DSE- 2009

Posted by Pinky on Apr 23, 2012; 3:52am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2009-tp7490626.html

14. A monopoly faces the demand curve P=8-Q. the monopoly has a constant unit cost equal to 5 for Q<=2 and a constant unit cost equal to 3 for Q<=2. its profit maximizing output equals:
(a) 3/2
(b) 2
(c) 5/2
(d) both 3/2 and 5/2

....the MR=MC condition gives values 3/2 and 5/2 .. which is the answer in key...
but wont we further find the profits both at 3/2 and at 5/2 ..
profit when Q=5/2:
PQ-3Q:
(8-5/2)*(5/2)-3(5/2)
=5/2*(8-5/2-3)
=5/2*5/2
=25/4

similarly for 3/2 it comes out to be 9/4..

since profit at 5/2> profit at 3/2

so 5/2 is the answer..

is this correct..?????????
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17. In the IS-LM framework, an increase in expected rate of inflation results in
a) an increase in the equilibrium value of income and an increase in the equilibrium value of real interest rate
b)a decrease in the equilibrium value of income and a decrease in the equilibrium value of real interest rate
c)an increase in the equilibrium value of income and an decrease in the equilibrium value of real interest rate
d)a decrease in the equilibrium value of income and an increase in the equilibrium value of real interest rate

....how to do this..? .. how expected inflation enters into IS-LM model..???