ISI 2017 PEB

[Halflife]

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[Diya]

PEB 2017 KEY

1. C
2. D
3. D
4. D
5. B
6. D
7. B
8. B
9. B
10. B
11. A
12. D
13. B
14. C
15. B
16. B
17. D
18. C
19. C
20. A
21. C
22. C
23. C
24. A
25. A
26. B
27.
28. B
29. A
30. C

Help me with Q. 9, 27, 30?
Thanks

[Seecha]

4. will be d.
10. will be b .
how you did 16th and 3rd?

[Diya]

Can you explain to me how my answers for the 2 questions are wrong? :/
Thanks

For 3rd, as IS is vertical, no amount of monetary expansion would change the output. Only fiscal policy could help pull the economy out of depression.

16) As A and C are monotonic transformations of 3x1+2x2, B is the only option that doesn't represent the reqd preferences.

[Algaeconomics]

For the 23rd question how did you get c? Cause I am getting d

[Econenthusiast]

How was Q28 done ???

[Econenthusiast]

I got b for 23

[Algaeconomics]

I guess b would have been correct if it was social improvement rather than pareto..
Here govt is losing out..and no where is it mentioned about transfer of surplus
So how can it be pareto improvement?

[Diya]

28.  Take total profit(x,y)= 22x-x^2+32y-y^2-xy
Solve them for x and y and equate them to 0.
x=4 and y=H1=14

Now, profit(x)=22x-x^2 and profit(y)=32y-y^2-xy
Differentiate with x and y resp and equate them to 0.
x=11 and y=H2=16

Hence answer is (b)

Could someone explain how to go about 27 and 30 as I find the information to be incomplete?

[sneha]

30. I guess the answer should be B.

P1  has substitute preferences with slope 1/4 and P2 has convex preferences.

Draw  the preferences in edgeworth box and the contract curve u'll get will be steeper.

[Satyarth]

Ques29-a

[Econenthusiast]

okay I get your point Alibaba. So it isn't a Pareto improvement. However could I justify that its socially efficient as follows:
Since the monopolist produces 7 slops an price 7, it would get a revenue of 49 Rs. Yet with this, it wouldn't be able to cover its fixed cost and will go out of business. Now, when the govt pays the subsidy of 59 Rs and the price is set to zero and 14 units would be supplied ( creating a consumer's surplus of 98 Rs). The government's loss is 59 Rs and the monopolist's surplus is 4 Rs, summing this up we get 98 - 59 + 4 = 43. This is greater than the initial surplus of 19.5 Rs ( which is calculated by taking consumer's surplus when price is at 7 Rs and profits made by the monopoly at the same price)

Now, my doubt is should we take producer's surplus into consideration while checking social efficiency or should we take profits of the monopolist into consideration ?. In this case profits when 7 units are produced is a -5 Rs ( 49-54). But producer's surplus ( = fixed cost + profits ) is 49 Rs. I find it intuitive to take profits rather than producer's surplus because it depicts the obvious fact that the firm is making a loss.

[Econenthusiast]

Thank you Diya !!

[Halflife]

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[Diya]

How can your output, x1 or x2 be negative?
We are squaring output, not utlities