Exam
Section A: Answer ALL questions (10 marks each) 经济学考试代做
1
A competitive firm in Industry A has the cost function c(q)=2q2. For every unit it produces, it exerts the external marginal cost e(q)=5q on consumers in Industry B. Demand in Industry A is q = 25 − p.
(a) What are the efficient and competitive levels of output in Industry A?
(b) Define Pigouvian taxation and find the Pigouvian tax that leads to the efficient output.
2
Consider a two-person exchange economy with two goods, x and y. Person A has utility uA = 10xA + yA. Person B has utility uB = xB + 10yB.
(a) Define what it means for an allocation to be a general-competitive-equilibrium allocation.
(b) Can the allocation that gives each person 5 units of each good be a general-competitive equilibrium allocation? Explain.
3 经济学考试代做
Joan inhabits a Robinson-Crusoe economy in which labour time L can be transformed into coconuts according to the production function f(L) that is increasing and concave, with f(0) = 0. As consumer, Joan is endowed with one unit of time and all profits earned by the competitive firm; she chooses how to divide her time between leisure and working for the wage rate w, and how many coconuts to consume at per-unit price p. As firm, Joan maximises profits, taking both p and w as given.
(a) In a diagram with leisure time on the horizontal axis and coconuts on the vertical axis, draw the PPF and the consumer’s budget set.
(b) Suppose that the government subsidises labour by s, which it funds through a lump-sum tax on the consumer. Is the equilibrium allocation Pareto efficient? Explain in your diagram.
4
(a) Define what it means for someone to be risk averse.
(b) Is someone who is loss averse necessarily risk averse? Explain.
5 经济学考试代做
Workers can be of two types, high and low. High types have marginal revenue product of 10. Low types have marginal revenue product of 2. The labour market is competitive such that each worker gets paid the market expectation of his or her marginal revenue product.
Firms do not know individual workers’ type but do observe whether each worker chose to obtain a BSc before entering the labour market. They also know that half the workers are high types and half low types. The utility cost of a BSc to a low-type worker is 10, whilst the cost to a high-type worker is 5. Assume that all workers have utility of money u(w) = w.
(a) Explain whether there is a pooling equilibrium in which every worker gets a BSc.
(b) Explain whether there is a separating equilibrium in which only high types obtain a BSc.
Section B: Answer BOTH questions (25 marks each). 经济学考试代做
(a) 7 marks Explain whether the endowment is Pareto efficient.
(b) 5 marks Find Ani’s demand for kiwis using any method you want.
(c) 5 marks Find Bill’s demand for kiwis using any method you want.
(d) 8 marks Find the general competitive equilibrium allocation and describe the pattern of Ani and Bill’s trade.
(a) 5 marks Draw the two types’ endowments and preferences in a diagram whose axes depict money when sick and money when healthy.
(b) 5 marks Assume the presence of a risk-neutral insurance company. Is the endowment Pareto efficient? Explain.
(c) 7 marks Under complete information, describe the equilibrium in the insurance market with perfect competition and free entry and exit.
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