The Paul H. Nitze School of Advanced International Studies
The Johns Hopkins University
SAMPLE FINAL EXAM
You have 2 hours and 30 mnts to complete this exam.
Total points available: 100.
your responses carefully, as points are awarded for
(6 points each; 30 points total).
Please answer FIVE of the following
SEVEN questions. You should fully explain your answers, including diagrams where appropriate.
Points will be given based on your explanation.
Explain why price is always equal to minimum average cost in the long run in a perfectly
competitive equilibrium. At such price, are firms adopting a profit-maximizing behavior?
China and Bangladesh produce microchips (M) and cotton t-shirts (TS). China has 20.000
units of labor, whereas Bangladesh has 5.000. Prior to trade, China consumes 100 units of M
and 100 TS. Bangladesh consumes 2 units of M and 6 units of TS. The cost in terms of labor
requirements to produce M and TS are given in the following table:
Labor per M
Labor per unit of TS
Which country has a comparative advantage in the production of each good? If China opens
up to trade with Bangladesh, how many M and TS will it produce? Briefly discuss your
In a monopoly, marginal revenue is smaller than price for every output level. Explain with
the help of a graph.
Define the concept of natural monopoly and briefly explain:
why it should be regulated;
why regulating it through marginal cost pricing might not be a good idea.
Define second-degree price discrimination and explain why, possibly through an example,
such practice might be welfare-enhancing when compared to uniform pricing.
Explain why a general economic equilibrium with production is reached when the MRT
equals the MRS of the consumers
Describe the equilibrium in a Bertrand duopoly with homogeneous goods in which the
marginal costs for Firm A and B are constant but different, with MC
. Motivate your