Detailed Solution to Final Examination (F2011; Micro Principles)

經濟學(一) (Principles of Microeconomics)
3:00 pm ~ 5:00 pm, Monday, Jan.9, 2012
Open books/notes exam (excluding texts written in Chinese). Absolutely no talking nor borrowing items during exams.，可使用自己的資料(中文課本除外)、字典或翻譯機。行動電話若響起，該生扣十分、以強調基本禮貌。務必工整依序作答。題目較多，目的在於測試是否有平日閱讀英文資料之習慣。3:50 pm後，不可使用字典或翻譯機。題目較多，防止伏案補眠、速讀課本瞎找答案、左顧右盼。Watch your time and have fun! Total: 118 points
Part One: 30 Multiple choice questions. [By multiple choice in an English-speaking academic environment, we mean that you must choose the most appropriate one from 4 alternatives. 依慣例，答錯不倒扣！] 90 points
1. A bakery shop suddenly raised all prices by 15%, it would soon have a large drop in bakery goods sold. However, if the electricity company raised the charge rate by 15%, it would only have a small decrease in the amount of electricity sold. This sheds light on the importance of
(A) opportunity costs;
(B) sunk costs;
(C) production efficiency;
(D) market structure.
Ans: D. [p.289, text]

2. According to your textbook, which of the following is incorrect?
(A) The assumption of free entry and exit is very much needed in justifying price-taking;
(B) A perfectly competitive market must have many buyers and many sellers;
(C) Goods offered in a perfectly competitive market are largely the same;
(D) The assumption of having buyers and sellers well-informed is missing in the textbook’s definition of perfectly competitive markets.
Ans: A. [p.290, text; lecture 6]

3. If we carefully examine the first section of Ch.14, the definition of marginal revenue (or MR for short) is actually defined in the sense that
(A) MR := dTR/dq (where TR is total revenue and q stands for output level);
(B) MR at q = 4 is calculated by P(4 - 3);
(C) MR at q = 4 is calculated by P(5 - 4);
(D) MR measured while moving from q = 4 to q = 5 is calculated by P(5 - 4).
Ans: D. [p.291, table 1, text]

4. Suppose that your firm is in a perfectly competitive market (e.g., p.291). Then
(A) marginal revenue always equals average revenue whatever q > 0 is;
(B) average revenue always equals the price of good whatever q > 0 is;
(C) your rivals can affect your supply curve;
(D) changing your supply curve will influence the market demand.
Ans: B. [Since the price is determined by the market, changing your supply curve will only alter your output decision. From question 3, we see why (A) is incorrect.]

5. 一門選修課，只有15位同學。上課三週後，四位同學因故休學，學校仍然讓課程繼續。很多五金行，星期日不營業。The explanation has something to do with
(A) comparative advantage;
(B) sunk costs;
(C) marginal revenue equals marginal cost;
(D) fairness vs. equity.
Ans: B. [pp.297-8, text]

6. Think about a perfectly competitive market in the long run.
(A) Producers make positive profit if they have lower costs;
(B) The market demand curve is horizontal;
(C) The market supply curve is horizontal;
(D) None of the above is correct.
Ans: C. [p.303, text]

7. [continued from question 6]
(A) Producers make zero accounting profits;
(B) Producers make positive (economic) profits;
(C)這可以解釋為何當今大學面臨退場機制的威脅；
(D)這可以解釋為何古代的傳統小農一直是窮困的。
*Ans: D. [zero (economic) profits yet positive accounting profits. See p.303, text.]

8. From Ch.1, we learned that the cost of something is what you give up to get it. Here
(A) opportunity costs are not considered;
(B) explicit costs are not considered;
(C) implicit costs are not considered;
(D) None of the above is correct.
Ans: D. [pp.268-9, text]

9. Cynthia is teaching English (as a tutor) and making NTD40000 per month. She does not know how to drive, so she spent NTD8000 on taxi fares monthly. Before becoming a tutor, Cynthia was working at some language school near her home. That teaching job paid her NTD28000 monthly. She spent NTD2000 each month on buying small presents to create incentives for kids. The (economic) cost of her providing tutorial service is
(A) NTD34000 monthly;
(B) NTD32000 monthly;
(C) NTD8000 monthly;
(D) NTD36000 monthly.
Ans: A. [It is 8000 + (28000 - 2000) = 8000 + 26000 = 34000. See p.269, text]

