Econ1101 Session 1, 2009 Final Exam

Page 1 of 14 THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF ECONOMICS SESSION 1, 2009 , , I ECONllOl MICROECONOMICS I FINAL EXAMINATION TIME ALLOWED – 2HOURS THIS PAPER IS WORTH 65% OF THE TOTAL SUBJECT MARK This examination paper consists of two parts – Part A and Part B Part A consists of 20 multiple choice questions each worth onc and one quarter (1. 25) marks. Answer all the questions in Part A on the answer sheet provided, using pencil . only: Print your student number, name and initials in the space provided and mark he appropriate boxes below your student number, name and initials. For each question, mark tbe appropriate response (a), (b), (c), or (d). There is only one correct response to each question in Part A. Part B consists of four (4) essay-type questions, each worth TWENTY (20) marks. Answer only TWO (2) questions from Part B. ANSWER EACH PART B QUESTION IN A SEPARATE EXAMINATION BOOKLET Answers to questions in Part B must be written in ink. Pencil may be us ed in answers to Part B for drawing, sketching or graphical work only . †¢ †¢ This question paper may be retained by the candidate There are 14 pages in this exam paper. 1 Page 2 of 14 PART A This section is worth 25 marks Mark your answer on Answer Sheet provided Question 1 , †¢ †¢ A monopo list estimates that at the current pnce being charged for the product, Marginal Cost is greater than Marginal Revenue and the abso lute price elasticity of demand is 1. 8. To increase profit the monopolist should: a) Increase price so that price equals the maximum the consumer is willing to pay ) Decrease price and sell more c) Set price equal to the minimum average cost d) Increase price and sell less Question 2 The Coase theorem suggests that private markets may not be able to solve the problem of externalities, a) Unless the government becomes involved in the process b) When the number of parties is large and the bargaining costs are high c) If the firm in the market is a monopoly d) If some people benefit from the externality †¢ TURN OVER THE PAGE 2 Page 3 of 14Question 3 Consider the following graph where a legally enforced ceiling price operates Price ~_ _ _ __ _ _ _ _—, J __ _ G- – – – s · c , B~ ___H L_ , , , ___ L ___ I 01 , :F : , : : ::J ‘ — I , : O — b–b3 —d -1 2 a) FEC. b) DAC. c) GJECF. Quantity The maximum dead weight loss due to the price ceiling is represented by the areas: d) JAE + DGF. Question 4 Perfect competition is efficient and monopoly is not, because in perfect competition _ _ _ _ , while in monopoly _ _ _ __ a) P b) P c) ~ ~ MC; P>MC MC; P Econ1101 Session 1, 2009 Final Exam Page 1 of 14 THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF ECONOMICS SESSION 1, 2009 , , I ECONllOl MICROECONOMICS I FINAL EXAMINATION TIME ALLOWED – 2HOURS THIS PAPER IS WORTH 65% OF THE TOTAL SUBJECT MARK This examination paper consists of two parts – Part A and Part B Part A consists of 20 multiple choice questions each worth onc and one quarter (1. 25) marks. Answer all the questions in Part A on the answer sheet provided, using pencil . only: Print your student number, name and initials in the space provided and mark he appropriate boxes below your student number, name and initials. For each question, mark tbe appropriate response (a), (b), (c), or (d). There is only one correct response to each question in Part A. Part B consists of four (4) essay-type questions, each worth TWENTY (20) marks. Answer only TWO (2) questions from Part B. ANSWER EACH PART B QUESTION IN A SEPARATE EXAMINATION BOOKLET Answers to questions in Part B must be written in ink. Pencil may be us ed in answers to Part B for drawing, sketching or graphical work only . †¢ †¢ This question paper may be retained by the candidate There are 14 pages in this exam paper. 1 Page 2 of 14 PART A This section is worth 25 marks Mark your answer on Answer Sheet provided Question 1 , †¢ †¢ A monopo list estimates that at the current pnce being charged for the product, Marginal Cost is greater than Marginal Revenue and the abso lute price elasticity of demand is 1. 8. To increase profit the monopolist should: a) Increase price so that price equals the maximum the consumer is willing to pay ) Decrease price and sell more c) Set price equal to the minimum average cost d) Increase price and sell less Question 2 The Coase theorem suggests that private markets may not be able to solve the problem of externalities, a) Unless the government becomes involved in the process b) When the number of parties is large and the bargaining costs are high c) If the firm in the market is a monopoly d) If some people benefit from the externality †¢ TURN OVER THE PAGE 2 Page 3 of 14Question 3 Consider the following graph where a legally enforced ceiling price operates Price ~_ _ _ __ _ _ _ _—, J __ _ G- – – – s · c , B~ ___H L_ , , , ___ L ___ I 01 , :F : , : : ::J ‘ — I , : O — b–b3 —d -1 2 a) FEC. b) DAC. c) GJECF. Quantity The maximum dead weight loss due to the price ceiling is represented by the areas: d) JAE + DGF. Question 4 Perfect competition is efficient and monopoly is not, because in perfect competition _ _ _ _ , while in monopoly _ _ _ __ a) P b) P c) ~ ~ MC; P>MC MC; P