PracticeFinal(1)

武汉大学2009-2010学年第一学期期末考试经济与管理学院 2009级 2010年1月24日微观经济学（A卷）Principles of Microeconomics ( Paper A )InstructionYou have two hours to complete this test. Full marks are 100 points.Write your answers on the answer sheet. You can answer your questions either in English or in Chinese. Read the questions carefully before answering them.Be precise and keep to the point.Good luck!Problem 1 (15 points) Imagine two countries (A and B) that produce military goods (guns) and consumer goods (butter). Assume that each country has 100 million workers. The following table lists the product quantities of each goods per worker in a year in both countries.Butter (tons) GunsCountry A 5 10Country B 4 5a.Draw the production possibilities frontier (PPF) for both countries separately.Explain in what condition the PPF may have a bowed-out shape.b.For country A, show the point that is impossible to achieve - label your point “I”;and show the point that is feasible but inefficient - label your point “U”.c.What would happen to PPF in country A if there is an economic advance in thebutter industry? Or if there is a war? Show your answer in the graphs.d.Construct a table to show the opportunity costs of a gun and one ton of butter forcountry A or B. In producing guns, which country has an absolute advantage?Which country has a comparative advantage?e this example to judge and explain the statement that “if a certain trade is goodfor one country, it can’t be good for the other one”.Problem 2 (10 points) Consider a competitive market for apartments. What would be the effects on the equilibrium output and price after the following changes (other things held equal)? In each case, explain your answer using supply and demand.a. A rise in the income of consumers.b.$10-per-month tax on apartment rentals.c. A government edict(法令)saying apartments could not rent for more than $200per month.d. A new construction technique allowing apartments to be built at half the costProblem 3 (15 points) Answer the following questions with graphs and brief analysis, applying the versatile(万能的) tools of supply, demand and elasticity.a. What happens to wheat farmers and the market for wheat when university agronomists （农学家） discover a new wheat hybrid （杂交小麦） that is more productive than existing varieties?b. In the 1970s, OPEC decided to raise the world price of oil. However, just after an temporary rise, the oil price eventually came back to the low level in 1970. Explain this phenomenon.c. Assume that the government wants to raise revenue from the rich. If the government adopts a new luxury tax （奢侈品税） on items such as furs, jewelry and expensive cars, can he realize his goal?Problem 4 (15 points) Consider the competitive market with the following supply and demand equations: a. Find the equilibrium point without government. Compute the point price elasticity of demand.b. If the government levies 6 dollars for each product, find the new equilibrium point. Compute the change of consumer surplus and producer surplus. Compute the surplus that government receives and the deadweight losses. Show your answer in a graph.c. If the government subsidizes 3 dollars for each product, redoing the computing in part b.Problem 5 (10 points) Jack owns a dog legally. The dog barks and disturbs Linda, Jack’s neighbor. Jack gets a $600 benefit of from owning the dog, but Linda bears a $1000 cost from the noise.a. What is the externality here?b. What is the Coase theorem? According to the theorem, how can the private market reach an efficient outcome on its own? Give an example.c. If Jack has no right to keep a barking dog, or Linda has the legal right to peace and quiet, what different would the outcome be from part b?d. Why private solutions do not always work? In this case, what public policies can make toward externalities?1202;4D D S SQ P Q P =−=Problem 6(10 points) Suppose the cost function of Sparkle company is: TC=0.6Q2+4Q+5, where Q is the product quantity that Sparkle supplies.a.If Sparkle is a perfectly competitive firm, and the market price is $12, calculatethe profit-maximizing quantity in the short-run.b.If Sparkle is a monopoly firm, and the market demand curve is: P=12-0.4Q,calculate the profit-maximizing quantity and profit. Is it an efficient outcome for the market?c.If Sparkle is a monopoly firm which adopts perfect price discrimination and themarket demand curve is: P=12-0.4Q, calculate the profit-maximizing quantity and profit. Compare with part b and explain.Problem 7(15 points) Johnson & Johnson(JNJ), one of the makers of Tylenol pain reliever（羟苯基乙酰胺退热药）, does a lot of advertising and have much loyal customers. In contrast, the firm Anthony, one of the makers of generic acetaminophen （一般的醋氨酚退热药）, does no advertising, and his customers shop only for the lowest price.a.Assume that the MC, A VC, and ATC curves of Anthony and JNJ take a “u” shape,draw out these cost curves in a graph and explain simply for their relations.b.In the short-run, both Anthony and JNJ make some profits. Draw diagramsshowing their profits separately.c.Illustrate the long-run equilibrium of Anthony in a graph. Compare with theshort-run equilibrium in part b and explain.d.Illustrate the long-run equilibrium of JNJ in a graph. Label out JNJ’ s price,markup over marginal cost, and excess capacity.Problem 8(10 points) Farmer Jack and Farmer Linda graze their sheep on the same field. If there are 40 sheep grazing in the field, each sheep produces $6,000 of wool over its lifetime. If there are more sheep in the field, then each sheep can eat less grass and its wool production falls. With 50 sheep on the field, each produces $5,000 of wool; with 60 sheep, each produces $4,000 of wool. Each sheep costs $1,000.a.Assume that Jack and Linda can each purchase either 20 or 30 sheep, but thatneither knows how many the other is buying when she makes her purchases.Calculate the payoffs of each outcome.b.What is the dominant strategy of Jack? Of Linda? What is the Nash equilibrium inthis game? Briefly explain.c.Is there an outcome that would be better than the Nash Equilibrium result? Howcould it be achieved?武汉大学2009-2010学年第一学期期末考试经济与管理学院 2009级 2010年1月24日微观经济学（A卷）说明：考试时间为2小时，满分为100分。