Please see the attachment for questionMPE781_T2_2018_QBs Part A: Microeconomics and Macroeconomics ...

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Please see the attachment for questionMPE781_T2_2018_QBs Part	A:	Microeconomics	and	Macroeconomics	 Question	1:	 Assume	that	a	firm	in	a	perfectly	competitive	market	can	sell	its	product	for	$35	(ie	price	per	unit	of	 output).	Furthermore,	it	faces	the	following	costs:	 Output	(Q)	 Total	Cost	 0	 25	 1	 50	 2	 100	 3	 120	 4	 155	 5	 190	 6	 250	 7	 390	 	 a) Calculate	 Total	 revenue	 (TR),	Marginal	 Cost	 (MC),	 Fixed	 Cost	 (FC),	 Variable	 cost	 (VC)	 and	 Average	Cost	(AC).	 b) What	is	the	profit	maximizing	output	level?	 c) Is	this	firm	is	making	a	profit	or	loss	at	profit	maximizing	output	level?	Explain.	 d) Do	you	think	the	firm	will	continue	its	production	in	the	short	run?	 e) What	will	be	the	long-run	price	in	this	market?	 Question	2:	 Assume the current price of corn chips is $2 per packet. The demand elasticity is 1 (ignoring the  negative sign) and current consumption (i.e. quantity demanded) is 40 million packets per week.  Suppose that the manufacturer raises the price of corn chips to $4 per packet.   a) Derive the demand equation.  b) What will happen to weekly consumption as price increases to $4?	 c) Suppose the supply equation is P=2+Q. Find out the market equilibrium price and equilibrium  quantity.	 d) Given the above supply and demand equations, calculate the surpluses for both consumer and  producer. 	 e) Now suppose the supply curve shifts and the equation of new supply curve is P=4+Q. Do you  think market exist? 	 	 	 	 	 	 	 Question	3:	 										Suppose	that	the	demand	equation:	P	=	10	–	Q	and	supply	equation:	P	=	Q.	 a. Calculate	the	equilibrium	price	and	quantity.	 b. Calculate	the	consumer	surplus,	producer	surplus	and	total	surplus	at	 equilibrium.	 c. Suppose	the	government	imposes	a	tax	of	$2	for	each	unit	bought.		Derive	the	 new	equilibrium	price	that	consumers	pay,	the	price	that	firms	receive,	and	 quantity.	 d. Calculate	the	deadweight	loss	of	this	tax.	 e. In	a	diagram,		show	the	equilibrium	in	part	a		and	the	equilibrium	in	part	c;	and	 the	areas	that	you	computed	in	part	b	and	d.	 	 Question	4:	 Consider	 perfect	 competition,	 a	 non-discriminating	 monopoly	 and	 a	 perfectly	 discriminating	monopoly.		 a. Comparing	and	contrast	the	equilibrium	price	and	quantity	in	each	of	the	market	 structure	and	identify	for	each	market	structure	whether	it	is	efficient	or	results	 in	deadweight	loss.		 b. Why	do	governments	control	certain	monopolies?	Provide	at	least	one	real	world	 example	in	supporting	your	argument.	 c. Why	do	governments	create	certain	monopolies?	 	 Question	5:	 Using	a	simple	example,	explain	the	Comparative	Advantage	Theory	and	how	Countries	can	benefit	 from	international	trade.	What	type	of	economic	policy	does	this	theory	call	for?	 Question	6:	 Assume that Bob can either type 6 pages per hour or bake 2 cakes. His wife Mary can type 12 pages  per hour or bake 4 cakes.   a) What is comparative advantage? Explain.  b) Calculate the comparative advantage of each person in the above example.	 c) In this example, do you think that complete specialization is possible? Explain.	 d) Will	there	be	any	trade	between	Bob	and	Mary?	 	 