MICROECONOMICS --- Example of final written Test. See also the examples of 1° + 2° partial Tests Time: 70 minutes - For answers to type A questions (open questions) only use the space in the box below - For each type B question (multiple choice) there is a single correct answer. - It will not be taken into account the answers of which is not provided justification by calculation, graphics or other - Only use this sheet for calculations, graphs, and any other account using any white space if necessary -
1a. List the axioms ensuring that consumer’s preferences are regular.
A consumer, whose choices violate the weak axiom of revealed preference, can have regular preferences?
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1b. A consumer buys only two goods, x and y. Initially, with prices [2,1], the consumer chooses the basket (2.2).
When prices change and become [2,2], the consumer chooses the basket (1, 4). Then it is possible to state that:
a) consumer’s choices violate the weak axiom of revealed preference (WARP) b) consumer’s choices do not violate the weak axiom of revealed preference
c) it is not possible to determine whether consumer’s choices do, or do not, violate WARP
d) you cannot determine whether consumer’s choices do, or do not, violate WARP, without knowing his preferences
e) none of the other statements is correct
2a. indicate which features distinguish a public good from a private good -
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2b. 100 individuals with identical preferences assess how many hours of gardening they want to buy for the maintenance of a common garden. The reserve price of each consumer for the public good 'time of gardening' is 20 - 2H, with H indicating the hours of gardening. How many hours H is it optimal to purchase, if the market price of one hour of gardening services is constant and equal to 50 Euro.
a) H = zero b) H = 7.25 c) H = 9,75 d) H = 5
e) none of the other statements listed is correct
3a. Show and comment the conditions determining the vector of general competitive equilibrium prices in a pure exchange system with two individuals and two goods.
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3b. Two subjects A and B have utility functions in terms of two goods x and y: uA (x, y) = min {xA, yA} and uB (x, y) = xB + yB. The initial endowments of goods x and y are (2, 1) for A and (1, 2) for B. Using a graphical representation, indicate which of the following allocations is a Pareto improvement upon the initial endowment.
a) (2,2) for A and (1,1) for B b) (1,1) for A and (2,2) for B c) (2,2) for A and (2,2) for B d) (1,1) for A and (1,1) for B
e) none of the other answers is correct.
4a. Define the concept of technical rate of factor substitution (TRS) and explain its use in cost minimization, if performed by a competitive firm.
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4b. Anna’s wealth is W1 = 0, if state 1 occurs, W2 = 1000 if state 2 occurs. The two states occur with probability (1/3, 2/3). Her utility function for wealth is U (W) = W1 / 2. Paying an insurance premium γ = 1/2 for each unit of insured wealth to an insurance company, Anna can cover a variable fraction the losses produced by the realization of the state 1. Indicate the total insurance premium γK which is optimal to pay (where K is the insured wealth).
a) 1000 b) 500 c) 200 d) zero
e) none of the other answers is correct
5a. explain what is meant by pre-contractual opportunism, and give an example -
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5b. In a Cournot duopoly, market demand is y = 360 - p, where p is the price. Companies 1 and 2 have identical cost function ci(yi) = 60yi, i = 1, 2. Determine the market price in a Cournot equilibrium.
a) 80 b) 100 c) 160 d) 200
e) none of the other answers is correct
6a. describe the characteristics of a long-term equilibrium in a perfectly competitive industry.
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6b. Firm 1 has total cost function C (y1, E) = y1 - 4E + ½ E2, where E is the level of pollutant emissions, jointly produced with good y1. The emissions increase firm 2 costs, without any possibility for this firm to control the level of E. Firm 2 total cost function is C2 (y2, E) = y2 + E. Indicate the Pareto efficient level of E:
a) 4 b) 3 c) 2 d) 0
e) none of the answers is correct
