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Midterm

Exam-ECON2003-2005AprilExam


Department
Economics
Course Code
ECON 2030
Professor
All
Study Guide
Midterm

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W Carleton
qP UNIVERSITY Dr.,'
FINAL
EXAMINATION
APRIL
2OO5
DURATION:: HOURS
Department
Name & Course
Number: ECON
2003 D
Course
lnstructor(s) o McFETRIDGE
No.
of Students: 7C
AUrHoRrzEo
MEMoRANoA
Non-programmable
calculators
are
permitted.
Students MUST
counl the nunrber
of pages
in this examination
question paper
before
beginning
to
write, and report any discrepancy
to a proctor. This question paper has _
5_ pages.
This examination question paper MAy be
taken from the examination room'
/
ln addition to this question paper,
students require: an examination booklet yesS|/ noJ ,/
a Scantron sheet YesE noSy'
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,X}
llr\
where
Xu
and
Yo
are
Beckr"s
consumption
of
X and
Y respectively'
Assume
Arthur's
initial
endowment
is 10
X and
25
Y and
Becky's
initial
endow'ment
is l5 X and
5Y.
(a)
(i) lllustrate
the
initial
situation
described
above
using
an
Edgervorlh
box
diagram'
(i marks)
(ii) Can
you
determine
rvho
is
better
off
in
the
initial
situation?
If so'
r'vho?
(2
marks)
(b)
(i)
Derive
Arthur"s
net
demancl
function
for
X' (3
marks)
(ii) Derive
Becky's
net
demand
function
for
X' (3
rnarks)
(c)
(i)
Using
your
answers
to
(b)"
find
the
equilibrium
price
of
X in
terms
of
Y (P'/Pt) in
this
econom\'.
(3
marks)
(ii)Explaintlreexclratrgewhiciloccursbetu,eenAr-thurarrdBecky.Shou,thatthisexchange
ismutr-rall1'beneficial'Iliustrate)'ouransweru'ithadiagram'(3marks)
6.Fir.ef-trrtrsarelocatedaroundacircle60milesincircumference.Thefirmsareequallyspaced
around
the
circle
as
are
the
clrstomcrs
(one
cllstomer
per
mile)' The
firms
produce
the
same
product
at
the
same
cost
(the,v
are
s1'n-}1r-retric)'
The
cost
of production
is
$5
per
ton
and
transportation
cost
is
$
1
per
ton
per
mile
($
1
to
trat'rsport
a
ton
of
product
one
mile)' Each
cLrsrolrrerbr.rl,s
1
ton
of
product
rron,,t. iuppr,.rr"t*]ll: lorvest
delivered
price
(the
delivered
priceisat_trm'S,.rrln*priceat_itsplantplustransportationcosts).Ifeaclrfinnsetsitsselling
price
so
or
ro
n-,u*i-iie'its
profits
gi'enih. selling
prices
of
tl-re
other
firms.
find
the
eqr'rilibrium
selli'g
price
i' this
market.
Shor'r'hou'and
*h1''Vour
ans\\'er
nould
change
if there
\\'t're
six
(equalll'spaced)
ii''n'''
l'''
the
markr;t
instead
of f-ive'
(8
marks)
7.
An econom}'is
endorr.ed
r,vith
tu'o
inputs.
K and.!' Ili'enclor'r.ed
with 100
trnits
of
each
input,
These
inpr.rts
are
used
16
produce
,ruo'gioa''
X a.d Y' The
production
functions
for
X and
Y are:
(a)
If this
econorn)'
der
oted
all
its
resotlrces
to
Y production:
\-/ -
(i)
hou'mttch
Y could
it produce?
(2
marks)
(ii)
nhat
u'or-rld
the
ratio
of input
prices
(rv' / rv*)
be?
(3
n-rarks)
(b)
lf this
ecorlom)'der
oted
all
its
resources
to
X production:
(i)
ho*'much
X could
it produce?
(2 marks)
(ii) rvhat
rvoulcl
the
ratio
of
input
prices
(rv'/ u'*)
be?
(3
marks)
(c)
Explain
u'h1'.vottr
answers
to
(a)(ii)
and
(b)(ii)
differ'
(2
marks)
X
= KiL',
Y=
K;tLl
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