MPE781 T3 2019Exam Question Bank (Question answers will not be given and discussed by instructors) Section A A 1 a Define the price elasticity of demand b Suppose that government would like to maximize tax revenue Explain why it may be a good idea for the government to lower tax rates for the goods that have very high price elasticities of demand (exceeding one) c Suppose that government would like to maximize tax revenue Explain why it may not be a good idea for the government to lower tax rates for the goods that have very low price elasticities of demand (less than one) A 2 a Define the demand function of a good b Discuss the price elasticity of demand for a necessity good, such as rice or bread c Suppose that the government wants to maximize tax revenue Explain why it may be not a good idea for the government to raise tax rates for a good with a price elasticity of demand more than one A 3 a Use a demand supply diagram to discuss why rice farmers may not benefit from a technological improvement in producing rice b Use a demand supply diagram to discuss why producers for luxury goods may benefit from a technological improvement in producing the goods A 4 a Define the markets of perfect competition and monopoly b Using a diagram to explain which market (i e , perfect competition or monopoly) is more efficient c Why do governments issue the copy right to a firm or block the merging of two firms 2 A 5 Suppose that the demand equation P 6 Q and supply equation P Q a Calculate the price elasticity of demand at equilibrium b Calculate the equilibrium price and quantity, and consumer surplus and producer surplus c Suppose government imposes a unit tax of $1 on producers, and the new supply function becomes function becomes P 1 Q, while the demand function remains P 6 Q Calculate the new equilibrium price and quantity d Based on (c), calculate the consumer surplus, producer surplus, tax revenue and the deadweight loss under the tax rate in (c) Also explain your answers diagrammatically A 6 a Suppose the demand function P 10 Q, and the supply function is P Q, where P is price and Q is quantity Calculate the equilibrium price and quantity b Suppose government imposes per unit tax of $2 on consumers The new demand function becomes P 8 Q, while the supply function remains P Q Calculate the new equilibrium price and quantity c Based on (b), calculate the consumer surplus, producer surplus, tax revenue and the deadweight loss under the tax rate in (b) Also explain your answers in (c) diagrammatically A 7 Consider the following cost data for a perfectly competitive firm Output (Q) Total Fixed Cost (TFC) Total Variable Cost (TVC) 1 100 120 2 100 200 3 100 290 4 100 430 5 100 590 a If the market price is $140, how many units of output will the firm produce in order to maximize profit in the short run Use a diagram to explain your answer b Find out economic profit or loss at the short run profit maximizing output level c Define the long run equilibrium under perfect competition What will be the price and quantity in the long run equilibrium Explain your answer diagrammatically 3 A 8 Consider the following cost data for a perfectly competitive firm Output (Q) Total Fixed Cost (TFC) Total Variable Cost (TVC) 1 100 120 2 100 200 3 100 290 4 100 430 5 100 590 d If the market price is $160, how many units of output will the firm produce in order to maximize profit in the short run e Specify the amount of economic profit or loss at the profit maximizing output level in the short run f What will be the price and quantity for the long run equilibrium A 9 Suppose the wage rate is $10 per hour and the fixed cost is $20 The production information is as follows Labor (hour) Output 0 0 1 2 2 4 3 6 4 8 Suppose the market is perfectly competitive, and the market price is $10 a Find out the profit maximizing output level at short run b Specify the amount of economic profit or loss at the profit maximizing output level in the short run c What will be the price and quantity for the long run equilibrium A 10 Suppose that the monopolist's demand is P 8 Q, and marginal revenue is MR 8 2Q The marginal cost is MC 2, and there is no fixed cost a Find out the profit maximizing output level b Specify the amount of economic profit or loss at the profit maximizing output c Calculate the price elasticity of demand at the profit maximizing point and explain it 4 A 11 Suppose that the market demand is P 10 Q, and marginal revenue is MR 10 2Q The marginal cost is