25 May 2009 13:56 HP LASERJET FflX UNIVERSITY OF MALTA ISLANDS AND SMALL STATES INSTITUTE MA (ISLANDS AND SMALL STATES STUDIES) May 2009 SESSION ISS-5Q26 Aspects of Microeconomics and Macroeconomics with Special Focus on Size and Insularity Factors May 2009 Answer TWO questions from each section. Use a separate booklet for each question. SECTION A: Microeconomics 1. What are the factors which influence the demand for goods by households and supply of goods by firms? How do interactions by consumers and suppliers affect market prices? Why ts the likelihood of market failure more common in small states? 2. What do you expect the average cost curve of a firm to be U-shaped in the short run and in the long run? Why do manufacturing firms in small states likely to find it difficult to reap Hie benefits associated with economies of scale? 3. Briefly discuss the meaning of perfect competition, monopoly and oligopoly. Explain why oligopolistic or monopolistic market structures tend to prevail in small states. Why are consumers disadvantaged when competition is curtailed? 4. Explain the factors that affect labour demand and labour supply. What is the likely affect on labour demand by a firm if the wage rates increase and output increases at the same time, SECTION B: Macroeconomics 5. What do you understand by GDP. and how is it measured? Why is it important to measure GDP in real terms over time? How is GDP often compared across countries? Is such comparison useful? 6. What do you understand by economic vulnerability? Why are small states likely to be very economically vulnerable? Explain what policy measures such states could adopt to improve the economic resilience? 7. Discuss the relation between aggregate demand, aggregate supply and the general level of prices. How can aggregate demand shifts be inflationary? What do you understand by supply side policies? 8. What do you understand by the income multiplier process? Why is the income multiplier coefficient likely to be small is small states? Is this necessarily a disadvantage? p.l