Question	7:	 The	elasticity	demand	plays	a	crucial	 role	 in	determining	 the	 incidence	of	 tax	between	buyers	and	 sellers.	Explain	with	proper	diagram(s).	 	 Question	8:	 Starting from an above full employment equilibrium, briefly explain with the aid of a diagram, the  short-run effect on the price level and real GDP of an open market purchase of securities by the  central bank. Does such an action lower real GDP in the long run?	 	 	 Question	9:	 What is deflation? Discuss the appropriate government policies to deal with a problem of deflation;  and also provide diagram (s) and at least one real world example in supporting your argument.	 	 Question	10:	 Using	 the	AS/AD	model,	discuss	 the	 likely	 impact	of	 the	 following	events	with	proper	 diagram(s):	 a) An	increase	in	petrol	price	(starting	from	the	full-employment	level).	 b) A	rise	in	the	general	price	level	(starting	from	below	the	full-employment	level).	 c) The	world	economy	enters	 into	a	recession	(starting	 from	the	 full-employment	 level).	 d) The	Real	Estate	business	in	Australia	booms	(starting	from	the	full-employment	 level).	 	 Question	11:	 Two	prisoners,	A	and	B,	alleged	to	be	conspirators	in	a	crime,	are	put	into	separate	 rooms.		A	police	officer	goes	into	each	room	and	says:	 	 If	your	partner	confesses	and	you	confess	also,	you	will	only	get	3	years	in	prison.	 If	your	partner	remains	silent	and	if	you	are	silent	also,	you	will	get	1	year	in	prison.	 However,	if	your	partner	confesses	and	you	remain	silent,	you	will	get	5	years	in	prison.	 But	if	your	partner	remains	silent	and	you	confess,	you	will	be	out	in	0.3	years.	 	 a. If	prisoner	A	confesses,	what	would	be	the	best	strategy	for	prisoner	B?	 b. If	prisoner	A	does	not	confess,	what	would	be	the	best	strategy	for	prisoner	B?	 c. Define	Nash	equilibrium:	what	is	the	Nash	equilibrium	for	this	question?	 	 	 	 Question	12:	 Does	a	minimum	wage	law	always	lead	to	unemployment?	When	does	the	minimum	 wage	law	lead	to	an	efficient	outcome	in	a	competitive	labour	market?	Explain	with	an	 appropriate	diagram.	 Question	13	 Suppose	that	the	demand	equation:	P	=	12	–	Q	and	supply	equation:	P	=2	Q.	 a. Calculate	the	equilibrium	price	and	quantity.	 b. Calculate	the	consumer	surplus,	producer	surplus	and	total	surplus	at	 equilibrium.	 c. Suppose	the	government	imposes	a	tax	of	$3	for	each	unit	bought.		Derive	the	 new	price	that	consumers	pay,	the	price	that	firms	receive,	and	quantity.	 d. Calculate	the	deadweight	loss	of	this	tax.	 e. In	a	diagram,	show	the	equilibrium	in	part	a	and	the	equilibrium	in	part	c;	and	 the	areas	that	you	computed	in	part	b	and	d.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 PART	B:	STATISTICS	 Question	1.		 The	final	exam	marks	for	10	students	taking	MPE781	are	given	as	follow:	 9			8			5			8			3			4			7			8			6			7	 a)	Calculate	the	mean,	median	and	mode.	 b)	Calculate	the	first	quartile,	third	quartile,	and	interquartile	range.	Interpret	these	 values.	 c)	Calculate	the	sample	standard	deviation	and	interpret	this	value.		 d)	What	is	the	main	advantage	of	the	sample	standard	deviation	over	the	sample	 variance	as	a	measure	of	variability?	 	 Question	2.	 Each	partner	in	a	sample	of	10	married	couples	was	asked	how	happy	each	is	 in	their	 own	marriage	on	scale	1	to	100.		The	ratings	by	these	couples	(husband,	wife)	were:	 (60,50),	 (70,65),	 (80,	 81),	 (80,79),	 (80,85),	 (40,35),	 (50,	 55),	 (60,55),	 (65,65),	(65,60).	 	 