Explain the questions attached
9. In case of monopoly, a firm in the long run can have almondoil Baghlead A. Loss B. Super Normal Profit C. Break even D. All of these sham I eshso noltesup nose .lower's /461509 10. Income elasticity is computed by A. ei = (Y2 - Y1) / e1 vo beoubount esw noblegnoc toll B. ei = (Y1 - Y2 ) / P1 ei = ( (Q2 - Q1 ) / Q1 ) / ( (Y2 - Y1 ) / Y1) D. ei = (Q2 - Q1 ) / P1 belles ri toyud ano ying al 91or evenw. None Section B Answer any 5 questions. Each question carries 6 marks. (6x5=30 marks) 11. Law Of Equi Marginal Utility ? 12. Explain Law Of Demand & It's Exceptions ? (or) Why Demand Curve Slopes From Left To Right ? 13. Diminishing returns to Scale ? or Variable Proportional To Scale ? 14. Difference Between Perfect Competition and Monopoly 15. What is Trade Cycles ? Explain Its Fluctuation ? 16. What is Utility? Explain various types of Utility? 17. Why does a Demand curve has a negative slope? 18. Explain any three definitions of National Income Section C Answer any 3 questions. Each question carries 10 marks. (3x10=30 marks) 19. Explain law of Equi Marginal Utility? 20. What is Monopoly? Explain how price determination under Monopoly. 21. Explain the difficulties of Barter System 22. State any three major functions of Central Bank 23. Explain the classifications of Markets? 24. What are the various methods of Debt redumption?QUESTION ONE One of the economic impacts of the current covid -19 pandemic is a rise in demand deficient unemployment. i) Explain how fiscal policy can be used to solve this problem. (5 marks) i) How can monetary policy be used to address the same problem. (5 marks) iii) Explain the links between changes in the nation's money supply, the interest rate, investment spending, aggregate demand and real GDP. Illustrate with a graph where appropriate (5 marks) iv) Discuss the negative redistributive effects of unanticipated inflation on any three groups/agents in the economy. (5 marks) v) Which of the two types of inflation is most likely to be associated with a negative GDP gap? Illustrate with a graph. (5 marks) vi) During World War II, an Allied soldier named Robert Radford spent several years in a large German prisoner-of-war (POW) camp. At times more than 50,000 prisoners were held in the camp, with some freedom to move about within the compound. Radford later wrote an account of his experiences. He described how an economy developed in the camp, in which prisoners traded food, clothing, and other items. Services such as barbering also were exchanged. Lacking paper money, the prisoners began to use cigarettes (provided monthly by the Red Cross) as money. Prices were quoted, and payments made, using cigarettes. (a) In Radford's POW camp, explain how cigarettes fulfilled the three main functions of money (3 marks) (b) Briefly discuss why a non-smoking prisoner would have been willing to accept cigarettes in exchange for a good or service in Radford's camp. (2 marks)Consider a homogeneous good industry (such as an agricultural product) with just two firms and a total market demand Q = 400-P, so the inverse demand is P = 400 - Q. Suppose both firms have a constant marginal cost equal to $100 per unit of output and a fixed cost equal to $10,000. One simple way to depict rivalry in a duopoly (2 firms) is the Cournot model. This model is reasonable in agricultural markets where firms choose production (plantings) in advance and the market price is determined later after the crop is harvested. In the Cournot model, we imagine that the two firms simultaneously choose their production or quantity and that demand (market clearing) determines the price given each firms' quantity. (a) Suppose (hypothetically) that the second firm produces 0 units, and the first firm anticipates this, so the first firm is the only seller. How much will the first firm produce (in this case the first firm acts as a monopolist and sets output where MR = MC)? Hint: The first firm's inverse demand is P = 400-(Q1 +Q2), but since Q2 = 0 we can write this as P = 400-Q1 and so MR = 400 - 2Q1. Mathematically this problem is the same as a monopoly problem. What quantity will firm 1 choose? What price will it charge? What are the producer surplus and profit? (b) Now suppose instead that the second firm produces exactly 100 units, and that the first firm anticipates this. The total output is the first firm's output, Q1, plus 100, so substituting Q1 + 100 for QT in the inverse demand implies that P = 300 - Q1. That is if firm 1 produces Q1 it expects the price to be 300-Q1. This implies that MR = 300-Q2. How much will firm 1 produce (set MR = MC)? What price will clear the market given the total output Q1 + Q2? What are the producer surplus and profit? (c) Explain intuitively why neither firm wants to change their production if each is producing 100 (Q1 = Q2 = 100)? Note that your are explaining why Q1 = Q2 = 100 is a Cournot-Nash equilibrium). (d) Calculate the total producer surplus (both firms) and consumer surplus in parts (a) and (b). Why is consumer surplus higher with 2 firms than with one firm? (e) Intuitively, why is the deadweight loss smaller with two firms than with only one firm?. (Inverse) labor demand for low-skilled workers in Arizona is determined by w=32 - 0.2E where E is the number of workers (in millions) and w is the hourly wage. There are 30 million native low-skilled workers in Arizona who supply labor inelastically. If the United States opened its borders to immigration from Mexico, 5 million low-skill immigrants would enter Arizona and supply labor inelastically. Assume that low-skilled immigrants are perfect substitutes for low-skilled native workers. a. Illustrate the effect of immigration in this labor market on a graph. b. What is the market-clearing wage if immigration is not allowed? c. What is the market-clearing wage with open borders? d. How much is the immigration surplus when the United States opens its borders? e. How much surplus is transferred from Arizona workers to Arizona firms? f. Now assume that low-skilled immigrants are complements to high-skilled (college educated) native workers. What do you expect to happen to equilibrium wages and employment for college educated native workers as a result of immigration? Why? Illustrate your explanation with a graph. 2. Debbie is about to choose a career path. She has narrowed her options to two alternatives. She can either become a marine biologist or a concert pianist. Debbie lives two periods. In the first, she gets an education. In the second, she works in the labor market. If Debbie becomes a marine biologist, she will spend $15,000 on education in the first period and earn $472,000 in the second period. If she becomes a concert pianist, she will spend $40,000 on education in the first period and then earn $500,000 in the second period. a. Suppose Debbie has a 5 percent discount rate between periods. Which career will she pursue? What if she had a 15 percent discount rate? Will she choose a different option? Why? b. Suppose musical conservatories raise their tuition so that it now costs Debbie $60,000 to become a concert pianist. What cancer will Debbie pursue if the discount rate is 5 percent
