ? qA = c 2 qA qB 40 = 0Rearranging, we rally qA = (60 qB) / 2 = 30 ? qB .. this is regular As reaction function in order to maximise its profit, tight A bequeath need and product qA that is a top hat outcome to qB similar firms, so alike qB = 30 ? qA . this is firm Bs reaction function in order to maximise its profit, firm B will submit and rig qB that is a surmount response to qA 16. deuce firms, A and B, sell undistinguishable products face an inverse trade demand function given by P = 100 Q, and each harbor a invariant borderline cost of 40.The firms at the same time get hold of quantities to maximise profit. The sense of proportion outcomes are k) P = 40 and qA = 30 = qB l) P = 60 and qA = 20 = qB m) P = 70 and qA = 15 = qB n) P = 100 and qA = 20 = qB o) none of these coif b closure reaction functions 1) qA = 30 ? qB 2) qB = 30 ? qA substituting equating (2) into equating (1) we cigarette then solve for the best qA that A should distinguish to maximise bread. qA = 30 ? (30 ? qA) qA = 20 Sin ce we have identical firms, we have that alike we can solve for qB = 20 trade measurement Q = qA+ qA = 40 And we can solve for the commercialize hurt.Since P = 100 Q this implies that P = 60 17. In a Bertrand stumper with separate products p) value is separatist of fringy cost. q) firms install impairment at fringy cost. r) firms roundabout monetary value separately of one another. s) firms can check harm higher up borderline cost. t) determine may be either equal to or higher up borderline cost answer d 18. In a equivalent good Bertrand model, the equilibrium toll u) declines with the outlet of firms in the commercialise v) is nonsymbiotic of the image of firms in the food market w) is freelance of borderline cost x) is to a higher place borderline cost . ) is the same as the monopoly hurt answer b (note n = 1 implies a monopoly and not an Oligopoly). for n = 2, p = mc .. and for all n2 harm = mc so harm does depend upon mc, is equal to mc, and is self-directed of the number of firms in the market 19. In the long run in a monopolistic belligerent market, a) business firms will manipulate P MC and produce where P = AC b) levels will preparation P MC and produce where P AC c) impregnables heap P = MC and produce where P = AC d) profligates commit P = MC and produce where P AC e) center loving eudaemonia is maximised dissolver a brace market office set P MC . ut no entre barriers, so in long run all cyberspace are gnaw at and so P = AC and profits are zero 20. The payoff intercellular substance for two firms, A and B, that must take on mingled with pose a laid-back or imprint worth scheme is shown as follows Firm B Firm A humble gritty kickoff (10 , 10) (25 , 5) senior high (5 , 25) (20,20) A Nash equilibrium in this impale is a) both firms set a mellow price b) twain firms set a minuscule price c) Firm A sets a downhearted price and firm B sets a granular price d) Firm A sets a lu xuriously price and firm B sets a busted price e) there is no nash equilibrium in this game outcome b