SIS 2013

[AS]

4.a monopolist faces MC=1,FC=0

D(p)=100/p   p<20

      =0         p>20

what is the profit max choice of output?

5. if govt could set a price ceiling on the above monopolist in order to force it to act as a competitor,what price it should set.

[Akshay Jain]

case 1..if Q=20 then P=5 acc to demand function
(TR)Total revenue=100 and (TC)Total cost is 20
(NP)Net Profit=100-20=80
case 2..if Q=5 then P=20
TR=100, TC=5
NP=95
case 3..if Q= 1/99 then P>20 (not possible coz of constraint on demand function if P>20 then Q=0)
case 4...if Q=10 then P=10
TR=100, TC= 10
NP=90

clearly profit is maximized at Q=5

[Akshay Jain]

In perfect competition the price charged is the marginal cost of production and no economic profits...
so price ceiling is P=1
at this price total revenue is 100 and total cost is also 100
so 0 economic profits....

[AS]

thanks Akshay.....

[Homer Simpson]

Akshay, in terms of intuition, can i consider it this way? the monopolist would try to produce as less as possible and give the highest price he could. i need such a quantity that would give me a price close to 20 cuz i would get really less demand there - that makes me have less cost although my TR is same for everything i produce. so if i take q = 5, then i get profits of 95. anything below this quantity, the prices would be out of the viable range. anything above this, my costs would rise and profits would fall.

[Akshay Jain]

Yes u can think in dis way...but remember...if dere is no restriction on prices dn dere is no solution to the given problem....if demand is continuous nd not descrete

[Homer Simpson]

Ok, thanks!

[Ridhika]

Hey guys please confirm and let me know if you are getting same answers:

1. c
2. d
3. c
4. b
5. c
6. c
7. d
8. a
9. b
10. d
11. b
12. c
13. d
14. a
15. a
16. b
17. c
18. dunno :(
19. dunno :(
20. c
21. dunno :(
22. d
23. b
24. c

Please also explain 18, 19 and 21?

[The Villain]

2 c
3 b

[Ridhika]

2)
MRS=(y/x)^(1/2) = 5 (price ratio)
5x+y=60 these solve for x = 2

3) I used the following reasoning:
The production function is CRS. To increase production both input need to be increased in same ratio. As combined prices of equal amounts of both inputs is same in both countries the firm is indifferent.

[The Villain]

Quest 2...these are concave pref...he will asume only 1 good
q3..take q as 1
now find cost for both...use optimisation

[Siddhant]

2 (d) Fastest way to do it is to insert the bundles into the utility fx and checking for max u. (After checking whether they are feasible or not). sqrt 2 + sqrt 50 = 1.414 + 7.something = 8.4xxx. sqrt 60 < 8.

3 (b)

18 What is the flexible version of the quantity theory?

19 (a) dY/dT = mpc/1-mpc = -4. Therefore, dT= - dY/4 = -20.

21 No clue.

24 Could someone explain this? I was getting (b) (at par), but I'm not certain at all.

[Dreyfus]

@ron...preferences are convex...!

[Dreyfus]

@siddhant..for 24...I am also getting b...I used the prices that are borne by consumers of B in terms of A$ as A$225

[The Villain]

Sry my bad...these are convex bt there is corner soln

[Dreyfus]

@ron...y there is corner solution?

[Ridhika]

so for 24..
i converted everything to usd..

Price of petrol in A = USD 1.5
Price of petrol in B = USD 1.5

Income in A = 1000 USD
Income in B = 3000 USD

So at same prices people in B have more income.. so ans is c..

makes sense no?

@ ron .. thanks I got 3 :)

[Dreyfus]

@ridhika...den where is that ppc 3 times price statement gone?

[Ridhika]

Hmm.. fair point .. but if that has to hold aren't the given nominal prices or exchange rate wrong ?

----- Reply message -----
From: "Vaibhav Garg [via Discussion forum]" <ml-node+[hidden email]>
To: "Ridhika" <[hidden email]>
Subject: SIS 2013
Date: Wed, May 14, 2014 2:40 PM

@ridhika...den where is that ppc 3 times price statement gone?

---

If you reply to this email, your message will be added to the discussion below:

http://discussion-forum.2150183.n2.nabble.com/SIS-2013-tp7589464p7589671.html

To unsubscribe from SIS 2013, click here.
NAML