C2 Micro and Macro questions

[anya]

Now the Econ:

1. TRUE about Competitive Firm
A: MP=P

2. P1=P2 U=x/2 + y, income 90. What's the amount of x consumed
A: I don't remeber the number, maybe 60???

3. TRUE about cartel instability
A: C,there is principal agent problem (it looked like E which mentioned the incentive to cheat but the members cheat in Q not in P)


4. The competitive firms at P=25 and the monopoly at MC 4
A: A,Q=25

5. Another consumer choice problem with income doubling
A: one normal, one inferior good, I don't remeber which is which

6. tax burden
A: obviously buyers hold it all as D was inelastic

7. comparative advantage agricultural problem
A: 1500 more

8. Social Surplus with S function for P>1
A: don't remember but you subtract the area under 1 from the total tringle


Macro:
1. target inflation 0 policy
A: expansionary fiscal

2. output growth & total productivity
A: calculations

3. Short term effect of fall in demand with rising supply:
A: producers decrease output and employment

4. CA increase
A: incresed by 125-25= 100

5. positive slope long run supply curve
A: more expensive production for enty firms( random guess)

6. IS LM problem
A: don't remember

7. effect of technological advance and fall in demand:
A: P falls, Q cannot be determined

[Avi]

Now the Econ:

1. TRUE about Competitive Firm
A: MP=P

2. P1=P2 U=x/2 + y, income 90. What's the amount of x consumed
A: I don't remeber the number, maybe 60???

3. TRUE about cartel instability
A: C,there is principal agent problem (it looked like E which mentioned the incentive to cheat but the members cheat in Q not in P)


4. The competitive firms at P=25 and the monopoly at MC 4
A: A,Q=25

5. Another consumer choice problem with income doubling
A: one normal, one inferior good, I don't remeber which is which

6. tax burden
A: obviously buyers hold it all as D was inelastic

7. comparative advantage agricultural problem
A: 1500 more

8. Social Surplus with S function for P>1
A: don't remember but you subtract the area under 1 from the total tringle


Macro:
1. target inflation 0 policy
A: expansionary fiscal

2. output growth & total productivity
A: calculations

3. Short term effect of fall in demand with rising supply:
A: producers decrease output and employment

4. CA increase
A: incresed by 125-25= 100

5. positive slope long run supply curve
A: more expensive production for enty firms( random guess)

6. IS LM problem
A: don't remember

7. effect of technological advance and fall in demand:
A: P falls, Q cannot be determined

1 Dont Remember

2 0, since they cost the same, but Y gives twice the utility, why buy any X at all? (First Partial derivative of U(x,y) wrt y is a + constant, so max value is found at max Y! First partial derivative of U(x,y) wrt x is a negative constant, so max value is found at X = 0)

3 Chose E See Landsburg page 407 "few more items at slightly lower cost"

4 B Q < 23, but I think I'm wrong.

5 X normal (from 5 to 16) Y inferior (from 10 to 7.5)

6 Sellers as D was totally elastic, but I could have messed up the axes again.

7 Agreed

8 657.5

Macro:

1 Monetary contracts, the central bank cannot affect fiscal policym and we're in a recession.

2 50% Labor, 10% land

3 Agreed

4 I do not remember which question you are referring to, please elaborate

5 You are correct I think, I chose the opposite answer, break-in cost dropping

6 Don't remember the question

7 Agreed

[anya]

Macro # 4

Old current account was 885 or 775.
Receipts icreased by 125 and net unilateral payments decreased by 25. What's the new CA balance?

I beleive it incresed by 100...

[Avi]

Macro # 4

Old current account was 885 or 775.
Receipts icreased by 125 and net unilateral payments decreased by 25. What's the new CA balance?

I beleive it incresed by 100...

Used to be 895

NF Exports went up by 125 and net Uni pymts went down by 25.

I forgot if Net Uni Payments were a positive or negative adjustment. So I think I messed up on this one too, I gave a 150 adjustment instead of a 100 adjustment.

[Burgled.]

Am I the only one who is REALLY freaked out by these two? I mean come on!!!!

[retaker]

Micro:

1) What do you mean MP = P? You mean MR =P. Of course it does.


2) Right on, Avi. That was actually a good question.

3) E

4) I think Q = 23, because if you calculated the MR from the demand curve and set it equal to the MC =4, you got 23. I don't think it would be less than 23.

