微经试卷

武汉大学2010-2011学年第一学期期末考试
经济与管理学院 2010级 2011年1月18日
微观经济学（B卷）
Principles of Microeconomics (Paper B)
Instruction
You have two hours to complete this test. Full marks are 100 points.
Write your answers on the answer sheet. You can answer your questions either in English or in Chinese. Read the questions carefully before answering them.
Be precise and keep to the point.
Good luck!
1.(10 points) Give at least two examples for each concept or principle below:
Sunk cost, positive externalities, public goods, collusion among big firms, rent seeking, price discrimination, oligopolies producing identical products
2.(10 points) An article in The New York Times described a successful marketing campaign
（营销活动）by the French champagne (香槟) industry. The article noted that “many executives (公司执行官如CEO等) felt giddy (眩晕，眼花缭乱) about the stratospheric prices (极度的高价). But they also feared that such sharp price increases would cause demand to decline, which would then cause prices to plunge (跳水，骤降).” What mistake are the executives making in their analysis of the situation” Illustrate your answer with a graph.
3.(10 points) Beachfront resorts （海滨度假）have an inelastic supply, and automobiles
have an elastic supply. Suppose that a rise in population doubles the demand for both products (note that the demand and the quantity demanded are different).
(1)What happens to the equilibrium price and quantity in each market?
(2)Which product experiences a larger change in price?
(3)Which product experiences a larger change in quantity?
(4)What happens to total consumer spending on each product?
4.(10 points) The U.S. government administers (实施，管理) two programs that affect the
market for cigarettes. Media campaigns (限制传媒宣传) and labeling (吸烟有害健康标示) requirements are aimed at making the public aware of the dangers of cigarette smoking. At the same time, the Department of Agriculture maintains a price-support program for tobacco farmers, which raises the price of tobacco above the equilibrium price.
(1)How do these two programs affect cigarette consumption? Use a graph of the cigarette
market in your answer.
(2)What is the combined effect of these two programs on the price of cigarettes”
(3)Cigarettes are also heavily taxed. What effect does this tax have on cigarette
consumption?
5.(10 points) Marginal cost curve is U-shaped, includes decreasing part and increasing part.
Explain why all firms will always produce where marginal cost is increasing in quantity produced (i.e., the part of marginal cost curve that slopes upward to the right).
6.(10 points) Show that when return to scale is increasing, the average cost is decreasing,
and when return to scale is decreasing, the average cost is increasing. (Prove the relationship between law of return to scale and average cost changes).
7.(10 points) Draw a graph to illustrate a short run equilibrium for an imperfectly
competitive firm with breakeven (an equilibrium at which both profit and loss are zero).
All cost curves are required to be drawn and be sure to locate their position correctly.
8.(15 points) There are three industrial firms in Happy Valley.
Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit
A 70 20
B 80 25
C 50 10
The government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits (污染物排放权).
(1)Who sells permits and how many do they sell? Who buys permits and how many do
they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation?
(2)How much higher would the costs of pollution reduction be if the permits could not be
traded?
9.(15 points) Use tables (what we call payoff matrix or decision box) to understand Nash
equilibrium in realities around you. You are required to list real examples.
Answer any THREE of six questions below.
(1)Find an example in which there is a single Nash equilibrium that cannot be found
using dominating strategies (there is no dominating strategies).
(2)Find an example in which the dominating strategies lead to Nash equilibrium.
(3)Find an example in which there are two Nash equilibria or more and they are
equivalent in the sense of Pareto optimum.
(4)Find an example in which there are two Nash equilibria or more and one of them is
more preferred by all players than any others. That is to say, it is the only Pareto optimum.
(5)Find an example in which there is no Nash equilibrium.
(6)Find an example in which there is a single Nash equilibrium that is not Pareto optimal.
That is, it is a prisoner’s dilemma.
The Answer
2.(10 points) An article in The New York Times described a successful marketing campaign
（营销活动）by the French champagne (香槟) industry. The article noted that “many executives (公司执行官如CEO等) felt giddy (眩晕，眼花缭乱) about the stratospheric prices (极度的高价). But they also feared that such sharp price increases would cause demand to decline, which would then cause prices to plunge (跳水，骤降).” What mistake are the executives making in their analysis of the situation” Illustrate your answer with a graph.
