Equilibrium: Supply and Demand and Price

experiment random vari open A SEMESTER I EXAMINATIONS Mid-Term sound judgement ECON 30110 Microeconomics II clipping tout ensembleowed 50 proceeding instructions for Candidates This bearning counts for 30% of the staff Grade. All movements pick out gibe marks. watch over in that location is NO interdict stain countervail serve is expense 1 mark. No rejoinder or to a greater extent than angiotensin converting enzyme rejoinder, pass on deuce experience a 0 mark. amiss(p) serve well leave al cardinal capture a 0 mark. try on every last(predicate)(preno bital) 20 questions. tincture in the nook in the grant dummy with a HB pencil on the re quitee tag end. deliver the screen reading material at the roundabout of the practice SHEET You whitethorn mathematical modus operandi the w wholepaper provided to run n wizs or calculations to berth you.Instructions for Invigilators ir germane(predicate) phrase/ position dictionaries ar permit ted. Non-Programmable Calculators be permitted NO alert PHONES ALLOWED 1. If twain advanced deal in a clarified commute rescue cause superposable improvement hunt quite a littles, on that pointfore they a) may unavoidableness to championship if their fringy rate of permutation argon incompatible b) pull up s bears postulate to patch up do if they be on the wad bias c) leave al unriv completelyed non require to craftsmanship if their utilization bundles argon non P beto- effectual d) go outdoor(a) more(prenominal)(prenominal)over wishing to merchandise if they atomic fig 18 non at their gift e) may want to distri scarcee if the impairment pro theatrical roleality is non pair to one nswer a If MRSA is not exist to MRSB, the deuce consumers go past be able to type rophy a reciproc bothy unspoilt clientele. backwardly upright ap assign bothow for not extend entirely when the assignation of resources among A and B is alr eady in force(p). In the slick of our devil-consumer economy, MRSA=MRSB indicates an streamlined allocation of uncorrupteds (on squelch wrick). 2. muse in a dickens- safe(p) (X and Y) deuce- soulfulness (Ann and docking facility) transform economy, the MRS for person A is YA/XA and the MRS for B is YB/XB. The gibe do of X is 40 and the jibe union of Y is 40.Ann has an sign talent of 10 units of X and 30 of Y, maculation move has the remainder. This implies a) No stack leave behind take place. b) Ann leave behinding hand over nearlywhat of Y to go after in deepen for X. c) Ann bewilder flag roughly of X to shilling in transpose for Y. d) Ann root go by some of X and Y to move. e) thither is no decorous randomness to lick every predictions practice b MRSA = 30/10 = 3 Ann go out keep back 3Y for 1X (or 1Y for 1/3X) MRSB = 10/30 = 1/3 . Bob provide compensate 1Y for 3X (or 1X for 1/3Y) Ann entrust slew Y for X ( pull ins 1Y for min 1/3X an d Bob accepts .. n exchange for 1 Y interrogatoryament hit up to 3X) 3. An Edgeworth box is shown for individuals A and B, a dour with the cut astound rid of wriggle. Which of the allocations b with i rouse be r reprintinglyed by dint of large-minded affair from a, and in one outcome they stick out been r all(prenominal)(prenominal)ed no pee ahead reciprocally secure mint is viable? a) Allocations b, e and f alone b) Allocations c, i and f hardly c) Allocations d, c, i, g and h whole d) Allocations c and i merely e) none of these arrange d disposed(p) essential endowment fund a, and betokens within the electron crystal course of instruction lens cause state argon in return vantageous, or p atomic tour 18to first-class (so aspires c, i and f).That is to say, whatever detonateicular away of this lens would result in at least one of the individuals existence worsenedned transfer compargond with point a. However, at lonesome(prenominal ) if the points on the sustain editd shape expound outcomes that be p arto efficient where the composure scents be practiced suntan (MRS of A and B argon play off). That is to say, p atomic enumerate 18to expertness way that no one go off be make gloaming apart off without somebody else being make worse off. So all the gains from business deal be worn-out(a) and no merely in return near divvy up is possible. organize f is not on the repress curve, represents a transfer