I looked at the problem as a dominant firm deal. The one guy with MC=4 was dominant and there were many competitive firms with whatever.

5) You are correct Avi.

6) You are correct Anya.

7) You are both correct. Another good problem. The CAS probably came up with these two. :)

Eight) FAULTY QUeSTION, but I put A, the same as AVi.

Macro:

1) Correct Avi.

2) that seems right, or it was the other way around. It was choice E, I believe.

3) Don't remember this one. All the macro seemed to be very straight forward.

4) Was this a Macro question? I guessed 150. Was this wrong?

5) Yes, this was an Increasing cost industry question. What ever increases the MC of new producers would work.

6) Don't remember, but the IS/LM seemed extremely straightforward?

7) Don't remember, but this sounds familiar.

[Avi]

You know something, I find it reassuring when retaker agrees with me :D

I agree, the corn/wheat problem was neat, and the Utility problem was a nice twist.

I keep on messing the axes up (see CS/PS, Elastic/inelastic, LRAC+/LRAC-)

Cost me 3 questions so far :crying:

[Burgled.]

I keep on messing the axes up (see CS/PS, Elastic/inelastic, LRAC+/LRAC-)

Cost me 3 questions so far :crying:
That's okay, you'll know for the next time you have to take it.

:lolup: Just kidding.

[Take 3]

You people are just way too scary for even me!!!! I came on here just looking to get a feel of how others did....I think I did ok, but you people were busy memorizing problems. I barely had time to think!

[Avi]

I keep on messing the axes up (see CS/PS, Elastic/inelastic, LRAC+/LRAC-)

Cost me 3 questions so far :crying:
That's okay, you'll know for the next time you have to take it.

:yikes: :yikes: :yikes:

:lolup: Just kidding.

:guitarwo:

[Avi]

You people are just way too scary for even me!!!! I came on here just looking to get a feel of how others did....I think I did ok, but you people were busy memorizing problems. I barely had time to think!

During the test, we reach a higher level of consciousness. We approach another plane of existence, we supersede mere mortal test-takers and become avatars of



<font size = "7" color = "red">PANIC</font>


Well, at least I do.

Ok, ok, sorry, just getting rid of some post-test anxiety.

As :beer: or :toast: is not allowed on the job, I have to settle for :slug:

[RiSK kid]

Am I the only one who is REALLY freaked out by these two? I mean come on!!!!


No I'm pretty freaked with them too

[retaker]

Thanks Avi! :D As an egomaniac, you don't know how much that means to me. :notworth:

I actually managed to stay calm this time, and it helped. For some of us, when we are stressed out with the time limit, any question which differs from the questions we have seen before by more than a certain critical threshold, causes our cognitive centers in our brain to shrink, and we can't think as well as we normally can. I think it is a by-product of our flight or fight, instinct. I guess it means our ancestors were the whimps who ran away rather than fought. :D
Anyway, I think I have finally figured out that this is one of the main things these exams test in a second hand type of way - the ability to stay calm and think rationally under pressure. The only hard part is convincing myself of this right before the exam.

[aas]

determine how many of those posted answers are incorrect.

[LM]

Ok, ok, sorry, just getting rid of some post-test anxiety.
Out of curiousity...how long do your post-test anxiety spells usually last? I mean, can you take out your post-test aniexty out somewhere else? You're freaking us out...

[Avi]

Ok, ok, sorry, just getting rid of some post-test anxiety.
Out of curiousity...how long do your post-test anxiety spells usually last? I mean, can you take out your post-test aniexty out somewhere else? You're freaking us out...

[Sense of Humor = "FALSE"; Serious = "TRUE"]


LM, seriously, how exactly am I freaking you out? Because there are some of us who would like to know what our chances at passing are, how does that interfere with your equilibrium? Firstly, as long as Traci allows these kinds of posts, there should be no reason for them not to exist. If you are so totally freaked out, you don't have to read the posts.

Secondly and more importantly, what is it truely that does freak you out. All psychobabble aside, is it the fact that some of us retained some of the questions? All that means is that we, or actually I, for I can presume to speak for no one, have been very single minded about this exam recently. I know a number of actuaries who breezed through the exams, and tell me that they couldn't remember a thing after they left the room. So if it pleases you to think that I have no life other than devouring the material, huddled up in a dark corner with loads of take out pizza, stale Dr. Pepper, and a 60 watt bulb, then so be it.