MC 4 and average cost is AC 4 a If the market is under monopoly Find out the profit maximizing price and output for this monopolist and calculate its economic profit or loss at the profit maximizing output b If the market is under perfect competition Find out the profit maximizing price and output and calculate the profit or loss at the profit maximizing output c Which firm is more efficient, i e , monopolist or competitive firm Why A 12 Suppose that the single priced monopolist's demand is P 12 2Q, and marginal revenue is MR 12 4Q Assume that marginal cost is MC 4, and fixed cost is 0 a Determine the profit maximizing price and output b Calculate the amount of economic profit or loss at the profit maximizing output c Using a diagram to explain your answers in (a) and (b) d Calculate the price elasticity of demand at the profit maximizing point and explain it A 13 Suppose that the market demand is P 24 3Q, and marginal revenue is MR 24 6Q The marginal cost is MC 6 and fixed cost is 0 a If the market structure is monopoly, determine the profit maximizing price and output for this monopolist and calculate its economic profit or loss at the profit maximizing output b If the market structure is perfect competition, determine the profit maximizing price and total output and calculate a typical firm's profit or loss at the profit maximizing output c Which market structure is more efficient, i e , monopoly or perfect competition Also explain your answer in (c) diagrammatically A 14 Using AD AS model and diagrams, discuss the short run and long run impacts of the following events on the price level and output of the domestic economy (starting from the full employment level) a An increase in money supply b An increase in the demand for housing by foreigners c An increase in government spending d An operation of Open Market Purchase of bonds by the central bank e A rise in oil prices Also provide a policy recommendation f An increase in tourism 5 Section B B 1 The assignment marks for 11 students are 9, 8, 5, 10, 8, 3, 4, 7, 8, 6, 7 a Calculate the mean, median and mode b Calculate the first quartile, third quartile, and interquartile c Calculate the sample standard deviation and interpret this value B 2 A sample of 4 married couples were asked how happy each is in their own marriage The ratings by these couples are Husband (X) Wife (Y) 2 1 7 6 8 7 3 2 a Calculate the sample covariance and interpret the result b Calculate the sample coefficient of correlation and interpret the result B 3 A sample of 4 married couples were asked how happy each is in their own marriage The ratings by these couples are Husband (X) Wife (Y) 6 5 7 6 8 7 3 2 a Calculate the sample covariance and interpret the result b Calculate the sample coefficient of correlation and interpret the result 6 B 4 A simple linear regression model for salary (Yi) and the number of years of working (Xi) is as follows Yi 0 1 Xi ei where 0 and 1 are unknown parameters, and ei is the disturbance term The regression results are Coefficient Standard errort Stat p value Intercept A 20 00 5 00 0 000 Working years B 0 50 10 00 0 000 Regression Statistics R Square0 8643Standard error9 4531Observations30 a What are the values of A and B Explain b Explain the meaning of R Square c What conclusions can you reach about the relationships between salary (Yi) and working years (Xi) d What is the predicted salary for a person with 10 years working experience e Is this prediction reliable B 5 A simple linear regression model for marks (Yi ) and the hours of study (Xi) is as follows Yi 0 1 Xi ei where 0 and 1 are unknown parameters, and ei is the disturbance term The regression results are Coefficient Standard errort Stat p value Intercept 50 2 00 A 0 000 Study hours B 0 50 4 0 000 Regression Statistics R Square0 8643Standard error9 4531Observations30 a What are the values of A and B Explain b Explain the meaning of R Square c What conclusions can you reach about the relationships between marks (Yi) and study hours (Xi) d What is the predicted marks for a person with 20 hours of study e Is this prediction reliable