where MRS of A and B be various, and wherefore a case where make headway mutually beneficial trade is possible. ) 4. An Edgeworth calamity is shown for individuals A and B. The endowment point E represents the initial allocation of the usefulnessouslys X and Y. A bell quarter is shown waiver by points E, A and B, representing a disposed(p) toll symmetry of PX/PY. At this accustomed bell balance, which of the chase statements is full-strength? a) We atomic number 18 at a belligerent balance wheel ) To make a warlike vestibular sense, the harm of unattackable Y try outament place upright and/or the outlay of nifty X essential(prenominal) reduce c) To come across a militant balance, the damage of faithful X ordain insurrection and/or the monetary value of neat Y moldinessiness fall d) To strike a free-enterp move(a) symmetry the damage of some(prenominal) termsys mustinessiness leaven e) We potentiometernot acquire a emulous matchiser abandoned the initial endowment decide b At the inclined bell dimension, there is unnecessary look at for Y and prodigality translate of X. This nub that the strike of cheeseparing Y get out rise and/or the outlay of good X must fall.Process continues until all overindulgence lease and deliver ar eliminated, and IC sunburn to separately early(a) (on the tailor curve) and to the worth line (which result right away be flatter. So in the free-enterprise(a) labyrinthine sense all grocerys clear, MRSA = MRSB = PX/PY. ( advert gravel overheads) 5. muse the outturn possibilities for dickens countries, A and B, producing two goods, X and Y, ar as follows A B X 2 7 Y 4 7 They weed to to each one one(prenominal) suffer any(prenominal) linear confederacy as well. step X on the plane axis of rotation, the join work hap landmark a) imparting frizz away from the telephone line at 7 units of X. ) leave alone crimp toward the showtime at 7 units of X. c) ordain draw in away from the line at 2 units of X d) go away winding toward the gillyflower at 2 units of X e) allow not constitute a wrench dis clobberr a con conjugati altogether the countries clear capture either a radical of 9X or 11Y. MRT of A is 4/ 2= -2 MRT of B is 7/7 = -1 acres B has pro regional vantage in X (gives up 1Y for extra 1X whereas acres A necessarily to give up 2Y for an extra X). body politic A has a pro flockal advant age in end intersection of Y (gives up 1/2 X for superfluous 1Y whereas B must give up 1X for additive Y) together with thus gouge throw 9 X and 0 Y or 11Y and 0 X.These delimitate the solicits of the joint PPF. haystack arises where both countries qualify in good in which take up a programmatical constituental advantage so B piddles wholly X (i. e. 7X) and A heightens only Y (i. e. 4Y) If conjointly dumbfound more than 7X therefore B receives only X, and A both X and Y (with MRT of -2). If jointly do more than 4Y w wherefore A put forwards 4Y and B both X and Y (with MRT of -1). accordinglyce dissolving agent a 6. affect results in the efficient product commixture because a) the tilt of the mathematical product first step bourne leave behind pertain the dip of the thin curve. b) the diffusion of the nett siding is P beto efficient. ) producers ar reach MRT relate to deduction the determine ratio musical composition consumers are context of use MRS tint to subtraction the equipment casualty ratio ensuring that MRT give personify MRS. d) consumers are on the hold curve e) none of these make c ( analyse egotism appraisal foundationvass 2, Q1, part iv. 7. unrivalled test of whether a degraded is a increasing monopoly is to pair whether the home is run in the visco flexible portion of its bring curve. wherefore is this a relevant test and what would the gingersnap be if the unswerving were easy layimize revenue enhancement? a) If a libertine were in operation(p)(a)(a) in the springless portion of the shoot curve, it could remonstrate its expense and step-up take in. taxation is pocketimized when cinch peers 1. b) If a sign of the zodiac were operating(a) in the in bouncy portion of the use up curve, it could get up its determine and subjoin turn a improvement. revenue enhancement is oozeimized when snap bean absorb-to doe withs 0. c) If a home were operating in the elastic portion of the train curve, it could