If you can explain to me what about these posts that anya, retaker, Lporter33, and myself , to name a few, freaks you out so much, I'll be able to try to prevent from upsetting you.

However, merely to ask for a blanket injuction due to some phantom discomfort strikes me as a bit extreme, no?

[Sense of Humor = "TRUE"; Serious = "FALSE"]

[VernSchil]

It's just what kind of personality you have. All through my life right after I finished a big important test (SATs, AHSME, Cornell finals, SOA exams) I've obsessed about answers for the next week or so. Many people who I'm sure did much better than me wouldn't even want to hear the word Course 2 once they walked out of the exam center. Sometimes I hate having an obsessive personality, but what can you do? These forums feed into it beautifully :D

[Burgled.]

It seems to me that it is all about self-glorification and confirmation of
what you know to be true -- i.e., that you did, in fact, pass. Flaunting
your supreme intelligence, if you will.

[VernSchil]

I don't agree. If I was confident I passed, I wouldn't be posting at all since what everyone else got for answers wouldn't matter in the least. In fact, I'm very tentative about many of my answers and so posting and talking about solutions/questions greatly eases my mind since it gives me an idea of how I did, for better or for worse.

[proudmom13]

Macro #4: I answered 150. I figured that if net transfer payments are decreasing by 25, then the balance must be getting bigger. Was that wrong?

[seraph]

I got 150 too for that question. Are you sure its wrong?

[Dumbledore]

On the Net Txfr question, I too added 150 to the 895 current balance to get an answer of 1045... My reasoning was I knew that the 125 definitely was a positive trans to the balance but then the Net Txfr in the Macro study note was shown as a subtraction from the Current Balance... since the problem stated that it was a decrease, I took that to be a -(-25) or adding 25 for a new current balance of 1045... Any thoughts???

I take a bit offense at someone thinking that I am flaunting that I passed by being so obsessed about what others got.... in my case..I didn't "memorize" any of the questions but it just seems that when you spend four hours pouring over 50 problems you tend to pick up a bit or two about a particular question that sticks out to you... and then when you combine it with another bit or two that another exam taker might remember, you tend to get the key paoints of a question and what you put and whether it was right or not... I'll admit that I didn't do much at work today as I was working some of the problems that I could remember with the help of my texts for verification purposes... and I did spend a good part checking the Rebel Forum a lot to see what others thought of Course 2 but that will probably subside by Monday until around January 3 when results should be out.....

Sorry for being long-winded.... just wanted to give you my honest opinion.... :argue:

[RiSK kid]

On the Net Txfr question, I too added 150 to the 895 current balance to get an answer of 1045... My reasoning was I knew that the 125 definitely was a positive trans to the balance but then the Net Txfr in the Macro study note was shown as a subtraction from the Current Balance... since the problem stated that it was a decrease, I took that to be a -(-25) or adding 25 for a new current balance of 1045... Any thoughts???



that's exaclty what I did... I thought a delince in net transfer pmt's increased the balance.... i got 1045 too...yes... hopefully we're all right...

[Anonymous]

I can recall there are two more Macro problems.

1. What effect does currency depreciation have on PAD and net exports?

I don't remember which letter it is, but the answer should be that both PAD and next exports increase, am I right?

2. I believe there is a problem which requires the formula MV=PY, but I don't remember what is the answer.

[RiSK kid]

I can recall there are two more Macro problems.

1. What effect does currency depreciation have on PAD and net exports?

I don't remember which letter it is, but the answer should be that both PAD and next exports increase, am I right?

2. I believe there is a problem which requires the formula MV=PY, but I don't remember what is the answer.


Oh yeah.. I think M= 2 million.... p=?? y = 8 million... find V

[VernSchil]

I can recall there are two more Macro problems.

1. What effect does currency depreciation have on PAD and net exports?

I don't remember which letter it is, but the answer should be that both PAD and next exports increase, am I right?

2. I believe there is a problem which requires the formula MV=PY, but I don't remember what is the answer.


Oh yeah.. I think M= 2 million.... p=?? y = 8 million... find V

I see to remember getting 1.2 as an answer because I remember 2*1.2 =2.4 which is what I think P*Y equaled. Im not that confident thought.