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MPE781 T3 2019Exam Question Bank (Question answers will not be given and discussed by instructors) Section A  A 1  a  Define the price elasticity of demand  b  Suppose that government would like to maximize tax revenue Explain why it may be a good idea for the government to lower tax rates for the goods that have very high price elasticities of demand (exceeding one)  c  Suppose that government would like to maximize tax revenue Explain why it may not be a good idea for the government to lower tax rates for the goods that have very low price elasticities of demand (less than one)  A 2  a  Define the demand function of a good b  Discuss the price elasticity of demand for a necessity good, such as rice or bread  c  Suppose that the government wants to maximize tax revenue Explain why it may be not a good idea for the government to raise tax rates for a good with a price elasticity of demand more than one  A 3  a Use a demand supply diagram to discuss why rice farmers may not benefit from a technological improvement in producing rice  b Use a demand supply diagram to discuss why producers for luxury goods may benefit from a technological improvement in producing the goods  A 4 a  Define the markets of perfect competition and monopoly  b  Using a diagram to explain which market (i e , perfect competition or monopoly) is more efficient  c  Why do governments issue the copy right to a firm or block the merging of two firms  2 A 5 Suppose that the demand equation  P   6   Q and supply equation  P   Q  a  Calculate the price elasticity of demand at equilibrium  b  Calculate the equilibrium price and quantity, and consumer surplus and producer surplus  c  Suppose government imposes a unit tax of $1 on producers, and the new supply function becomes function becomes  P   1   Q, while the demand function remains  P   6   Q Calculate the new equilibrium price and quantity  d  Based on (c), calculate the consumer surplus, producer surplus, tax revenue and the deadweight loss under the tax rate in (c) Also explain your answers diagrammatically  A 6 a  Suppose the demand function P   10   Q, and the supply function is  P   Q, where P is price and Q is quantity  Calculate the equilibrium price and quantity  b  Suppose government imposes per unit tax of $2 on consumers The new demand function becomes  P   8   Q, while the supply function remains  P   Q Calculate the new equilibrium price and quantity  c  Based on (b), calculate the consumer surplus, producer surplus, tax revenue and the deadweight loss under the tax rate in (b) Also explain your answers in (c) diagrammatically  A 7 Consider the following cost data for a perfectly competitive firm  Output (Q) Total Fixed Cost (TFC) Total Variable Cost (TVC) 1 100 120 2 100 200 3 100 290 4 100 430 5 100 590 a  If the market price is $140, how many units of output will the firm produce in order to maximize profit in the short run  Use a diagram to explain your answer  b  Find out economic profit or loss at the short run profit maximizing output level  c  Define the long run equilibrium under perfect competition What will be the price and quantity in the long run equilibrium Explain your answer diagrammatically  3 A 8 Consider the following cost data for a perfectly competitive firm  Output (Q) Total Fixed Cost (TFC) Total Variable Cost (TVC) 1 100 120 2 100 200 3 100 290 4 100 430 5 100 590 d  If the market price is $160, how many units of output will the firm produce in order to maximize profit in the short run  e  Specify the amount of economic profit or loss at the profit maximizing output level in the short run  f  What will be the price and quantity for the long run equilibrium  A 9  Suppose the wage rate is $10 per hour and the fixed cost is $20 The production information is as follows  Labor (hour) Output 0 0 1 2 2 4 3 6 4 8 Suppose the market is perfectly competitive, and the market price is $10  a  Find out the profit maximizing output level at short run b  Specify the amount of economic profit or loss at the profit maximizing output level in the short run  c  What will be the price and quantity for the long run equilibrium  A 10  Suppose that the monopolist's demand is  P   8   Q, and marginal revenue is  MR   8   2Q  The marginal cost is  MC   2, and there is no fixed cost  a  Find out the profit maximizing output level b  Specify the amount of economic profit or loss at the profit maximizing output  c  Calculate the price elasticity of demand at the profit maximizing point and explain it  4 A 11  Suppose that the market demand is  P   10   Q, and marginal revenue is  MR   10   2Q  The marginal cost is  MC   4 and average cost is  AC   4  a  If the market is under monopoly  Find out the profit maximizing price and output for this monopolist and calculate its economic profit or loss at the profit