Past ISI questions

[Rajat]

Lets discuss past ISI questions here. Can someone please share solution to Q.1 of ME II of 2012 paper.

http://economicsentrance.weebly.com/uploads/1/1/0/5/1105777/msqesq2012.pdf

[kanv93]

This is how i solved it.Pls confirm if it is right or wrong ?

Short Run:
C=10L
for the optimised production L*, K* , Y=L*^0.25 X K*^0.25
         
so y^4=L* X K* => L=Y^4/K*. Therefore C=10Y^4/K*

Long Run

C=10L+10K
here for optimised production dY=0 => L=K
at optimised production Y= L*^0.25 X K*^0.25 => Y=L^0.5 (as L=K) => Y^2=L

Therefore C= 10(L+K)=20L=20Y^2

This is my solution

@ Rajat Pls help me with PEB 15 Ques 6 An economy comprises of a consolidated household sector, a firm sector and the government...

[Rajat]

Hey Kanv, thanks.
But shouldnt we also include K* in cost function ?

Regarding you question, sorry but even i have not been able to give it some thought. However, annakin has shared his solution. He has solved it using the lagrangian multiplier method. Have a look at it.

[kanv93]

I too have that doubt. But i assumed 0 capital cost for short run. By the by i think it is right to assume that or else we would not be able to arrive at the solution

[kk]

PEB 15 question 6
a_(1).jpg  a_(2).jpg a_(3).jpg

[kk]

a4.jpg  a.jpg

[kanv93]

Thank you kk...so kind of u to have posted the image of ur soltion

[Rajat]

people who have solved 2014 paper. can you please post your solutions to ME II

[kanv93]

@ Rajat. may i know for which ques in 2014 ME  II u want solutions

[Rajat]

Hi,
Can you pls post for Q.1 , 10 and 6(a) from ME II

[kk]

i have already posted the answers of the first 5 questions in the forum..
I HAVE SOLVED THE FIRST 5 QUESTIONS OF ISI 2014 PEB ECONOMICS AND I AM GETTING THE FOLLOWING ANSWERS..PLEASE TELL ME IF YOU ARE GETTING THE SAME ANSWERS.

QUESTION 1 (a) QUANTITY=3 PRICE- 7 IN DOMESTIC MARKET. AND PRICE=QUANTITY=5 IN EXPORT MARKET
(b) QUANTITY=2 AND PRICE-8

QUESTION 2 (a) (1) a=b = 20    (2) a=b=5   (b) DEADWEIGHT LOSS= 350 THOUSANDS OF UNITS  (b)PRICE CEILING=RS 30/UNIT

QUESTION 3 (a) (1) MAX PROFIT =532.2 (2) REMAINS SAME  (b) (1) EQUILIBRIUM PRICE =5 (2) DOUBT
QUESTION 4  (a) (1) QUANTITY =8 AND PRICE =12  (2) QUANTITY = 6 AND PRICE =14
QUESTION 5 (a) q1 =q2 =3 (b)  q1=q2 =7/2

and check this link..some other questions are also discussed..like 6(a)  see discussion
ISI PEB (Economics), 2014 ANSWERS 1 TO 5..

[Rajat]

Thanks KK !

in Q.5 part b, as per your solution, q1=q2=3.5 but there is a capacity contraint of q1=q2=<2.
How did you do this ?

[L]

Hi Rajat
I have posted solution for Q.10 in another thread. However, I am posting it again over here.
 Q. 10. Budget Constraint: (1+R) Cm + Co = (wh - e(1+R) ) (1+R)
 first order condition: (dU/dCm)/(dU/dCo) = u'(Cm)/(beta* u'(Co) = 1+R

b) We can write it in form of profit maximization
 Z = wh - e(1+R) .......where the profit is used for consumption in period 2 & 3.
dZ/ de = wh'(e) - (1+R) = 0
h'(e) = (1+R)/w

if W increases then h'(e) decreases. H is a concave function, so, if you plot h w.r.t e and isoprofit lines, then you will see optimal education will increase as slope of isoprofit line decreases.

Similarly, if R increases, then, h'(e) increases, then, it will lead to less education.

[Rajat]

Thanks L.

You have assumed that price of consumption in both the periods is 1. Although this is a helpful and simplistic assumption, do we need to give an explanation for this in the exam ?

Also, the answer to part b is pretty simple and straighforward.. dunno why it is for 10 marks.
It just gives you a lingering feeling that we are missing something :P

[L]

Yeah you should that assuming prices to be 1 so that consumption is just money consumed. If you varian's 10th chapter, he had assumed prices to be 1 except when he considers inflation.
And you will find many questions in previous ISI papers which are very simple but carries a lot of marks, and  I especially found this in 2013 paper.

[Rajat]

Hi all,
Do they follow step-marking in the subjective paper ? Do we get zero marks if the final answer is incorrect? any idea how it works ?

[Rajat]

A library has to be located on the interval [0; 1]. There are three
consumers A, B and C located on the interval at locations 0.3, 0.4
and 0.6, respectively. If the library is located at x, then A, B and C’s
utilities are given by  -|x - 0.3|, -|x - 0.4| , -|x - 0.6|, respectively.
Define a Pareto-optimal location and examine whether the locations
x = 0.1; x = 0.3 and x = 0.6 are Pareto-optimal or not.

In this case, how do we define a solution ? is it the one that maximizes total utility ? then x = 0.4 should be the answer

[Rajat]

can someone pls attempt this

[onionknight]

What do you mean by "solution"? Do you mean the Pareto optimal points as mentioned in the question?

[Rajat]

yes.. that is what i mean..
in the language of the question, how do we define a pareto-optimal location ?