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Frequently Asked Questions

Past Final:

Questions: Link to Dr. Indart's Website

(Personal) Answers:

* August 2012: EBBCD BDABD CCDDD EDECE CDEEC
                      CACDC ACBEB CCBED AEDCE DEDCB

* May 2012: AECBE DBABA DDACD CCCDD EEBDB
                   CDCDC EEAAE CCCBB CBCAB AADAA

* August 2011: DBEDB AAEBE BBAAA ABACE DDDEB
                      BEDDA CBADA DBDAA DCABD CACEC

* May 2011: AECEC CAEBC EEDDE CBBDE EBCBD
                   CCDEE CDEEE CAEAB EABDA AEDEE

* August 2010: EDCCD DBCED DDDDE BDB

* May 2010: BBEEE AEABC EDCBC CCECB ADDAC
                   ADACA CDEBA DBCDD EDCEB CDCCE

* August 2009: CBDDE BEABA ECCAB DCC

* May 2009: ACEDB BCDBD CADEB BECCD EEBDD
                   AABAE DCAEA DCCBE EDABE DBCEA

* August 2008: N/A (cooming not so soon)

* May 2008: BBCAA DDDDC DECCA CABED DCDBD
                   BBDCD DABAC BBDAB DCBEE BBDCE (not as credible)

Note: The above answers are NOT official solutions, please use with caution.

Micro:

* Q: Marginal Revenue falls faster than price for a monopolist because?

* A: (Typo in Midterm 3 Sample 1: MC should be replaced by MR) MR is the change in total revenue for the addition unit sold. In a competitive market, selling one more unit will increase revenue by the price of the good since price is fixed for each firm (they are price-takers). For a monopolist, selling one more unit means decreasing the price of ALL previous units as well, thus, MR falling faster than D. For example, when Demand is linear, MR is "half" of D.

* Q: Midterm 3 Sample 1 Question 3. What does "you pay yourselves the opportunity cost of labour $10/hour each ..."?

* A: It is like the competitive wage: if you are hired as a worker in a competitive market, then you get wage 10 * 2 * 20 = $400 (2 people working 20 hours).
     If you work together and set up a monopoly, then you get 10 * 2 * 15 + 5 = $305, where the 5 is the monopoly profit.

* Q: Who is Adam Smith?

* A: He is an economist. >.< He argues that "countries should export (specialize in) goods that they can produce cheaper for imports that foreigners can produce cheaper".

* Q: What's wrong with Obama's pipeline?

* A: Hint: It has negative externatility.

* Q: What monopolists never produce in the inelastic portion of the demand curve?

* A: Since inelastic means decreasing Q will cause TR to incresase. Also, decreasing Q ALWAYS causes TC to decrease. Thus, decreasing Q in the inelastic portion will increase TR and decrease TC, i.e. increase profit. Therefore, a monopolist never produce in that part of demand.
     Note: this works for non-linear demand too, but if demand curve is linear, inelastic portion is the same as the part of demand with MR < 0 OR the right half of the demand curve.

* Q: Why decreasing MC will increase profit for a monopolist?

* A: This is tricky. Decreasing MC will decrease AC as well, thus decreases monopoly price and increase quantitiy. To argue that profits increase: consider when we have the lower MC, we could potentially waste (set aside) some money so that it looks as if we have the orginal (higher) MC. Then will have the original profit (corresponding to the higher MC) PLUS the profit we can make with the money we set aside. Thus, the new profit will be higher.
     Note: it is possible to prove it using more mathematics with the concept of constrained optimization (ECO206 or 204): the idea is that maximization with "tighter" constraints (higher MC) will yield lower maximum.

Macro:

* Q: Where do I find unemployment data?

* A: For Canada: Statistics Canada, on the left where it says "Unemployment rate (June 2013) 7.1%".
     For US: Bureau of Labor Statistics, on the right where it says "Unemployment Rate: 7.6% in Jun 2013".

* Q: What happens to profit if GDP Deflator increases faster than CPI?

* A: Hint: Costs increase faster than prices, thus profit falls. (But it is possible to argue about it differently too.)

Short Questions:

Note:
*) You do not need to use your name, but please do not use my name and pretend to be me too.
*) All the answers in this box is unofficial, please use with caution.
*) For personal questions, do NOT leave message here, email me at yiyang.wu@mail.utoronto.ca OR use this page: Here

Last Updated: February 28, 2019 at 3:43 PM