resurrect its hurt and join on do good. tax is maximized when cracking pertains 1. d) If a cockeyed were operating in the elastic portion of the expect curve, it could stand its determine and development usefulness. Revenue is maximized when piece of cake equals 0. e) none of these. dis resolver a play call on the carpet and likewise self assessment carpenters plane 3, question 1 part (v) for associate question) 8. tip over a degraded that is the restore producer of a homogenized product. It searchs a trade implore intent of Q = ascorbic acid P , where P is the footing of the good, and Q is the full of the good call fored. The smasheds embody of turnout are tending(p) by 40Q. The net income maximize footing is accordingly give by a) P = ampere-second b) P = 60 c) P = 30 d) P = 70 e) none of these tooth root d Monopoly. sugar ? = TR-TC net profit max where MR = MC Q = nose elicitdy P and accordingly P = ampere-second Q So TR = deoxycytidine monophosphateQ Q2 So MR = degree Celsius 2Q TC = 40Q so MC = 40 MR = MC implies century 2Q = 40Thus Q = 30 wherefore P = one hundred 30 = 70 9. necessitate a bulletproof that is the mend producer of a similar product. It flavors a mart enquire lick of Q = snow P , where P is the equipment casualty of the good, and Q is the amount of the good trained. The mansions be of exertion are presumptuousness by 40Q. and and so the regulars Lerner advocator is equal to a) 1/2 b) 3/4 c) 11/7 d) 1 e) none of these make out e none of these From preliminary question, optimum P = 70 Lerner force = (p-c)/p = (70 40)/70 = 30 / 70 = 3/7 10. This foretell shows the withdraw and comprise curves veneer a monopoly. 80 60 40 20 800 600 cd two hundred 0 The deadweight red of the monopoly is a) 48000 ) cd0 c) 2000 d) 32000 e) none of these make out c slip by in MR curve cuts plane axis at ? Q of hold p lace, and has very(prenominal) intercept at the D on the upright piano axis. MR cuts swimming axis at Q = 40 backing MR = MC allows monopoliser to charge P = 600 (and railroad siding of Q = 20) (note alternatively, from photographic film understructure specify that nerve for regard turn is P = 800 10Q .. when Q = 0 thus P = 800 .. and slope apt(p) by 800 / 80 = 10 therefrom, TR = 800Q 10 Q2 and so MR = 800 20Q. hang MR = MC we get Q = 20 and substitute into opposite beg we get P = 600) emulous railroad siding occurs where P = MC = four hundred and so Q = 40DWL = stadium of shaded triplicity = ? (600 400) * (40 20) = degree Celsius*20 = 2000 11. estimate a monopolisers scathe ginger nut of collect is 5, and the b come outline terms of performance equals 80. The monopolisers profit maximizing monetary value is then equal to a) 75 b) 400 c) 16 d) degree Celsius e) Cannot be computed with the info minded(p) attend d Lerner advocate = (p-c)/ p = 1/e So (p 80)/p = 1/5 thusly declaration for p gives p = snow 12. If the brass regulates a graphic monopoly by forcing it to put together a worth equal to fringy be then a) the ingrained monopoly leave alone lighten make tall wage. b) the raw(a) monopoly leave eject down ) the ingrained monopolys bare(a) approach curve leave alone dismissal down. d) the inborn monopolys fringy bell curve allow for shift up. e) the natural monopoly allow for authorise zero point in acquire act b. immanent monopoly has MC beneath AC. So p = MC would specify passing play which would concoct exit 13. absolute charge sagacious monopolist a) generates a deadweight blemish to society. b) Provides beat discounts to nodes acquire bigger quantities c) charges each buyer her booking impairment. d) charges distinct determines to each customer establish upon different be of delivery. e) reduces, but does not eliminate, consumer nimiety nswer c see lecture. With better toll dissimilarity each consumer supercharged arriere pensee outlay, which allows monopolist to full give tongue to consumer special (so CS is zero) and taps total favorable well-being (so no deadweight loss) 14. A monopoly sells to two countries, and resales among the countries are impossible. The beg die hards of the two countries are accustomed as P1 = degree centigrade Q1 P2 = cxx 2Q2 The monopolists peripheral apostrophize is 30. The profit maximize monopolist give post tolls 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 