Econ Answer ALL FIVE questions

发布时间：2021-12-08

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Answer ALL FIVE questions

Remember to show your work for all calculations

Q1. An economy has two industries: agriculture and manufacturing.

x To produce £1.00 worth of agricultural output, the production process requires £0.20 of the agricultural output and £0.20 of the manufacturing output.

x To produce £1.00 worth of manufacturing output, the production process requires £0.10 of the agriculture output, and £0.30 of the manufacturing output.

a. Write the input coefficient matrix. [5 points]

b. Does this problem satisfy the Hawkins-Simon condition? Explain. [5 points]

c. Final demand for agriculture output is £750 and final demand for manufacturing output is £300. Determine the value of output in each industry that is required to satisfy final demand. [5 points]

d. How much of the primary input is required to be available in this economy to produce the value of output calculated in part (c)? [5 points]

Q2.A manufacturing firm produces shoes by combining labour and capital. The wage is £8 and the rental rate is £2. Shoes are produced according to the following production function:

ൌ ⃞/2 ⃞/2

a. What is the cost minimising ratio of capital to labour? If the firm wishes to produce 80 units of output, how much capital and labour should be used? [5 points]

b. Suppose that due to a sudden increase in demand, the firm wishes to

double their production of shoes to 160, but capital is fixed at the level calculated in part a. What is the total cost of producing 160 units of output when capital is fixed at this level? [5 points]

c. What is the total cost of producing 160 units of output if capital is free to vary and the firm chooses the cost-minimising input combination? [5 points]

d. Based on your calculations, provide and explain a graph which shows the short-run and long-run expansion paths to illustrate why costs are lower when capital is not fixed. [5 points]

Q3. Brenda and Tina consume cucumbers and potatoes. They do not have the same preferences, but they both view cucumbers and potatoes to be perfectly substitutable. Brenda will always substitute 1 cucumber for 1 potato, and Tina will always substitute 1 cucumber for 2 potatoes.

a. Brenda is endowed with 6 cucumbers and 4 potatoes, and Tina is endowed with 4 cucumbers and 6 potatoes. Draw the Edgeworth box showing the initial allocation. What allocations are feasible? [6 points]

b. Draw clearly labelled indifference curves associated with the initial allocation. Is this Pareto optimal? Explain. [7 points]

c. Identify the contract curve. [7 points]

[Note: you may combine answers using one Edgeworth provided that it is clearly labelled and very easy to read. Otherwise use separate Edgeworth boxes]

Q4. Consider the market for paper in a particular country, where the inverse demand curve is given by ൌ 80 െ . The private marginal cost of production for the aggregation of all paper-producing firms is given by ൌ 20 ⃞ 2 . Paper production pollutes, and the marginal external cost of paper production is given by ൌ 0.75 .

a. Calculate the output and price of paper if it is produced under competitive conditions without regulation. Compare this to the socially efficient price and output. [4 points]

b. Calculate the output and price of paper if it is produced under monopolistic conditions without regulation. Compare this to the socially efficient price and output. [4 points]

c. Which market structure yields a higher social welfare? Calculate and explain. [7 points]

d. If paper is produced under monopolistic conditions, how should the government intervene in this market, if at all? [5 points]

Q5. This question is based on the article “The Case Against Patents” by Boldrin and Levine (2013).

a. Briefly outline the costs and benefits associated with stronger patent protections. [8 points]

b. What is Boldrin and Levine (ʹͲͳ͵Ȍ’s argument that an ideal patent system cannot be implemented? [7 points]

c. Boldrin and Levine provide a list of reforms in their concluding section. Select one reform and discuss whether you think that reform would be effective and whether it would be easy to implement. [5 points]