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Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Semester 2 Examinations 2008/
Exam Code(s): 2BA1, 1EM1, 1OA Exam(s):^2 nd^ B.A., Erasmus, Occasional Modules: Part A: EC233 Research Methods in Economics Part B: EC249 Comparative Economic Thought Part C: EC250 Cost Benefit Analysis Part D: EC257 Mathematical Economics External Examiner(s) Professor Robert Wright Professor Cillian Ryan Internal Examiner(s) Professor Eamon O’Shea Dr. Aidan Kane Professor Terrence McDonough Ms. Naomi Foley Dr. Ruvin Gekker Instructions: 2BA1 students should answer Part A: Research Methods in Economics and either Part B: Comparative Economic Thought or Part C: Cost Benefit Analysis or Part D: Mathematical Economics. 1EM1 and 1OA1 students should follow instructions on relevant module. Students are advised to allocate 1.5 hours to each part as appropriate. Students are asked to read carefully the instructions within each part. Please use separate answer books for each part. Duration 3 hours No. of Pages 17 pages in total Department(s) Economics Course Co-ordinator(s) Requirements: A. Kane, T. McDonough, N. Foley, R. Gekker 2 answer books
PART A:
EC233 Research Methods in Economics
Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Semester 2 Examinations 2008/
Exam Code(s) 2BA1, 1EM1, 1OA Exam(s) 2 nd^ B.A., Erasmus, Occasional Module Code(s) EC Module(s) Research Methods in Economics Paper No. Yes Repeat Paper External Examiner(s) Professor Robert Wright Internal Examiner(s) Professor Eamon O’Shea Dr. Aidan Kane Instructions: Please follow instructions carefully. Please use a separate answer book for this part. Duration 1.30 hrs. No. of Pages 2 (This page + 1) Department(s) Economics Course Co-ordinator(s) A. Kane Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
PART B:
EC249 Comparative Economic Thought
Ollscoil na hÉireann, Gaillimh
National University of Ireland, Galway
Semester 2 Examinations 2008/
Exam Code(s) 2BA1, 1EM1, 1OA Exam(s) 2 nd^ B.A. Module Code(s) EC Module(s) Comparative Economic Thought Paper No. 1 Repeat Paper External Examiner(s) Professor Cillian Ryan Internal Examiner(s) Professor Eamon O’Shea Professor Terrence McDonough Instructions: Please follow instructions carefully. Please use a separate answer book for this Part. Duration 1.30 hrs. No. of Pages 6 (This page + 5) Department(s) Economics Course Co-ordinator(s) T. McDonough Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
Section A (30 marks) Answer all questions (no negative marking). Please use the MCQ answer sheet provided, using lines 1 – 30.
- In the neoclassical theory of demand the market demand curve a. is determined by the institutional rules of the market b. is primarily influenced by advertising strategies c. adding up individual demand curves d. depends on customary standards of living
- Critics of the neoclassical theory of demand believe the demand curve a. slopes up b. has no particular shape c. slopes down d. is concave in shape
- In the simple corn model the second pile of corn represents a. the seed corn b. the standard of living of the producing class c. potential taxation d. the interest payments on capital invested
- In the GDP of a modern industrial economy, the standard of living of the working class is represented by the a. depreciation b. wage goods c. surplus product d. net national product
- From a Marxian perspective the function of unemployment is to a. precipitate business downturns b. absorb excess workers c. provide time for job training d. regulate wages
- Fractions of the unemployed include a. floating b. stagnant c. latent d. all of the above
- “A fair day’s work for a fair day’s pay” a. is just common sense b. identifies two elements of conflict c. contains one main element of conflict d. is an uncontroversial union demand
- New techniques will be adopted if a. technical change renders the existing technique technically inefficient b. the price of the machines relative to wages decreases sufficiently c. the new technique raises labour intensity d. all of the above
- Variable capital is money capital invested in a. machines b. technical change c. wages d. training
- Which of the following is not one of the unique features of Post-Keynesian economics? a. class b. time c. uncertainty d. money
- A fundamental Keynesian criticism of the quantity theory of money is that a. the velocity of money is highly variable b. the government doesn’t control the money supply c. the quantity of output is fixed d. prices fall when the money supply is increased
- Barter depends on a. the availability of money b. a universal commodity c. double coincidence of wants d. market exchange
- In the chartalist account a. money must be divisible and storable b. the first bankers were goldsmiths c. taxes drive money d. money is a unit of account
- According to Post-Keynesian monetary theory, the money supply rises and falls a. as currency is injected by the central bank b. as much as borrowers think it should c. in the foreign exchange markets d. according to mark-ups over costs
- Speculation ignores the fact that income streams a. must be positive b. must be capable of honouring debt obligations c. must be reinvested d. follow the movements of the supply of money
- According to Kalecki, wages plus profits equal worker’s consumption plus a. capitalist consumption b. investment c. government spending d. both a. and c.