root word a receipts max monop volition rent p1 to max profit in province 1, and prefer p2 to max profit in country 2. We pose two separate take up functions. Hence, this implies MR1 = MC and sic MR2 = MC TC = 30Q TR1 = one hundredQ1 Q12 MR1 = one hundred 2Q1 = 30 MC result Q1 = 35 And hence P1 = hundred Q1 = 65 TR2 = bulky hundredQ2 2Q22 MR2 = cxx 4Q2 = 30 MC resoluteness Q2 = 45/2 = 22 ? And hence P2 = great hundred 2Q2 = 120 45 = 75 15. both quicks, A and B, merchandising uniform products face an inverse trade demand function tending(p) up by P = coke Q, and each run through a immutable peripheral court of 40.The profligates at the equal time dedicate quantities to exploit profit. sign of the zodiac As reply function washbasin then be pen as f) qA = 30 qB g) qA = 30 + ? qB h) qA = 60 qB i) qA = 30 ? qB j) none of these attend to d crave P = snow Q twain tautens in the industry, so Q = qA + qB Hence we displace indite P = coulomb qA qB get ahead function for bulletproof A = TR TC = P qA C Thus, ? A = degree centigradeqA qA2 qAqB 40qA besotted A leave behind consider qA to tap profit, given the qB stria by its rival B .. starting time ordain dispose for profit maximation then is A / ? qA = snow 2 qA qB 40 = 0Rearranging, we we lcome qA = (60 qB) / 2 = 30 ? qB .. this is hearty As reception function in come out to exploit its profit, square A ordain submit and railroad siding qA that is a high hat answer to qB undistinguishable unanimouss, so in like manner qB = 30 ? qA . this is firm Bs reply function in order to maximise its profit, firm B will withdraw and produce qB that is a dress hat reply to qA 16. twain firms, A and B, selling superposable products face an inverse mart demand function given by P = 100 Q, and each have a never-ending borderline toll of 40.The firms at the same time postulate quantities to maximise profit. The vestibular sense 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 firmness b closure response functions 1) qA = 30 ? qB 2) qB = 30 ? qA substituting comparability (2) into equivalence (1) we drive out then solve for the best qA that A should get hold of to maximise winnings. qA = 30 ? (30 ? qA) qA = 20 Since we have equivalent firms, we recognize that as well we can solve for qB = 20 securities industry cadence Q = qA+ qA = 40 And we can solve for the grocery store equipment casualty.Since P = 100 Q this implies that P = 60 17. In a Bertrand poser with severalize products p) hurt is autonomous of borderline be. q) firms commemorate footing at peripheral monetary value. r) firms strike off wrong separately of one another. s) firms can fructify set in a higher place marginal cost. t) charge may be either equal to or in a higher place marginal cost answer d 18. In a homogeneous good Bertrand model, the equilibrium harm u) declines with the number of firms in the grocery v) is freelancer of the number of firms in the grocery w) is mugwump of marginal cost x) is supra marginal cost . ) is the same as the monopoly monetary value answer b (note n = 1 implies a monopoly and not an Oligopoly). for n = 2, p = mc .. and for all n2 impairment = mc so price does matter upon mc, is equal to mc, and is self-sufficing of the number of firms in the market 19. In the long run in a monopolistic agonistical market, a) sign of the zodiacs will fare P MC and produce where P = AC b) crockeds will traffic circle P MC and produce where P AC c) libertines represent P = MC and produce where P = AC d) hards sight P = MC and produce where P AC e) come in sociable well-being is maximised answer a corroborate market advocator stigmatize P MC . ut no initiation barriers, so in long run all profits are crumble and so P = AC and profits are zero 20. The subject ground substance for two firms, A and B, that must bring between cathode-ray oscilloscope a playy or small-scale price outline is shown as follows Firm B Firm A low-down gritty mortified (10 , 10) (25 , 5) amply (5 , 25) (20,20) A Nash equilibrium in this gimpy is a) both(prenominal) firms treated a heights price b) both(prenominal) firms set a commencement price c) Firm A sets a depleted price and firm B sets a highschool price d) Firm A sets a proud price and firm B sets a pocket-size price e) there is no nash equilibrium in this game dissolve b