武汉大学2005一2006学年第二学期期末考试(A卷) 经济与管理学院 经济学基地班 2006级 INTRODUCTORY ECONOMICS (《西方经济学》试题A卷) 2007年1月22日1900-21：00 INSTRUCTION You have two hours to write the exam Full marks are 100 points.Answer all questions. Read questions carefully before you work on them.Make sure you have understood what you are required to do and note the value alloted to each question.Write out your answer in a concise way.A few words are enough if they keep to the poimt.So do not try to spread your expression Try to write in English Although Chinese is also allowed in this exam,it will be kss graded than English writing Good Luck! PARTL WARMING UP 1.(8 points)Give two examples for each of following concepts or events and explain: Natural Monopoly.price ceiling.price diserimination,and oligopolists. 2.(7 points)Just for fun.Read the story below before you answer questions A mid-ievel executtre was so frustrated at being passed orer for promotion year afer year that he wen to a braim-tranplanl cemer in the hope of raising his 1.Q.20 poimts. 4 her a banery of plnsical and p可chological se年，hea西old by the center方wgeon thar he was an acceptable comdidase. "That's grear!"the executive said."Bat I sderstond that this procedure can be really expemsive. "Yes.sir.it com."the srgeon repled "An owce of accoumianr's brain for example.cosis one thousud dollars:oce ofn ecommist's brin costs o thousand:oce ofa bive chip F文件使用"pdfFactory Pro”试用版本创建w,fineprint,cn
1 武汉大学 2005－2006 学年第二学期期末考试（A 卷） 经济与管理学院 经济学基地班 2006 级 ――――――――――――――――――――――――――――― INTRODUCTORY ECONOMICS （《西方经济学》试题 A 卷） 2007 年 1 月 22 日 19:00-21:00 INSTRUCTION: You have two hours to write the exam. Full marks are 100 points. Answer all questions. Read questions carefully before you work on them. Make sure you have understood what you are required to do and note the value allotted to each question. Write out your answer in a concise way. A few words are enough if they keep to the point. So do not try to spread your expression. Try to write in English. Although Chinese is also allowed in this exam, it will be less graded than English writing. Good Luck! PART I: WARMING UP. 1. (8 points) Give two examples for each of following concepts or events and explain: Natural Monopoly, price ceiling, price discrimination, and oligopolists. 2. (7 points) Just for fun. Read the story below before you answer questions. A mid-level executive was so frustrated at being passed over for promotion year after year that he went to a brain-transplant center in the hope of raising his I.Q. 20 points. After a battery of physical and psychological tests, he was told by the center's surgeon that he was an acceptable candidate. "That's great!" the executive said. "But I understand that this procedure can be really expensive." "Yes, sir, it can," the surgeon replied. "An ounce of accountant's brain for example, costs one thousand dollars; an ounce of an economist's brain costs two thousand; an ounce of a blue chip PDF 文件使用 "pdfFactory Pro" 试用版本创建 www.fineprint.cn
CEOr市-fve thousand.A月0 ce ofa polincim李brain is seve0-ive showsand dollars" Flabbergasted.the man asked."Seventy five thousand dollars for an ouce ofa polirician's bewn2在imported?" "No,hge尼ckd“/00p代ent home grown. “Why on earth占ar?A相hyd布is to fight among themselves and behare as if Ghana is so adranced sar we have the leiste to musling.How con you charge the client such a high fransplant fee? Guess what would the surgeon answer?What are possible causes for the high cost?Develop a model of supply and demand to find causes of high cost of transplanting politician's brain PARTII:TRUE OR FALSE. Indicate whether the following two stalements are true or false and defend your arswer. 3.(7 points)Perfect monopoly must be inefficient in any case 4.(8 points)For a country,compulsory military service possibly costs as much resources as voluntary ammy does. Note:Compulsory military service is one in which soldiers are not puid.The voluntary army is0pp0e0年 PART III:Conceptual. 5.(8 points)List all factors that determine the first year wage level of college graduates and class them as supply side and demand side. 6.(7 points)Because bagels and cream cheese are often eaten together.they are complements. a.We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have nisen.What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk?Illustrate and explain your answer. b.Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of hagels has fallen What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk?lllustrate and explain your answer. 7.(7 points)Nash Equilibrium. a.Suppose you date your girl/boy friend and both of you agree to meet at 7.00 pm.What are NASH equilihria?List three of them. b.Suppose you receive your friend in the airport but miss him.Then you and your friend 2 PF文件使用"pdfFactory Pro”试用版本创建w.finsprint,n