- The need to absorb surplus leads to continually increasing a. consumption expenditure b. military expenditure c. investment expenditure d. imports
- Competition in Marxian economics a. plays no role b. is a central force in the determination of price c. forces profit-maximizing behaviour d. characterizes most capitalist markets
- Which of the following falls during business cycle expansions? a. raw materials costs b. marginal propensity to consume c. inflation d. debt levels
- In social structure of accumulation theory institutions a. moderate and channel class conflict b. moderate and channel capitalist competition c. stabilize capitalists’ long run expectations d. all of the above
- Under global neoliberalism, spatialization is a. a labour control strategy b. the expansion of investment overseas c. globalization d. the dividing up of world markets
PART C:
EC250/EC258 Cost Benefit Analysis
Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Semester 2 Examinations 2008/
Exam Code(s) 2BA1, 2BA6, 1EM1, 1OA Exam(s) 2 nd^ B.A., 2nd^ B.A. (PSP), Erasmus, Occasional Module Code(s) EC250/EC Module(s) Cost Benefit Analysis Paper No. Yes Repeat Paper External Examiner(s) Professor Robert Wright Internal Examiner(s) Professor Eamon O’Shea Ms. Naomi Foley Instructions: Please follow instructions carefully. Please use a separate answer book for this part Duration 1.30 hrs. No. of Pages 5 (This page + 4) Department(s) Economics Course Co-ordinator(s) N. Foley Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
Semester 2 Exam: Cost Benefit Analysis Course Codes: EC250; EC Time: 1.5 hours Candidates must answer all multiple choice questions in Section A, one question from Section B and one question from Section C Section A: Multiple Choice Questions Answer all questions in Section A. Write your answers on the first page of your examination answer book and be careful when doing so. Write your answers in the same order as the questions and please write clearly and legibly. Each question is worth 5 points ( 40 points in total)
- According to the Kaldor-Hicks criteria a project should be implemented if it a) is Pareto efficient b) is potentially Pareto efficient c) is independent d) generates negative net benefits
- Ex-ante cost benefit analysis is undertaken a) while a project is under consideration and before it is started b) during the course of the life of the project c) when a project is completed and all costs are sunk d) none of the above
- Social surplus is a) producer surplus less consumer surplus b) the sum of consumer and producer surplus c) consumer surplus less producer surplus d) none of the above
- If the average annual return in the stock market is 8% per year, how much will €1, invested today be worth in two years? a) €1, b) €1, c) €1, d) €1,
Section B Answer 1 question only from this section (worth 40 points) Question 1 a) Outline and briefly discuss the main steps that should be undertaken when conducting a CBA. b) What is a sensitivity analysis and why might one be undertaken? Provide an example of the use of sensitivity analysis. c) Define and explain the concepts of Pareto efficiency and potential Pareto efficiency d) List and explain three methods of estimating horizon values. Question 2 a) Monopoly and information asymmetries are two examples of market failure. Illustrate and explain how each of them results in a deadweight loss. b) In what circumstances and to what extent should the government provide the missing information in the case of information asymmetry? c) What is a natural monopoly and why do governments allow them to occur. Discuss government options for regulating natural monopolies.