maximizing output  b  If the market is under perfect competition  Find out the profit maximizing price and output and calculate the profit or loss at the profit maximizing output  c  Which firm is more efficient, i e , monopolist or competitive firm  Why  A 12  Suppose that the single priced monopolist's demand is  P   12   2Q, and marginal revenue is  MR   12   4Q Assume that marginal cost is  MC   4, and fixed cost is 0  a  Determine the profit maximizing price and output b  Calculate the amount of economic profit or loss at the profit maximizing output  c  Using a diagram to explain your answers in (a) and (b)  d  Calculate the price elasticity of demand at the profit maximizing point and explain it  A 13  Suppose that the market demand is  P   24   3Q, and marginal revenue is  MR   24   6Q  The marginal cost is  MC   6 and fixed cost is 0  a If the market structure is monopoly, determine the profit maximizing price and output for this monopolist and calculate its economic profit or loss at the profit maximizing output  b If the market structure is perfect competition, determine the profit maximizing price and total output and calculate a typical firm's profit or loss at the profit maximizing output  c Which market structure is more efficient, i e , monopoly or perfect competition Also explain your answer in (c) diagrammatically  A 14  Using AD AS model and diagrams, discuss the short run and long run impacts of the following events on the price level and output of the domestic economy (starting from the full employment level)  a  An increase in money supply b  An increase in the demand for housing by foreigners c  An increase in government spending  d  An operation of Open Market Purchase of bonds by the central bank e  A rise in oil prices Also provide a policy recommendation  f  An increase in tourism 5 Section B  B 1  The assignment marks for 11 students are  9, 8, 5, 10, 8, 3, 4, 7, 8, 6, 7 a  Calculate the mean, median and mode b  Calculate the first quartile, third quartile, and interquartile  c  Calculate the sample standard deviation and interpret this value  B 2  A sample of 4 married couples were asked how happy each is in their own marriage The ratings by these couples are  Husband (X) Wife (Y) 2 1 7 6 8 7 3 2 a  Calculate the sample covariance and interpret the result  b  Calculate the sample coefficient of correlation and interpret the result  B 3  A sample of 4 married couples were asked how happy each is in their own marriage The ratings by these couples are  Husband (X) Wife (Y) 6 5 7 6 8 7 3 2 a  Calculate the sample covariance and interpret the result  b  Calculate the sample coefficient of correlation and interpret the result  6 B 4 A simple linear regression model for salary (Yi) and the number of years of working (Xi) is as follows Yi   0   1 Xi   ei where 0 and 1 are unknown parameters, and ei is the disturbance term The regression results are Coefficient Standard errort Stat p value Intercept A 20 00 5 00 0 000 Working years B 0 50 10 00 0 000 Regression Statistics           R Square0 8643Standard error9 4531Observations30       a  What are the values of A and B Explain  b  Explain the meaning of R Square  c  What conclusions can you reach about the relationships between salary (Yi) and working years (Xi)  d  What is the predicted salary for a person with 10 years working experience  e  Is this prediction reliable  B 5 A simple linear regression model for marks (Yi ) and the hours of study (Xi) is as follows Yi   0   1 Xi   ei where 0 and 1 are unknown parameters, and ei is the disturbance term The regression results are Coefficient Standard errort Stat p value Intercept 50 2 00 A 0 000 Study hours B 0 50 4 0 000 Regression Statistics           R Square0 8643Standard error9 4531Observations30       a  What are the values of A and B Explain  b  Explain the meaning of R Square  c  What conclusions can you reach about the relationships between marks (Yi) and study hours (Xi)  d  What is the predicted marks for a person with 20 hours of study  e  Is this prediction reliable

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MPE781 T3 2019Exam Question Bank (Question answers will not be given and discussed by instructors) Section A:

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Applying International Financial Reporting Standards

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Applying International Financial Reporting Standards

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