[Avi]

On the Net Txfr question, I too added 150 to the 895 current balance to get an answer of 1045... My reasoning was I knew that the 125 definitely was a positive trans to the balance but then the Net Txfr in the Macro study note was shown as a subtraction from the Current Balance... since the problem stated that it was a decrease, I took that to be a -(-25) or adding 25 for a new current balance of 1045... Any thoughts???



that's exaclty what I did... I thought a delince in net transfer pmt's increased the balance.... i got 1045 too...yes... hopefully we're all right...

I also got 1045. :)

[Avi]

I can recall there are two more Macro problems.

1. What effect does currency depreciation have on PAD and net exports?

I don't remember which letter it is, but the answer should be that both PAD and next exports increase, am I right?

2. I believe there is a problem which requires the formula MV=PY, but I don't remember what is the answer.


Oh yeah.. I think M= 2 million.... p=?? y = 8 million... find V

I see to remember getting 1.2 as an answer because I remember 2*1.2 =2.4 which is what I think P*Y equaled. Im not that confident thought.

I believe it was 3000000*.8 = 2000000*X SO X should have been 1.2

[Owen]

For the micro problem on competition and monopoly, I think the answer is A, which says the competition will dominate the industry. My reason is that since the competitive price (50-25=$25) is lower than the monopoly price (50-23=$27), no one wants to buy the product at a higher price.

This is just my thinking, maybe I am wrong.

[retaker]

Yeah, I think you might be correct, and I was incorrect. :oops:


That's one Micro down.

[snoo]

I can recall there are two more Macro problems.

1. What effect does currency depreciation have on PAD and net exports?

I don't remember which letter it is, but the answer should be that both PAD and next exports increase, am I right?

2. I believe there is a problem which requires the formula MV=PY, but I don't remember what is the answer.


Oh yeah.. I think M= 2 million.... p=?? y = 8 million... find V

I see to remember getting 1.2 as an answer because I remember 2*1.2 =2.4 which is what I think P*Y equaled. Im not that confident thought.

I believe it was 3000000*.8 = 2000000*X SO X should have been 1.2


I got 1.2 also

[ziaigiazig]

Actually I thought it would be a monopoly and produce more than 25 because the monopolist would be able to prevent competition by setting the price at anything less than the competitive price (which would lead to an output of 25). The monopolist can afford to do this since the marginal cost was 4 maybe? So the monopolist could set price as low as four and still be profittable. Anyway I don't remember the details of the question that well but I thought the monopolist would be able to drive out the competition so long as output > 25.

[Bill Thrill]

In my Drunken Stupor that is my post-test friday afternoon, I have solved the competition-monopoly micro problem. The question stated a new firm comes along with ability to produce at MC=4, what happens to the previously competitive industry?

The answer is it stays competitive. For the new firm may have MC=4, but also very well may have fixed costs of 1,000,000, in which case it would go out of business the next day. Hence it may not lead to a change in industry. To assume a monopoly emerges implies the new firm has a low fixed cost which was not a posit of the question. So any answer that includes monopoly will mean its a faulty question. :D

[ziaigiazig]

:argue:

But output decisions depend on marginal costs not fixed costs. And in the question it was clear that these firms were already all in the industry and the question was what would happen so fixed costs are irrelevant.

[shluffer]

Production depends on marginal cost only.

[retaker]

Wait a minute now. I think it was: Q = 50 - P --> P = 50 - Q so that

MR = 50- 2Q for the market.

For the guy or guys with MC = 4;

So MR = MC --> 50 - 2Q = 4 ---> Q = 23.

Now why/how do/can we put this 23 back in the market demand curve to see what price the guy with MC = 4 will charge?

The Demand curve doesn't tell you what the supplier will charge!

The guy with MC = 4 can charge anything he wants above AC, and he will still be making a profit. Why couldn't he price at 24, say, and steal everything away from the price takers at P = 25.

[RiSK kid]

:argue:

But output decisions depend on marginal costs not fixed costs. And in the question it was clear that these firms were already all in the industry and the question was what would happen so fixed costs are irrelevant.


This is correct.... my thinking was that it was a monopoly because this dominant firm's MC =4 whereas the prictaker's MC=P=25... ( i think)

SO I assumed that the monopoly could produce at a lower MC and was more efficient thus creating a natural monopoly. Eliminating any competition.