10. [continued from question 9] From the view point of an accountant, Cynthia’s profit (by providing the tutorial service) is
(A) NTD6000 monthly;
(B) NTD32000 monthly;
(C) NTD4000 monthly;
(D) None of the above is correct.
Ans: B. [It is 40000 - 8000 = 32000. See p.269, text]

11. [continued from question 9] From the view point of an economist, Cynthia’s profit (by providing the tutorial service) is
(A) NTD6000 monthly;
(B) NTD32000 monthly;
(C) NTD4000 monthly;
(D) None of the above is correct.
Ans: A. [From question 9, we see that it is 40000 - 34000 = 6000. See p.269, text]

12. [continued from question 9] The opportunity cost of her providing tutorial service is
(A) NTD28000 monthly;
(B) NTD26000 monthly;
(C) NTD32000 monthly;
(D) NTD18000 monthly.
Ans: A. [It is 28000 - 2000 = 26000. Recall midterm exam.]

*13. [continued from question 9] Suppose that she is now asked by her ex boss to go back to that language school under the same condition as before. From the view point of an economist, Cynthia’s profit by working at that language school is
(A) NTD6000 monthly;
(B) NTD26000 monthly;
(C) NTD34000 monthly;
(D) None of the above is correct.
Ans: D. [It is 28000 - 2000 - (40000 - 8000) = 28000 - 2000 - 32000 = -6000.]

14. Recall the relation between production function and total cost curve (as seen on p.272, text). If the graph of production function is 3x - y = 0 for all non-negative x and y, then, given input price as 6, the total cost curve on the y-C space must be
(A) C - y/2 = 0;
(B) C - 2y = 0;
(C) C - 18y = 0;
(D) C - 3y = 0.
Ans: B. [Note that y = f(x) = 3x, hence cost of producing y units is 6(y/3) = 2y.]

15. Recall lecture 5 and Ch.6. If the government imposes a unit tax as luxury tax on some good whose market supply is relatively not price-sensitive but market demand is relatively price-sensitive. Then
(A) the burden of tax falls largely on sellers;
(B) the burden of tax falls largely on buyers;
(C) the burden of tax falls equally on sellers and buyers;
(D) None of the above is correct.
Ans: A. [p.130, text]

16. [continued from question 15] 如果政府對國產的高檔有機咖啡豆課徵量稅，
(A)高檔有機咖啡豆消費者抗議聲浪較高；
(B)高檔有機咖啡豆生產者抗議聲浪較高；
(C)一般咖啡豆進口者抗議聲浪較高；
(D) None of the above is correct.
Ans: B. [Obvious]

17. 政府基於「以價制量」出發點，課徵從量稅，導致漲價。下列何種商品的消費族群，抗議聲浪將明顯較高？
(A) BMW cars;
(B) LV bags;
(C) tap water;
(D) admission to concerts.
Ans: C. [For tap water, the market supply is relatively price-sensitive but market demand is nearly vertical.]

18. (基本經濟社會時事題)行政院勞工委員會自101年1月1日起調整勞工基本工資為每小時x元，教育部於100年12月29日來函敬請各校配合調整工讀費給付標準為每小時x元起。會計室備註：校內工讀費、各專案預算數維持不變，請自行於預算額度內調整可執行之工讀時數。Here x is
(A) 105;
(B) 104;
(C) 103;
(D) None of the above.
Ans: C.

19. [continued from question 18] Hence, according to the government, the equilibrium wage rate, in the absence of government intervention, must be
(A) greater than x;
(B) less than x;
(C) equal to x;
(D) Need more information to answer it.
Ans: B. [Minimum wage is a floor price, which must be above the equilibrium price.]

20. 課本有一則賣雨傘的漫畫，其用意是在解釋
(A) Beautiful ladies usually pay more for umbrellas;
(B) Price is fixed at perfectly competitive markets;
(C) An increase in demand might increase the market price;
(D) A decrease in supply might increase the market price.
Ans: C. [p.85, text]

21. What is described in Ch.4 as “supply decreases and demand significantly increases, leading to a big increase in price”?
(A)氫氣；
(B)氦氣；
(C) balloon；
(D) ice cream.
Ans: B. [氦氣(Helium Gas). See p.83, text]

22. Let the market demand curve be given by P + 2Q = 6; the market supply curve be given by P - 5Q = 3. The total surplus is
(A) 9/14;
(B) 8/15;
(C) 7/11;
(D) None of the above is correct.
Ans: A. [Solving P = 6 - 2Q and P = 3 + 5Q, we obtain Q* = 3/7, hence P* = 36/7. Total surplus is consumers’ surplus plus producers’ surplus, which is (6 - 3)(3/7)(1/2) = 9/14.]

