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Ollscoil na hÉireann, Gaillimh GX_____
National University of Ireland, Galway
Summer Examinations 2007 / 2008
Exam Code(s) 3BA1, 3BA5, 3BA6, 4BA4, 4BA8, 1EM1, 1OA1, 3BC1, 4BC2, 4BC3, 4BC4, 4BC5, 1EK3, 3FM1, 3FM Exam(s) B.A., B.A. (ESS), B.A. (PSP), B.A. (Int’l), Erasmus, Occasional, B.Comm., B.Comm. (Language), 3 rd B.Sc. (Fin. Math. & Econ.), H.Dip.Econ.Sc. Module Code(s) EC Module(s) Advanced Economic Theory Paper No. 1 Repeat Paper External Examiner(s) Professor Cillian Ryan Professor Robert E. Wright Internal Examiner(s) Mr. Brendan Kennelly Dr. Ruvin Gekker Dr. Dany Lang Instructions: SECTION A: Please answer ONE Question SECTION B: Please answer BOTH questions. Please use separate answer books for each Section. Duration 2 hours No. of Pages 4 Department(s) ECONOMICS Course Co-ordinator(s) Dr. Ruvin Gekker Requirements : MCQ Handout Statistical Tables Graph Paper Log Graph Paper Other Material
EC385 Advanced Economic Theory SECTION A (100 POINTS) Answer ONE question from this section.
- State and discuss the Sen impossibility theorem of a Paretian liberal. Briefly comment on Sen’s attack against welfarism using this theorem. (50 points)
- Using a specific linear demand function, state and explain the limit-output model of entry deterrence which utilizes the Sylos postulate. Perform possible refinements of the limit-output model utilizing different behavioural assumptions in order to provide a satisfactory answer to criticisms of the Sylos postulate. Briefly analyze the significance of different behavioural assumptions on entry deterrence. (50 points)
- With a reference to some specific example, state and explain “the chair paradox” of strategic voting. Briefly outline some mechanisms to resolve this paradox. (50 points) SECTION B (100 POINTS) Instructions: Answer the two following questions No computer, note or calculator is allowed. 1. Choose either (a) or (b) (30 points) a. Explain the economic mechanisms underlying the Keynesian multiplier. b. According to Keynes, how can mass unemployment be explained? 2. Answer all parts of this question (70 points) Note that the questions below are related but designed in order to allow you going on with the next question if you are unable to reply to one of the questions. Consider the following structural model: ! "! = = 1 Y F ( K , L ) K L , 0< α <1 ( 1 ) S = s! Y , 0< s <1 (2) K ' = I " #! K (3) I = S (4) nt L = L 0! e (5)
- Prove that (7) can be written:
k '+ n # k #( 1 "! )= s #( 1 "! ) (8) ( 10 points)
In this model, the initial condition is k(t) = k 0 for t=0.
7. Solving the differential equation (8), prove that the general solution of it will be:
[ ]
n t
k t s n k s n e
"! "!
( 1 )
(9) (20 points)
- On the basis of equation (9): a. Give the equilibrium value of the system. (2 points) b. Prove that the system will tend to this equilibrium value. (3 points) c. Give the coefficient of convergence β in this model. (2 points)