Also, sinc ethe monopilist produces at MC=Mr i chose that the monoolist produces at Q=25..

Just my 2 cents but I could be wrong on this conceptual question.((damn SOA!!) :roll:

[proudmom13]

If I remember my macro economics right, then the monopolist picks the quantity where MC=MR, which is at Q=23. Then you look at the demand curve, P=50-Q to find the price the monopolist would charge, so P=27. Based on that, I picked answer A (competitive industry) as well. But I had to think about that long and hard, since all the other answers said monopoly. But I could be wrong...

[c3 taker]

I think you mean your MICRO economics, but you reasoning makes sense. :) I cant' remember the rationale I used during the exam, but I put one of the monopoly answers. I looked right to me then, not so sure now.

[shluffer]

I chose a monopoly answer. The question stated that the competitive firms were price takers. This tells me they will charge whatever price the monopoly set. You can then figure out the output based on the quantity demanded at that price. So I also went with the monopoly eliminating all competition and selling all 25 units.

[VernSchil]

Why would the monopolist sell 25 units and not 23? Shouldn't he always produce the number of units where MR=MC?

[fallout]

Although I didn't write this test, I think that a monopolist needs to consider the total supply curve.

An output along the lines of 26 units at a cost slightly below $25.00 would drive out the competition and maximize profit for the low MC monopolist.

The answer would definetly include some sort of monopoly.

[VernSchil]

If it's a monopoly though, there is no total or industry supply curve. Assuming the monpolist can drive out the other competitors, I don't see why he just wouldn't instantly change to produce where MR=MC. I'd really like to see the official solution to this question.

[retaker]

RiSK kid wrote:
Dumbledore wrote:
"On the Net Txfr question, I too added 150 to the 895 current balance to get an answer of 1045... My reasoning was I knew that the 125 definitely was a positive trans to the balance but then the Net Txfr in the Macro study note was shown as a subtraction from the Current Balance... since the problem stated that it was a decrease, I took that to be a -(-25) or adding 25 for a new current balance of 1045... Any thoughts???

that's exaclty what I did... I thought a delince in net transfer pmt's increased the balance.... i got 1045 too...yes... hopefully we're all right... "


Did we ever come to a conclusion about this?
That might be 3 I missed!

[VernSchil]

I've been obsessed with this econ question. I think someone mentioned in another thread that it came from the Dominant firm price leadership model, and it seems he's right. Does anyone know if this appears anywhere in the assigned readings? Also, does anyone remember if the industry supply was given in the problem or just the competitive firm's MC? I'd like to solve the problem but it seems you solve it by setting the monopolist's demand curve equal to the difference between competitive industry demand and supply, and I can't remember what the industry supply was. I really think the answer is going to be Q >25. I hope this problem is thrown out.

Here's the link. You can also do a search on the topic, as there were more articles.
http://www.unn.ac.uk/~egkh1/EuropeanIndustry/collusion%20and%20cartels.pdf

The Dominant Group - Price Leadership
A dominant firm or group has full information
about market demand and industry costs can set
prices so that it earns economic profit whilst the
passive fringe earns a normal rate of return.

A numerical example:
Assume the supply curve of the competitive fringe is
S = 0.2P
This is known to the dominant firm as is the market demand.
D = 50 - 0.3P
The dominant firm derives its own demand curve as the difference
X = D - S at any one price
X = 50- 0.3P - 0.2P
or P =100 - 2X
Assume the dominant firm’s costs are
C = 2X
and it maximises its profits:
MR = MC
100-4X = 2
X = 24.5
The leader will set price
P = 100 - 2X = 100 - 2(24.5) = 51
At this price the market is in equilibrium when.
D = 50 - 0.3 P = 34.7
As the leader produces 24.5 the fringe supplies
S = 0.2P = 0.2(51) = 10.2

[retaker]

They gave the price taker's price: P=25

The market demand: Q=50 - P

And the other dude's MC = 4

That's it!

I hope this is thrown out too, because I may not have picked the correct one.
Was it a red herring that they had all but one of the answer choices as Monolopy?

Were probably making more out of this than they planned (because we actually like to be correct), and they are probably taking a simplified view of this problem and considering their (possibly incomplete) answer to be correct?

[retaker]

We're

[on-course]

if you apply the mechanical idea and plot the supply curve (the curve should leave out the area below ???). But I am not very sure about this.