23. [continued from question 22] Recall lecture 5. Suppose that a unit tax, $1, is imposed on sellers’ side. The market demand curve and supply curve become
(A) P + 2Q = 5 and P - 5Q = 3;
(B) P + 2Q = 7 and P - 5Q = 3;
(C) P + 2Q = 6 and P - 5Q = 4;
(D) P + 2Q = 6 and P - 5Q = 2.
Ans: C. [Trivial]

24. [continued from question 22] Recall lecture 5. Suppose that a unit tax, $1, is directly imposed on buyers’ side. (Buyers’ tax burden)/(sellers’ tax burden) is about
(A) 7:2;
(B) 5:7;
(C) 1:2;
(D) 2:5.
Ans: D. [In light of the equivalence result, we can simply work with question 23. From P + 2Q = 6 and P - 5Q = 4 we get P** = 38/7 and Q** = 2/7. Buyers’ tax burden is 38/7 - 36/7 = 2/7 while sellers’ tax burden is 1 - 2/7 = 5/7. Hence it is 2:5.]

25. Recall lecture 4. Let’s call D your demand curve for leisure; call S your supply curve of labor. Which of the following statements is incorrect?
(A) the link is that leisure hours plus working hours must be a constant;
(B) D must be downward-sloping;
(C) S may not be upward-sloping;
(D) D becomes upward-sloping after P > Po if and only if S becomes downward-sloping after P > Po.
Ans: B. [Recall lectures]

26. (靈活思考題) 假設你(妳)五年後在某財經雜誌寫互動式專欄。讀者來信內容如下：「我是一個32歲的女人，5年前搬到義大利。在這裡，30多歲的單身男性簡直是鳳毛麟角。我該繼續留在義大利呢，還是回國去？」受過經濟學訓練的你(妳)，回應：
(A) Are you hitting on me?
(B) You have to stay there to balance the trade;
(C)請回到人口統計上有更多合格單身漢的地方吧；
(D)存錢變性才是最適解。
Ans: C. [Key is sunk costs. Source: 親愛的臥底經濟學家：從FACEBOOK到劈腿，150個生活難題爆笑拆解。原文作者：Tim Harford；譯者：尤傳莉]

Questions 27 ~ 30係為減輕『全面強制點名制度之副作用 -- 如伏案補眠或放空神遊』而設計的問題。
27. On November 21, 2011, when the instructor illustrated how to obtain market supply curve and market demand curve thru the coin-tossing game,
(A) the instructor made a mistake in figuring out the market supply curve;
(B) the instructor made a mistake in figuring out the market demand curve;
(C) the instructor made a mistake in figuring out both curves;
(D) a female student who was asked to work on the chalkboard made a mistake.
Ans: B.

28. On November 28, 2011 the instructor explained that the idea of having 2n-1 in the coin-tossing game
(A) will be further explored in Math for Management (管數) next term;
(B) was only a trivial and random design;
(C) was just meant to be fair to participants;
(D) None of the above.
Ans: A.

29. On Dec.26, 2011 the instructor mentioned an old academic joke about missing an exam.
(A) Three students knew which tire became a flat tire;
(B) The professor did not allow three students to take the make-up exam;
(C) The professor eventually failed those three students;
(D) Three students claimed that they were stuck by the road while returning from Kenting.
Ans: C.

30. The instructor mentioned his former professor, John Pomery, by saying that
(A) the web site Ratemyprofessors.com brings justice to the educational system;
(B) Professor Pomery was a terrible professor to him;
(C) many users in the web site Ratemyprofessors.com made very favorable comments on him.
(D) many users in the web site Ratemyprofessors.com made very bad comments on him.
Ans: D. [如果有同學抱怨自己認真到課，卻學不到東西，我們可以調閱試卷，看看 questions 27~30 答對幾題。]

Part Two: Four analytical questions. [注意字體工整、邏輯順暢與不要出現錯別字或注音(與火星文)！如果字跡難以辨認，視同未答。畫蛇添足、答非所問、不知所云、自曝其短，將不利得分。] 28 points