Section C Answer 1 question only from this section (worth 40 points) Question 1 A highway department is considering building a temporary bridge to cut travel time during the three years it will take to build a permanent bridge. The temporary bridge can be put up in a few weeks at a cost of €740,000. At the end of three years, it would be removed and the steel would be sold for scrap. The real net cost of this would be €81,000. Based on estimated time savings and wage rates, fuel savings, and reductions in risks of accidents, department analysts predict that the benefits in real euro would be €275,000 during the first year, €295,000 during the second year, and €315,000 during the third year. Departmental regulations require use of a real discount rate of 5 percent. a) Calculate the present value of net benefits assuming that the benefits are realized at the end of each of the three years. b) Calculate the present value of net benefits assuming that the benefits are realized at the beginning of each of the three years c) Calculate the present value of net benefits assuming that half of each year’s benefits are realized at the beginning of the year and the other half at the end of the year d) Does the temporary bridge pass the net benefits test? Question 2 The Marginal Cost of supplying material used in the production of small wind turbines is MC = 0. 5 Q where Q is quantity. The function for the Marginal Revenue (MR) is given by the expression MR = 100! 2 Q and the inverse demand function is P = 100! 1. 5 Q. Assume the firm has a monopoly in the production of the material. a) Find the level of output and price that would exist under competitive conditions b) Compare this to the level of output and price resulting from the natural monopoly. c) Find the consumer surplus and the producer surplus in each case d) Compute the deadweight loss graphically and numerically.
EC257 Mathematical Economics Answer any TWO questions.
- A real estate investor in Moscow is considering three alternative investments: a hotel, a theatre or a restaurant. Profits from the hotel or restaurant will be affected by the availability of petrol and the number of tourists; profits from the theatre will be relatively stable under any conditions. The following payoff table shows the profit or loss that could result from each investment. Petrol Availability Investment Shortage Stable Supply Surplus Hotel - 16,000 30,000 40, Restaurant 4,000 16,000 12, Theatre 12,000 12,000 10, (a) Determine the best investment using the following decision-making criteria: (i) Maximax (ii) Maximin (iii) Minimax regret (iv) Hurwicz ( ! " = .4) (v) Equal likelihood (30) (b) The real estate investor has decided to hire a petrol analyst to assign a probability to each event that may occur. The analyst has determined that there is a .20 probability that shortage will occur, a .30 probability that stable supply will occur and a. probability that surplus will occur. Using expected value, determine the best investment. (10) (c) Determine the expected value of perfect information. (10)
- The ABC car dealers are soon going to open a new dealership. They have three offers: from a foreign compact car company, a local producer of full-sized cars, and from a truck company. The success of each type of dealership will depend on how much petrol is going to be available during the next few years. The profit from each type of dealership given the availability of petrol is shown in the following payoff table: Dealership Petrol Availability Shortage (.6) Surplus (.4) Compact cars 300,000 150, Full-sized cars - 100,000 600, Trucks 120,000 170, (a) Determine which type of dealership the company should purchase. (10) (b) the ABC company wants to hire a petroleum analyst to determine the future availability of petrol. The analyst will report that either a shortage or a surplus
will occur. The probability that the analyst will indicate a shortage given that a shortage actually occurs is .9, the probability that the analyst will indicate a surplus given that a surplus actually occurs is .7. Determine the decision strategy of ABC dealership should follow, the expected value of this strategy, and the maximum amount the ABC should pay for the analyst’s services. (30) (c) Compute the efficiency of the sample information for the ABC car dealership. (10)
- In a duopoly with homogenous product, the rival firms face the inverse market demand P = 160 – Q/2, and both have identical marginal costs of 40, where P = price of output Q = (q 1 + q 2 ), q 1 , q 2 = output of firms 1 and 2 respectively. (a) Solve for the Cournot-Nash equilibrium in this model, stating clearly your assumptions and calculate the equilibrium price, quantities and profit levels for the two firms. (20) (b) Solve for the Stackelberg equilibrium in this model, assuming that firms move sequentially and that firm 1 moves first. (20) (c) Explain the difference between the two types of game specified in (a) and (b) above. (10)
- Waterville, where State University is located, has three bookstores that sell textbooks, the State Bookstore, the Eagle Bookstore, and the Tartan Bookstore. The State Bookstore is operated by the University. David Murphy, the manager of the State Bookstore, is in the process of placing book orders with his book distributors for the next semester. There are 17,000 undergraduate students at State and they all purchase their textbooks at one of the three stores. Students often will change from which bookstore they buy from one semester to the next. David has sampled a group of students and developed the following transition matrix for student movements between the stores. This Semester Next Semester State Eagle Tartan State .42 .34. Eagle .57 .25. Tartan .33 .26. (a) In this semester, if 9,000 students bought their textbooks at the State Bookstore, 5,000 bought their books at Eagle Bookstore and 3,000 students bought their books at the Tartan Bookstore, how many are likely to buy their books at these stores next semester? (30) (b) How many students will purchase their textbooks from each store in the long-run future? (20)
