Isi peb 2016

[knowpraveen]

In question 4, its quite possible, mathematically and practically.

Going by math, profit = R - C = qp+A(q)-c(q)
Maximizing profits would mean q(dp/dq)+p+dA/dq=MC

Given A is increasing in q and p is decreasing in q, so for |q(dp/dq)|<|dA/dq| we have price less than Marginal cost. Solve for p from the above equation.

By intuition, economy of scale comes at play given we have advertising revenue to support the operating cost and pushes it down big time. Even though the cost of production increases, advertising revenue offsets for the increase in per unit production cost. So, it's feasible.

[urvashi]

Thank you

[varnika1880]

In 2 part If e is 1/2 then utility will be 2 ?

[knowpraveen]

Anytime.

[knowpraveen]

I assume you are talking about the second part of question 3. So, since E has got to attain the maximum value for maximum utility, it should be E=1/2. Yeah, hence utility will be equal to 2. (3/2+1/2) Oh! My bad. I'd written 3/2 in the previous answer on this question. Thanks for correcting varnika.

[varnika1880]

Yeah I was a lil confused u have written total utility as 3/2 so that must have been a typo ...sorry

[knowpraveen]

Oh! My bad. I'd written 3/2 in the previous answer to this question. Thanks for correcting varnika.

[varnika1880]

Anytime and do u have any idea about last year's cut off

[knowpraveen]

Not sure, part A had a cutoff in 22-23 range. Not sure about Part B. I hadn't applied for ISI last year, I'm from engineering background basically so when I made up my mind to give economics a shot the admission portal for ISI was closed. The only exam I wrote was of DU's.

[Dr. Strange]

Budget equation for E>0.5  in part (iii) is
2(E-0.5)+0.5(1)+B=3-1
2E+B=2.5

Hence optimal bundle in part (iii) is E=1.25,B=0,U=3.75
Rest everything is perfect

[knowpraveen]

Okay, thanks Dr. Strange. It is 2E+B=2.5. Got it wrong there. Thanks. Didn't see that one coming! xD

[Amit Goyal]

Refer this post for solution to Q 1:

http://economicsentrance.in/thread/general-equilibrium-source-isi-sample-exam-2016/

[varnika1880]

Thnx sir

[knowpraveen]

Varnika, is it the same as what we'd discussed! Didn't read the whole thing. TLDR. In case its not, I'll be reading. =) Thank you Amit sir.

[varnika1880]

Yes it is the same

[urvashi]

Thank you sir

[urvashi]

In q 6 how does wage indexation affect unemployment and inflation? Is it captured by the catchall variable? And how do we find the returns to scale in q9?

[varnika1880]

Wage indexation increases the effect of unemployment on inflation

[varnika1880]

And I guess in q9 it should be CRS

[Mike]

Sir, can you please post the solution for question 5 , part v,  solow question?