a) Just	 by	 looking	 at	 the	 responses	without	 doing	 any	 formal	 calculation,	 can	 you	arrive	at	any	conclusion	about	the	relationship	between	the	husband	and	 wife	responses?	Explain	your	answer.	 b) Calculate	the	sample	covariance	and	interpret	the	result.	 c) Calculate	the	sample	coefficient	of	correlation	and	interpret	the	result.		 	 Question	3.	 Define	?	as	the	number	of	heads	observed	in	an	experiment	that	flips	a	balanced	 coin	3	times.	Calculate:	 a)	The	expected	value	of	?.	 b)	The	probability	that	? = 2.	 c)	The	probability	that	? ≥ 2.	 	 	 Question	4.	 A	real	estate	developer	is	interested	in	the	relationship	between	the	price	of	houses	in	 Melbourne	and	their	distance	to	the	CBD.	Using	data	collected	from	real	estate	agents,	 he	performed	the	following	simple	linear	regression	model:		 ?! = ?! + ?!?! + ?! ,	 where	the	dependent	variable	(?)	is	the	price	of	houses	(measured	in	thousands	of	 Australian	dollars);	the	explanatory	variable	(?)	is	the	distance	to	the	CBD	(measured	in	 km);	?!	and	?!	are	unknown	parameters;	and	?	is	the	disturbance	term.	The	regression	 results	are	given	in	the	following	Table.	 Table:	Excel	Output	for	Linear	Regression	Model	 Regression	Statistics	 	 	 	R	Square	 0.4615	 	 	 	Standard	 Error	 137.1313	 	 	 	Observations	 10	 	 	 	 	 	 	 	 	 		 Coefficients	 Standard	 Error	 t	Stat	 P-value	 Intercept	 865.87	 A	 16.30	 0.00	 Distance	 -14.75	 3.01	 B	 0.00	 	 a)	What	are	the	values	of	A	and	B?	 b)	What	is	the	interpretation	of	the	two	parameter	estimates?	Do	they	correspond	to	 your	expectation?	 c)	What	are	the	predicted	prices	for	a	house	in	Burwood,	which	is	15	km	from	the	CBD	 and	a	house	in	Yarra	Glen,	which	is	60	km	from	the	CBD?	Are	these	predictions	reliable?	 d)	Is	this	prediction	of	above	Table	reliable?	Explain.	 	 	 	 Question	5.	 A	statistician	is	interested	in	the	relationship	between	the	salary	of	graduates	from	a	 Master	program	at	a	university	and	the	number	of	years	after	their	graduation.	Using	 data	from	a	random	survey	with	recent	graduates,	he	performed	the	following	 simple	linear	regression	model:	 ?! = ?! + ?!?! + ?!,	 where	the	dependent	variable	(?)	is	the	salary	of	the	graduates	(measured	in	 thousands	of	Australian	dollars);	the	explanatory	variable	(?)	is	the	number	of	years	 after	graduation;	?!	and	?!	are	unknown	parameters;	and	?	is	the	disturbance	term.	 The	regression	results	are	given	in	the	following	Table.	 Table:	Excel	Output	for	Linear	Regression	Model	 Regression	Statistics	 	 	 	R	Square	 0.8643	 	 	 	Standard	 Error	 9.4531	 	 	 	Observations	 30	 	 	 	 	 	 	 	 	 		 Coefficients	 Standard	 Error	 t	Stat	 P-value	 Intercept	 40.73	 3.62	 11.24	 0.00	 Years	 6.42	 0.48	 13.35	 0.00	 	 a)	What	conclusions	can	you	reach	about	the	relationship	between	salary	and	 number	of	years	after	graduation?	 b)	What	is	the	predicted	salary	for	a	person	in	the	survey	in	2012,	who	graduated	 from	the	Master	program	in	2008?	Comment	briefly	on	how	safe	you	think	it	is	to	 rely	on	this	prediction.	 c)	Find	and	interpret	the	value	of	the	standard	error	of	the	estimate.	 d)	What	assumptions	have	been	employed	in	order	to	obtain	these	regression	results	 	 	 USEFUL	STATISTICS	FORMULAE	 Sample	Mean:	? = !! ! !!! ! 	 	 	 