ISI 2017 key

[Asd1995]

Beg to differ on 25th. Firm A can operate in a competitive market with p=1.

However firm B, on increasing output increases its revenue, so it makes positive profits hence can't work as a competitive market entity. It can flood the market at the "competitive price" or offer a little lower price than the marginal cost of "competitive" producers hence capture the whole market.

[Abhitesh]

sticky price means price doesn't change so the curve should be horizontal.

[Abhitesh]

Firm A can operate only when p>1. It'll shut if p<=1.
Firm B can operate at any p. B doesn't have to produce large output. It can just produce 1 unit and stop there.

In competitive industry firms are price takers.

[Halflife]

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[Asd1995]

More output for B== More profits for B. If you plot MR and MC for B, you'll find that their difference gets large as output increases. So why would it not produce more output? If someone initially operating as a competitive firm gets his hands on such a technology would he not decrease price charged and capture the whole market?

And are we in agreement that A "can" be a competitive firm at some price (p=1?)

[Asd1995]

That makes sense, but can you quote a source?
Picked up from google:
"While the long run aggregate supply curve is vertical, the short run aggregate supply curve is upward sloping. There are four major models that explain why the short-term aggregate supply curve slopes upward. The first is the sticky-wage model. ... The fourth is the sticky- price model"

[Abhitesh]

B can produce more output, haven't checked that. But it can operate in competitive market.

For A it will operate ONLY if p>1
It has to shut down if p=0.5(say). So it cannot operate in competitive market.

[Abhitesh]

Mankiw Chap 9.

In sticky price model that google mentions we assume that a fraction 'f' of firms keep prices constant while remaining fraction (1-f) change it. I don't think question meant that.

[Econ17]

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[Asd1995]

Right-o. You're probably correct on the B other question, I differentiated the function wrongly :)

Plus 4 Minus 4 on this forum today.

[Asd1995]

82 in Eco and 100 in Math.. Of course some questions are still controversial

[Autofill]

22. As function is non homogenous, we shouldn't use this short cut method, instead find the cost function.. (Varian has defined return of scale in average cost term.)

[Econ17]

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[dirt314]

Hey, I'm expecting around 79 in PEA and 77 in PEB. I hope the cutoff is below 160 :P

[dirt314]

Can somebody confirm the answer for 29th question in PEA?

[Asd1995]

Not the solution but I thought of the problem as a utility function with x and y as perfect complements, as for every optimal x, optimal y also increases. Since these are well behaved preferences, they'll be convex.

[Nak]

 In the 28th question it is mentioned that use an edgeworth box with A's origin on the bottom left corner.
So we have to answer accordingly.

[Halflife]

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[Parth Lucas]

Hi All,

Do we have a summary of the key for PEA and PEB.

TIA

[Halflife]

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