Re: DSE 2012- Question 16,29 and 30.

Posted by Sumit on Apr 23, 2013; 9:40am
URL: http://discussion-forum.276.s1.nabble.com/DSE-2012-Question-16-29-and-30-tp7580148p7580149.html

Q.16).Ans: Try to plot the fn graph (i.e x^7-x-1=0) you will see that there is a real sol. in the interval (0,2)

Q.29).Ans: a)Competitive equilibrium output: D(p)=120-p or D(q)=120-q(i.e inverse demand fn)

Now solve: D(q)=MC1(q), You will get q=50.

b)Social optimum output: solve D(q)=MC1(q)+MC2(q) you will get Q=20.
So the answer is option-A(50;20)
Note: we add MC2 in part-B coz we taking this cost is bearing by society.

Q.30).suppose that X1=richer person in the economy
X2=poorer person in the economy.

Now, suppose income of X1=5 and X2=2 which means total income of two person in the economy=X1+x2=7.
from this we get
W1(x1; x2) = x1 + x2=7
W2(x1; x2) = x1*x2=10

Now, suppose due to progressive transfer the new income of two is X1=4 and X2=3(Note: the total income in the economy is still the same and the rich remains richer even after the transfer)

Now If we check welfare given by above 2 equation after progressive transfer we will get
W1(x1; x2) = x1 + x2=7
W2(x1; x2) = x1*x2=12
The above result clearly shows that Only W2 is a `good' measure bcoz it increases social welfare which is not the case in W1..

So, answer is b).Only W2 is a `good' measure