ISI PEA 2015 discussion

[dhruv]

I read from only Varian and there was no discussion on lexicographic preferences.

[amalgamateking]

Doesn't mean it doesn't exist :P

[amalgamateking]

http://en.wikipedia.org/wiki/Lexicographic_preferences

[dhruv]

I meant to say, that was the reason maybe I couldn't do it, I was hoping you would refer some micro book that would be better, as now I have to target for DSE.

[amalgamateking]

Varian is good, and also for Gen eq, Pindyck and Reubenfield (spelling?) is good.

Btw how many questions did you attempt in PEA?
How many all parts in PEB, and how many few parts wala questions in PEB? (if you dont mind me asking this)

[dhruv]

28 in PEA, 3 full 3 partial in PEB, what about you?

[amalgamateking]

28 in PEA
2 full, 4 left 1 sub part each


What is the answer for the monopoly advertising part b and c? MR is necessarily negative and Price below MC (something like this)

[art]

as every function is twice differentiable( im not sure whether we can call a linear fn twice differentiable)  we can substitute quadratic functions for each function and see when MR could have +ve slope.

[Rajat]

I found that MR is not necessarily negatively sloped. On differentiating the MR curve again, MR' was not necessarily < 0 => MR is not necessarily decreasing or in other words, negatively sloped.

Also, what answer did you guys get for the circle question from PEA? where three line segments are chosen and we need to probability of forming a triangle. I think  i got b (or the one just above 2/n-1 option)

[Yo]

Yup I also got the same answer the one above the 2/n-1 option and it's correct :p I rechecked .
Also for the mr answer when we optimise we get Mr=mc, and the second order condition tells us that the slope of Mr has to be lesser than the slope of mc basically the sufficienct and necessary condition is that mc should cut Mr from below if mr is negatively sloped this is always satisfied here coz Mr has the advertisement also and even if we suppose the mr is positively sloped it can hold but it has to lie below the mc as in flatter after it cuts it at the optimum ☺️

[Ankita]

This should be the answer nC3/[(nC2)C3].   I think it was option (b)

where nC3 is the number of ways of choosing 3 points on the circle from 'n' points.

[onionknight]

Yup, that would be the correct answer

[Rajat]

@yo,
so you are saying that MR need not 'necessarily' be sloped negatively ?

[Yo]

Yup mr being negatively sloped is just a sufficient condition but not necessary ..

[onionknight]

Didn't they ask the equilibrium prices and quantities in that part and not the contract curves  ?

[Rajat]

these subjective questions really keep you guessing all the time after the exam !
While I have given the same answer that MR need not be necessarily negatively slope, my explanation is totally mathematical and not so much from an economics perspective (attributed to my engg. background)

You never know what the examiner is looking for and/or what will satisfy her !!

[onionknight]

Also, those a.) and b.) looked like sub parts to me on the first glance but only when you club a and b together will you get the complete description of lexicographic preferences as a.) said that he prefers x without caring for y and b.) said that when quantities of x are equal he prefers bundles with greater amount of y.

[Gurpreet Pannu]

yea me too same answer as yours and only from a mathematical perspective.

[amalgamateking]

No, pretty sure they didnot ask for equilibrium prices and allocation. They asked what is the pareto efficient set of outcoems (which is the contract curve). Also as far as I can remember, subpart a of part 4 of question 1, said P1 is perfect substitutes and P2 is lexicographic towards X. Subpart b said P1 is perfect substitute and person 2 is lexicographic towards Y

[amalgamateking]

Also what is the complete answer that you wrote for q1 part (iv)?