2 CEO is forty-five thousand. An ounce of a politician’s brain is seventy-five thousand dollars." Flabbergasted, the man asked, "Seventy-five thousand dollars for an ounce of a politician's brain? Is it imported? " “No,” the surgeon responded, “100 percent home grown.” “Why on earth is that? All they do is to fight among themselves and behave as if Ghana is so advanced that we have the leisure to mudsling. How can you charge the client such a high transplant fee?” Guess what would the surgeon answer? What are possible causes for the high cost? Develop a model of supply and demand to find causes of high cost of transplanting politician’s brain. PART II: TRUE OR FALSE. Indicate whether the following two statements are true or false and defend your answer. 3. (7 points) Perfect monopoly must be inefficient in any case. 4. (8 points) For a country, compulsory military service possibly costs as much resources as voluntary army does. Note: Compulsory military service is one in which soldiers are not paid. The voluntary army is opposite to it. PART III: Conceptual. 5. (8 points) List all factors that determine the first year wage level of college graduates and class them as supply side and demand side. 6. (7 points) Because bagels and cream cheese are often eaten together, they are complements. a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern—a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer. b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern—a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. 7. (7 points) Nash Equilibrium. a. Suppose you date your girl/boy friend and both of you agree to meet at 7:00 pm. What are NASH equilibria? List three of them. b. Suppose you receive your friend in the airport but miss him. Then you and your friend PDF 文件使用 "pdfFactory Pro" 试用版本创建 www.fineprint.cn
look for each other.Is there any Nash Equilibrium?Specify them if there are.Defend if there aren't. 8.(8 poimts)Nash equilibrium again Farmer Jones and Farmer Smith graze their cattle on the same field.If there are 20 cows grazing in the field,each cow produces $4.000 of milk over its lifetime.If there are more cows in the field,then each cow can eat less grass and its milk production falls.With 30 cows on the field each produces $3.000 of'milk.with 40 cows.each produces $2,000 of milk Cows eost S1,000 apicce. a.Assume that Farmer Jones and Farmer Smith can each purchase either 10 or 20 cows,but that neither knows how mamy the other is buying when she makes her purchases.Calculate the payoffs of each outcome. b.What is the likely oucome of this game?What would be the best oucome?Explain PARTIV CASE STUDY 9.(10 points)As you have boen informed.the railway ticket price will not be allowed to increase for this Chinese New Year.What are possible consequences of this policy?Who will benefit from this policy?Is there any party.exept the railway,who will be harmed?Do you support such a price ceiling policy or opposite Why? PARTV CALCULATION AND TECHNICAL 10.(10 points)Show in a rigorous way that when increasing retum to scale holds,the average cost is decreasing (Mathematical reasoning is strongly suggested). 11.(10 points)Suppose that Hubei province gives each town 5 million in aid per year.The way in which the money is spent is currencly unrestricted,but the gowernor has proposed that towres be required to spend the entire Y5 million on education You can illustrate the effect of this proposal on your town's spending on education using a budget constraint and indifference-curve diagram The two goods are education and noneducation spending a.Draw your town's budget comstraint under the existing policy,assuming that your town's only source of revenue besides provincial aid is a property tax that yields10 million On the same diagram.draw the budget constraint under the governor's proposal. b.Would your town spend more on education under the goveror's proposal than under the existing policy?Explain c.Now compare tow towns-Hongshan and Wuchang-with the same revenue and the same provincial aid.Hogshan has a large school-age population,and Wuchang has a PDF文件使用“pdfFactory Pro”试用版本创建，fineprint,cn