31. An economic agent, called A, has 10 hours to be spent on producing goods X and Y under linear (or fixed rate) technologies specified as follows. Spending a hours, with 0 ≦ a ≦10, on the production of X can bring him 2a units of X (or expressed by x = 2a); spending a hours, with 0 ≦ a ≦10, on producing Y can yield a/2 units of Y (i.e., y = a/2). Another economic agent, called B, has 20 hours to be spent on producing goods X and Y under linear (or fixed rate) technologies specified as follows. Spending a hours, with 0 ≦ a ≦20, on the production of X can bring him a/2 units of X; spending a hours, with 0 ≦ a ≦20, on producing Y can yield a units of Y.
(i) Carefully depict the PPF of A and the PPF of B. Must precisely spell out equations and label all intercepts.
(ii) Who has the absolute advantage in producing X? Briefly justify your choice.
(iii) Who has the comparative advantage in producing X? Justify briefly.
Ans:
In light of linear (or fixed rate) technologies, since a hours can produce 2a units of X, 1 unit of X requires (labor in the amount of) 0.5 hour. Similarly,a hours can produce a/2 units of Y, implying that 1 unit of Y requires (labor in the amount of) 2 hours. By 0.5x + 2y = 10 we see that A’s production possibility frontier (or PPF for short) is x + 4y = 20.
Similarly for B, since a hours can produce a/2 units of X, 1 unit of X requires (labor in the amount of) 2 hours. Likewise,a hours can produce a units of Y, implying that 1 unit of Y requires (labor in the amount of) 1 hour. Hence, 2x + y= 20. That is, B’s PPF is 2x + y = 20.
For x = 1, A needs to spend 0.5 hour; B needs to spend 2 hours. Hence, A has the absolute advantage in producing X.
For A, the opportunity cost of producing 1 unit of X is 0.25 unit of Y. For B, the opportunity cost of producing 1 unit of X is 2 units of Y. Hence, A has the comparative advantage in producing X. [Intuition? A’s PPF is flatter than B’s PPF.]
(圖形略)
Remark: 這是期中考題目。有一位UB1林同學(學號末一碼為1)竟然只答道：”Too difficult.”

32. 對於需要在校內打工的同學而言，question 18提到的新聞，是利多？還是壞消息？ Briefly comment on it.
Ans: Bad news. 校內打工意願提高，但雇用工讀生的預算固定，校內打工市場的失業現象將發生或惡化。

*33. “Suppose that both a floor price and a ceiling price are now imposed on some good. Before the intervention, the equilibrium price was 90. We also know that the both floor price and ceiling price are not binding. Also floor price > 90 > ceiling price. At best this example can be found in stock market.” Agree or disagree. Must briefly justify your choice.
Ans: Disagree! As seen in textbook, we call a floor price binding if it is above the equilibrium price; a ceiling price binding if it is below the equilibrium price. Yet, neither is binding, hence a contradiction. 股價之每日漲跌幅度限制，與floor price and ceiling price 無關。

34. (靈活思考題) 期末考前一週，陳x宇同學來找我，問道：「期中考題目又多又難，奇怪題目一堆。你難道不擔心學生會給你很差的期末教學評量？」Now think like an economist. Was she rational or irrational? And how would you respond should you be in my shoes?
Ans: Recall the solution to midterm exam. 學校不能承受學生大量流失、導致學費收入驟減之困境。「資訊不對稱」之限制下，體認教育市場現況，教師只能調分(curving)，確保學生不致於大量流失。教師出題時，不可能知道同學填寫的期末教學意見調查，打完學期成績後，看到期末教學意見調查結果，也不可能知道那些同學填寫正面意見、那些同學填寫負面對意見。教師只有盡全力將資訊透明化 -- 例如：公布試題與解答、調分公式、期中期末表現與自己的期末教學意見調查結果。試想一誇張例子：如果知名作家兼名嘴李敖來教授一門他的專長課程，縱然全班15人勾結、給他負面評量，只要他的授課實況錄影在電視播出，社會只會覺得文藻學生有問題。在正派經營的學校，好老師不會威脅同學，明示或暗示同學美化期末教學意見調查。同理，好學生也不會威脅老師，明示或暗示藉由期末教學意見調查可報復老師。即使陳同學只是隨口說說，此類「雜訊」，既無意義，也不理性。教師將此行為公開即可(see above)。
[Inspired by UB1陳x宇同學]
Remark: 一位重修同學答道：
”只能說：「雖然我也覺得題目又多又難又奇怪，但是我教學評量打得還不錯。」.”
我給她零分，評語：答非所問。列入解答。


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Performance:
60 students
Average: 53 (for midterm: 64)
Highest-lowest: 94-40 (for midterm: 91-40)
調分公式：Max{40, x(1.3)} (for midterm: Max{40, (x+15)(1.4)})


Final grade information:Average: 63.3
Highest-lowest: 88-49
Failure ratio: 25% (14位係來自UB1)

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