Sample	Variance:	?! = !!" !!! = !!!! !! !!! !!! = !! !! !!! !!!! !!! 		 ??? = ?! − ? !!!!! = ?!!!!!! − ??!	 	 Sample	Standard	Deviation:	? = ?!	 	 Sample	Covariance:	??? ?,? = !!"# !!! = (!!!! ! !!! )(!!!!) !!! = !!!!!!!! ! !!! !!! 		 ???? = (?! − ?!!!! ) ?! − ? = ?!?! − ???!!!! 		 Sample	Coefficient	of	Correlation:	? = !"#(!,!) !!!! = !!"# !!" !!" 	 General	Addition	Rule	of	Probability:	? ? ?? ? = ? ? + ? ? − ?(? ??? ?)	 General	Addition	Rule	for	Disjoint	Events:	? ? ?? ? = ? ? + ? ? 	 Conditional	Probability:	? ? ? = !(! !"# !) !(!) 	 General	Multiplication	Rule:	? ? ??? ? = ? ? ? ? ? = ? ? ? ?(?)	 General	Multiplication	Rule	for	Independent	Events:	? ? ??? ? = ?(?)? ? 	 Expected	Value	of	a	Discrete	Random	Variable:	? = ? ? = ?!? ?!!!!! 	 Variance	of	a	Discrete	Random	Variable:	?! = [?! − ?(?)]!? ?!!!!! = ?! !? ?!!!!! − [? ? ]!		 Z-value	in	a	Normal	Distribution:	Z = !!! ! 	 Standard	Deviation	of	the	Sample	Means:	σ! = ! ! 	 The	Predicted	Line	for	Simple	Linear	Regression	Equation:	?! = ?! + ?!?! 	 ?! = !!"# !!" = (!!!! ! !!! ) !!!! !!!! !!!!! 	and	?! = ? − ?!?		 Coefficient	of	Determination:	?! = !"#!"$$%&' !!" !" !"#$%&! !"!#$ !"# !" !"#$%&! = !!" !!" = !!!! !! !!! !!!! !!!!! 	 Standard	Error	of	the	Estimate:	?!" = !!" !!!  = !!!!! !! !!! !!!  	 	 	 Source:	Berenson	et	al.	(2010).

Riyas K · Accepted Answer

1. 
A)
B)
Profit maximising level of out put is 4. It is at this output marginal revenue becomes equal to marginal cost. 
C) Firm is incurring loss. Profit is TR-TC. TR= 140 and TC = 155. There is loss of 15.
D) Firm will continue production in the short run. Because price is sufficient to cover marginal cost. In this case MC = 35 and price =35.
E) Long run price will be 38.75. This is average cost of production. Some frim will exit from the industry because they incur loss. This will raise the price in the market. Exit of firms will continue until price rises sufficient to cover average cost of production.
2. 
A) Comparative advantage is the lower opportunity cost comparing to others.
B) Opportunity cost of Bob for paper = 2/6 =1/3
	Opportunity cost  of cake = 	6/2 = 3
Opportunity cost of wife Mary for paper = 4/12 = 1/3
Opportunity cost for cake = 12/4 =3
C) There will not be complete specialization in the production because of same opportunity cost. 
D) There will not be trade between Bob and his wife. It is because nobody benfit from trade
B) Price elasticity of 1 means that one percentage change in price lead to same percentage change in quantity demanded. When price increases to 4 then demand will fall to 20 million packet per week.
3
A) Demand equation is P =10-Q and supply is P=Q
	At equilibrium demand is equal to supply
				10-Q = Q
					2Q=10
					Q=5
Price is equal to 5
Equilibrium price is 5 and quantity is 5
B) Consumers surplus = ½ (10-Q) = 2.5
	Producers surplus = ½ (Q) = 2.5
	Total surplus =5
C) Now price becomes equal to 7. That is present market plus tax
	Demand is given by 7 = 10-Q 
				Q = 3
Price producer receive will remain the same. Producers will pass entire burden on consumers.
D)  consumers surplus = ½(3) =1.5
Producers surplus remains the same, that = 2.

MPE781_T2_2018_QBs PartA:MicroeconomicsandMacroeconomics Question1: Assumethatafirminaperfectlycompetitivemarketcansellitsproductfor$35(iepriceperunitof...

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