3 look for each other. Is there any Nash Equilibrium? Specify them if there are. Defend if there aren’t. 8. (8 points) Nash equilibrium again Farmer Jones and Farmer Smith graze their cattle on the same field. If there are 20 cows grazing in the field, each cow produces $4,000 of milk over its lifetime. If there are more cows in the field, then each cow can eat less grass and its milk production falls. With 30 cows on the field, each produces $3,000 of milk; with 40 cows, each produces $2,000 of milk. Cows cost $1,000 apiece. a. Assume that Farmer Jones and Farmer Smith can each purchase either 10 or 20 cows, but that neither knows how many the other is buying when she makes her purchases. Calculate the payoffs of each outcome. b. What is the likely outcome of this game? What would be the best outcome? Explain. PART IV: CASE STUDY 9. (10 points) As you have been informed, the railway ticket price will not be allowed to increase for this Chinese New Year. What are possible consequences of this policy? Who will benefit from this policy? Is there any party, except the railway, who will be harmed? Do you support such a price ceiling policy or opposite it? Why? PART V: CALCULATION AND TECHNICAL 10. (10 points) Show in a rigorous way that when increasing return to scale holds, the average cost is decreasing. (Mathematical reasoning is strongly suggested). 11. (10 points) Suppose that Hubei province gives each town ￥5 million in aid per year. The way in which the money is spent is currently unrestricted, but the governor has proposed that towns be required to spend the entire ￥5 million on education. You can illustrate the effect of this proposal on your town’s spending on education using a budget constraint and indifference-curve diagram. The two goods are education and noneducation spending. a. Draw your town’s budget constraint under the existing policy, assuming that your town’s only source of revenue besides provincial aid is a property tax that yields ￥10 million. On the same diagram, draw the budget constraint under the governor’s proposal. b. Would your town spend more on education under the governor’s proposal than under the existing policy? Explain. c. Now compare tow towns—Hongshan and Wuchang—with the same revenue and the same provincial aid. Hogshan has a large school-age population, and Wuchang has a PDF 文件使用 "pdfFactory Pro" 试用版本创建 www.fineprint.cn
lange elderly population.In which town is the govemor's proposal most likely to increase education spending?Explain 12.(10 points)The Chinese government plans to subsidize peasants by Y200 on each ton of comn.The demand and supply functions are respectively:Q-40,000-5P and Q=35P a.Calculate equilibrium the price of coms. b Calculate the effect of subside on the price of comns e.Who will benefit from the policy the most?Peasants or consumers? d Is there any other better policy supporting agriculture? e.Suppose the demand and supply functions become Q 10.000-5P and Q 5P respectively.Do question b and c again. f.Based on your answer to question b,c,and e,INTUITIVELY tell us why different functions produce dimferemt outcomes (i.e..What is the economie logie bchind those calculations?) Have wnderiol wi PF文件使用"pdfFactory Pro”试用版本创建w.fineprint,n
4 large elderly population. In which town is the governor’s proposal most likely to increase education spending? Explain. 12. (10 points) The Chinese government plans to subsidize peasants by ￥200 on each ton of corn. The demand and supply functions are respectively: Q = 40,000 – 5P and Q = 35P. a. Calculate equilibrium the price of corns. b. Calculate the effect of subside on the price of corns. c. Who will benefit from the policy the most? Peasants or consumers? d. Is there any other better policy supporting agriculture? e. Suppose the demand and supply functions become Q = 10,000 – 5P and Q = 5P respectively. Do question b and c again. f. Based on your answer to question b, c, and e, INTUITIVELY tell us why different functions produce different outcomes. (i.e., What is the economic logic behind those calculations?) PDF 文件使用 "pdfFactory Pro" 试用版本创建 www.fineprint.cn