S1W11

Ch1 - Q1

You are planning a last-minute, 200-mile trip to Manchester. Except for cost, you are indifferent between driving and taking the train. The costs of operating your car during a typical 10,000-mile driving year are as follows:
Interest: £2000

Fuel and oil: £1200

Tires: £200

License and registration: £50

Maintenance: £1100

Total: £4550

If you are rational, what will be your threshold price for buying a train ticket? (Round your answer to the nearest £10.)

Ch1 - Q2

Your friend is trying to cheat in the exam and has passed you a note asking what the common pitfalls of decision-making are?

• Ignoring implicit costs

• Failure to ignore sunk costs

• Measuring costs and benefits as proportions rather than in absolute monetary terms

• Failure to distinguish between average and marginal properties

Ch2 - Q1

Two common findings from labour market economics are that:

(i) low-skilled immigration, even at a fairly large scale, puts only a very small downward pressure on low-skilled wages;
(ii) minimum wage increases often have only very small negative effects on low-skilled employment.

If we wanted to model the low-skilled labour market using the supply and demand framework, what would we need to assume about the demand and/or supply curves so that our model was consistent with the findings in the low-skill labour market noted above?

• (i) implies that demand is elastic.

  (ii) implies that demand is elastic.

• (i) implies that demand is elastic.

  (ii) implies that demand is inelastic.

• (i) implies that supply is elastic.

  (ii) implies that demand is elastic.

• (i) implies that supply is elastic.

  (ii) implies that demand is inelastic.

Ch2 - Q2

Moschini and Meilke estimated a demand function for processed pork in Canada as:

Q = 180 - 30p + 30 pb + 13pc + 12Y

Where Q is the quantity of pork demanded (in millions of kilos), p is the price of pork in Canadian dollars per kilogram, pb is the price of beef in dollars per kilogram, pc is the price of chicken
in dollars per kilogram, and Y is the income of consumers in thousands of dollars per year.

What do the coefficients on p, pb, pc, and Y imply about how these variables affect the demand for pork?

Ch3 - Q1
Santa Claus and the elves are playing a quiz game against Grinch, if they answer the questions
wrong Grinch will leave the city . Identify which (if any) of the following are coordination games

• “Battle of the Sexes” is a coordination game

• Matching Pennies” is a coordination game

• “The Prisoners’ Dilemma” is a coordination game

• Stag Hunt” is a coordination game

Ch3 - Q2

Santa Claus and Jack Frost are facing off in a magical duel. Each can choose between two spells: ’Enchanting Christmas’ or ’Snow Disruption.’ The outcome of their duel depends on their spell choices. If both wizards cast ’Enchanting Christmas,’ they create a harmonious magical aura, and both benefit equally. If both cast ’Snow Disruption,’ they create chaos, resulting in a negative outcome for both.

• Coordination game, Nash Equilibrium (Enchanting Christmas, Enchanting Christmas)

• Game of conflict, Nash equilibrium: (Snow Disruption, Snow Disruption)

• Coordination game, Nash equilibrium: (Enchanting Christmas, Enchanting Christmas)

• Game of conflict, Nash equilibrium: (Snow Disruption, Snow Disruption)

Ch4 - Q1

Dolly the sheep needs to get out of the wolf’s stomach, but first she needs to answer a simple economics question. If Dolly answers correctly then the wolf will let her out but if she doesn’t the wolf’s stomach will get bigger and she will forever be trapped in there. As you understand, Dolly really needs your help. The question is: If the prices of all products are rising at 15% per year and your employer gives you a 15% salary increase, are you better off, worse off or equally well off in comparison with your situation last year?

• Better off

• Worse off

• Equally well off

Ch4 - Q2

True or False: if you are presented with a single, upward-sloping indifference curve for various bundles of x and y, you can say that one of the items is a good and the other is a bad, but you cannot say which is which.

• True

• False

• There's not enough information provided

Ch5 - Q1

Given the demand function q=-5p+120, find the point elasticity of demand when p=20

Ch5 - Q2

Suppose you are given the constant elasticity of demand curve with the form Qd=aP^(-E), where a is a positive constant and E is the absolute value of the PED. If quantity demanded is 200 when the price is $50 and the short-run PED is -0.2, what is the value of the constant a (round to the nearest whole number).