Review
March 6, 2008
Topics covered
Introduction (Chapter 1) Consumer Theory (Chapter 2) Demand Theory (Chapter 3) Theory of the Firm (Chapter 5 & 6)
What to know?
Basic concepts: Multiple choice questions and true or false questions Verbal a
ECON191 (Spring 2010) 6-7 & 10.5.2010 (Tutorial 10)
Chapter 14 Externalities and Public Goods (Chapter 18 of Textbook) Externalities occur when the welfare of some parties depends on their actions as well as actions under the control of other parties Nega
ECON191 (Spring 2010) 13, 14 & 17.5.2010 (Tutorial 11)
Chapter 14 Externalities and Public Goods (Chapter 18 of Textbook) Strategic behavior: Demand revealing mechanism In the Lindahl solution, people will have incentive to misrepresent their preferences,
Econ 191 Spring 2010 Francis Lui Problem Set 1
Due: February 25, 2009, 2:50 pm SHARP. Your answers should be concise and to the point. Draw diagrams to illustrate your arguments whenever necessary. 1) Suppose that a quota is imposed on the import of Japan
Econ 191 Sprig 2010 Francis Lui Problem Set 2 Due: March 11, 2010, 2:50pm. 1) A student registered in Econ 191 went to restaurant A where Cokes and beers cost $10 each and drank 6 Cokes and 4 beers. He/she then went to restaurant B where Cokes cost $5 and
Econ 191 Spring 2010 Francis Lui Problem Set 3 Due Date: March 22, 4:00 pm sharp. Please submit your PS to the HW collection cabinet outside the ECON department (Lift 17-19) (1) Suppose that a production function is given by Y = 4K0.25 L0.75. It can be sh
Econ 191 Spring 2010 Francis Lui Problem Set 4
Due Date: April 15, 2010: 2:50 pm.
1)
Let there be 2 firms, A and B, in a market of the same good. Suppose that it is completely costless to produce the good, and no other firms can enter into the market due
Econ 191 Spring 2010 Francis Lui
Problem Set 5
Due: Tuesday, April 29, 2010, 2:50 pm.
1) Suppose that in Economy A, everybody has the same wage rate, which is determined by the average of the marginal productivities of the entire working population. In Ec
Econ 191 Spring 2010 Francis Lui Problem Set 6
Due Date: Thursday, May 13, 2010, 2:50 pm. (This is a challenging homework.)
(Consumption externality.) Ada and Bill are two students having utility functions that depend on y = music/quietness, and x = all o
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 1 1)
P
DHK = Demand of Japanese cars from HK DW = Demand of Japanese cars from the world (HK + elsewhere) DW = Demand of Japanese cars from the world after a quota is imposed in HK
S
A B
Qu
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 2 1) Answer: False
Coke 20
At restaurant A, he spends $100. At B, he also spends $100. The diagram shows his budget constraints at A and B.
B 10 6 2 4 a A b 6 100 10 15 Beers
When he is at
ECON191 (Spring 2010) 29-30.4 & 3.5.2010 (Tutorial 9)
Chapter 13General Equilibrium (Chapter 16 of Textbook) Partial equilibrium: it is reached when DD = SS in a particular market. Markets are isolated, it assumes that changes in price can occur without c
ECON191 (Spring 2010) 22, 23 & 26.4.2010 (Tutorial 8)
Chapter 11 Uncertainty (Chapter 5 of Textbook) Expected value: Probability weighted average of the payoffs associated with all possible outcomes E(X) = Pr1X1 + Pr2X2 + + PrnXn Preference toward risk A
ECON191 (Spring 2010) 15, 16 & 19.4.2010 (Tutorial 7)
Chapter 9 Introduction to Game Theory (Chapter 13 of textbook) What is game theory? Game theory is a method for modeling decision making when decisions interact. A game is characterized by (i) The set
ECON191 ANSWER KEY FOR MIDTERM Part I. Multiple Choices (30 points) 1. E 2. C 3. B 4. E 5. C 6. A 7. A 8. A 9. C 10. D Part II. Problem Solving Questions 11. (20 points) a) Optimal condition:
MU x px y + 1 px = = MU y p y x -1 py
b) Demand function
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 4 1) Given the market demand function P 10 QA QB , TC = 0 for both Firm A and Firm B Firm A Max. 10 QA QB QA First order condition: 10 2QA QB 0 Reaction function for A: Q A 10 QB 5 QB .(1)
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 5 1) Adverse selection will occur in economy A. Those with MPL above average MPL will go to economy B when wage = W1 = Average MPL.
MPL
W2
W1 = Average MPL
After the best half of people hav
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 6
XA = 11 0B
F
Slope = -6
UB1
Contract Curve Y A * = Y A = 6
UA1 N
YB = 12
M
E
0A XA * = 9 XA = 10 XB = 1 0
Point E is initial endowment: 0 hours of music time for Ada and 10 units of other
ECON191 (Spring 2010) 8, 11 & 12.2.2010 (Tutorial 1)
Elasticities of Demand and Supply Price elasticity of demand Percentage change in quantity demanded of a good resulting from a 1-percent change in price Point elasticity VS Arc elasticity %Q Q Q Q P Poi
ECON191 (Spring 2010) 4, 5 & 8.3.2010 (Tutorial 3)
Chapter 2 Consumer Theory (Chapter 3 & 4 of textbook) Income and substitution effect
X2 A
X 2 2 X
E
N
Initial equilibrium: E with P1, P2 and Y Suppose P1 to P1, P2 and Y remains unchanged. New equilibri
ECON191 (Spring 2010) 11, 12 & 15.3.2010 (Tutorial 4)
Chapter 3 Production and Technology (Chapter 6 & 7 of textbook) Production function A production function shows the maximum amount of any output a producer in our economy can get most efficiently, give
ECON191 (Spring 2010) 18, 19 & 22.3.2010 (Tutorial 5)
Chapter 5 Perfectly competitive market (Chapter 8 & 9 of textbook) Short Run Equilibrium In the SR equilibrium, given market price, P*, Each individual firm takes P* and produce the profit maximizing o
ECON191 (Spring 2010) 8, 9 & 12.4.2010 (Tutorial 6)
Chapter 8 Monopolistic Competition and Oligopoly (Chapter 12 of textbook) Oligopoly: market or industry with two or a few firms. The simplest case is Duopoly. Cournot equilibrium: a pair of output levels
ECON191 Spring 2010
Outline of suggested solutions to Problem Set 3 (1) Given, MPL = 3(K/L)0.25, MPK = (L/K)0.75, PL = $3/unit, PK = $1/unit, PKK + PLL = 8 Cost is minimized when MPL/PL = MPK/PK (K/L)0.25 = (L/K)0.75 L=K Total cost of production PKK + PLL