They fail to tell the change in demand from the change in quantity demanded. The price up coming from the successful marketing campaign is a change in equilibrium, which results from the increase in demand driven by the marketing campaign and hence cannot influence the change in demand. Therefore, no further change in price will happen since no further changes in demand or supply will happen.
3.(10 points) Beachfront resorts （海滨度假）have an inelastic supply, and automobiles
have an elastic supply. Suppose that a rise in population doubles the demand for both products (note that the demand and the quantity demanded are different).
(1)What happens to the equilibrium price and quantity in each market?
Both price and quantity in both markets will rise.
(2)Which product experiences a larger change in price?
Beachfront resorts, since their supply is steeper.
(3)Which product experiences a larger change in quantity?
Automobiles, since their supply is flatter.
(4)What happens to total consumer spending on each product?
Total expenditure on Beachfront resorts increases and total expenditure on automobiles falls.
4.(10 points) The U.S. government administers (实施，管理) two programs that affect the
market for cigarettes. Media campaigns (限制传媒宣传) and labeling (吸烟有害健康标示) requirements are aimed at making the public aware of the dangers of cigarette smoking. At the same time, the Department of Agriculture maintains a price-support program for tobacco farmers, which raises the price of tobacco above the equilibrium price.
(1)How do these two programs affect cigarette consumption? Use a graph of the cigarette
market in your answer.
The first programs shifts demand curve to the left, reducing consumption. The second program can shift supply curve to the left, reducing supply.
(2)What is the combined effect of these two programs on the price of cigarettes?
The price will be above the equilibrium price more possibly. The first program leads the price down and the second program leads the price up. However, the demand curve for cigarettes is basically inelastic.
(3)Cigarettes are also heavily taxed. What effect does this tax have on cigarette
consumption?
It will reduce consumption lightly.
5. (10 points) Marginal cost curve is U-shaped, includes decreasing part and increasing part. Explain why all firms will always produce where marginal cost is increasing in quantity produced (i.e., the part of marginal cost curve that slopes upward to the right).
Part I: If the firm produce where MC is decreasing, it implies there are extra profits that have not been exploited, since the MR curve is constant or decreasing and is flatter than MC curve.
Part II: The necessary condition for profit maximization is the equality of MR with MC; the second order condition is that MC must be increasing. If the equality of MR with MC occurs where MC is decreasing, loss maximization instead of profit maximization happens.
6. (10 points) Show that when return to scale is increasing, the average cost is decreasing, and when return to scale is decreasing, the average cost is increasing. (Prove the relationship between law of return to scale and average cost changes).
Suppose C increases by αtimes and Q increases by βtimes. By definition, increasing return
to scale holds if αβ<or 11αβ+<+. Let 1C AC Q =, 2(1)=(1)C C C AC Q Q Q ααββ++=∙++ and we have 12AC AC > if the return to scale is
increasing.
7.(10 points) Draw a graph to illustrate a short run equilibrium for an imperfectly
competitive firm with breakeven (an equilibrium at which both profit and loss are zero).
All cost curves are required to be drawn and be sure to locate their position correctly.
8.(15 points) There are three industrial firms in Happy Valley.
Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit
A 70 20
B 80 25
C 50 10
The government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits (污染物排放权).
(1)Who sells permits and how many do they sell? Who buys permits and how many do
they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation?
Firm C sells 40 and firm B buys them. The total cost is 10*50+30*20=1100.
(2)How much higher would the costs of pollution reduction be if the permits could not be
traded?
30*20+40*25+10*10=1700
9.(15 points) Use tables (what we call payoff matrix or decision box) to understand Nash
equilibrium in realities around you. You are required to list real examples.
Answer any THREE of six questions below.
(1)Find an example in which there is a single Nash equilibrium that cannot be found
using dominating strategies (there is no dominating strategies).
(2)Find an example in which the dominating strategies lead to Nash equilibrium.
(3)Find an example in which there are two Nash equilibria or more and they are
equivalent in the sense of Pareto optimum.
(4)Find an example in which there are two Nash equilibria or more and one of them is
more preferred by all players than any others. That is to say, it is the only Pareto optimum.
(5)Find an example in which there is no Nash equilibrium.
(6)Find an example in which there is a single Nash equilibrium that is not Pareto optimal.
That is, it is a prisoner’s dilemma.。