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Talk to an Expert| Category | Assessment | Subject | Economics |
|---|---|---|---|
| University | University of st. Andrews | Module Title | EC1002 Microeconomics |
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MODULE CODE:
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EC1002 |
| MODULE TITLE: | Microeconomics |
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EXAM DURATION:
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2 hours |
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EXAM INSTRUCTIONS: |
(a) This exam has 8 questions, each with subquestions. Answer all questions and subquestions. (b) The weight of each question out of 100% is given in brackets. |
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(c) Calculators are permitted. |
You Must Hnnd In This Paper at the End Of the Exam
Please Do Not Turn Over this Exam Paper Until You Are Instructed to do so
1) [10%] Produc.on func.on. Consider the produc/on func/on below, showing grain produc/on as a func/on of the number of farmers working a large plot of land.
a) Compare points A and B on the figure. At which point is the average product of labour higher? In 1 sentence, explain how you determined this.
b) Is the marginal product of labour higher at A or at B? State your answer.
c) Is the marginal product of labour increasing, decreasing or constant with the number of farmers? In 1 sentence, explain how you can see this on the graph.
2) [10%] Different technologies. Consider the graph below, which plots the inputs required to produce 100 meters of cloth using 5 different technologies.
a) Are any of the technologies dominated? List any dominated technologies, describing in 1 sentence how you know they are dominated.
b) Suppose wages w=4 and cost of coal p=2. Which is the cost-minimizing technology? Show your work.
3) [20%] Consump.on-leisure. Suppose Sam has 3 weeks (21 days) in January before classes start. Sam has a job that pays £50 a day, and she can choose how many days to work. On a carefully-labelled graph with days of free /me on the x-axis and consump/on on the y-axis:
a) Illustrate Sam’s op/mal choice for these 3 weeks (label this point A).
b) Suppose now Sam’s job increases her daily wage to £75. Draw Sam’s new feasible fron/er and illustrate her new op/mal choice (label this point B).
c) Decompose the change in Sam’s choice of free /me between A and B into the income and subs/tu/ons effects, illustra/ng these on your graph with precise arrows.
d) Is the net effect of this change on Sam’s free /me posi/ve or nega/ve? State your answer in one sentence.
4) [15%] Pareto Criterion. Consider the 2x2 game in matrix format below.
a) Find any Nash equilibria of this game. State your answer.
b) Pu]ng Anil’s payoffs on the x-axis and Bala’s payoffs on the y-axis, represent the four sets of payoffs graphically as four points.
c) Are any of the four payoffs Pareto efficient? Does any of the four sets of payoffs Pareto-dominate the others? Explain in 1-2 sentences how you can tell this.
d) Will this game result in a Pareto efficient outcome? Explain in 1 sentence.
5) [10%] Bruno and Angela. Consider the figure below, which plots Angela and Bruno’s consump/on, and Angela’s free /me. Angela is a farmer, and Bruno is a landowner. Bruno can make a take-it-or-leave-it offer to Angela determining how much grain and how much free /me she gets. If Angela doesn’t work for Bruno, she can take an outside op/on which is on the indifference curve labelled IC1 (the outside op/on is not shown).
a) Could point L be Bruno’s op/mal offer to Angela? Explain why or why not: your explana/on should be precise and technical (1-3 sentences).
b) What condi/on(s) must be sa/sfied for Bruno’s offer to Angela to be his op/mal offer? Express this or these condi/on(s) in equa/on form, and explain them briefly (1-2 sentences).
6) [15%] Monopoly. Consider the figure below, illustra/ng the market for Preay Cars.
a) What is the monopolist’s profit-maximising price and quan/ty? How much profit does the monopolist make at this point?
b) Calculate the producer and consumer surplus at the profit-maximising point.
c) What is the socially op/mal price and quan/ty? Calculate the deadweight loss when produc/on takes place at the monopolist’s profit-maximising level.
7) [10%] Compe..ve markets. Consider the figure below, showing the marginal cost of a single bakery selling bread in a compe//ve market. The bakery can make at most 180 loaves per day
a) Calculate the producer surplus when the market price is ¥225. Show your work.
b) Suppose the market price drops to ¥175. How much bread will the bakery produce? Calculate the producer surplus in this case. Show your work.
c) Suppose the market price drops to ¥1.00. What is the producer surplus now? Explain in 1-2 sentences.
8) [10%] Externali.es. Consider the marginal cost of trivets illustrated in the diagram below.
a) Based on the diagram, does the produc/on of trivets have a posi/ve or nega/ve externality? Explain in 1-2 sentences.
b) Suppose the market price for trivets is $400. What is the socially op/mal level of produc/on? What is the privately op/mal level of produc/on?
c) Suppose the government sets a $100 per-unit tax on the sale of trivets. Comment on how this would change the level of produc/on of trivets in the market. Will this internalise the externality? Answer in 1-3 sentences.
Get Answer of EC1002 Microeconomics Assessment Brief
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