Paper 1
QQI
SUMMER 2020 EXAMINATIONS
Module Code:
B7AF111
Module Description:
Advanced Economic Perspectives
Examiner:
Dermot Gallagher
Internal Moderator:
Heikki Laiho
External Moderator:
Gillian Ormonde
Date: Monday, 20th April 2020
Time: 09:30-12:30
INSTRUCTIONS TO CANDIDATES
Time allowed is 3 hours.
ALL questions should be attempted.
1
Paper 1
*NOTE: questions may state eg. what area is or what areas are…….. take both to mean the same thing
(they are not => just one area nor that the answer has to be a couple of areas, etc.,)
(1) Looking at a firm, in a competitive oligopoly market, selling at a price eg. of €50 and quantity per minute sold is 600; if the firm were to
increase price, what area represents a loss of TR.
P
a
b
c
€50 P*
d
e
g
h
f
i
j
Q*
600
Q
D/AR
Answer: ____ (transfer to the Answer Sheet)
2
Paper 1
(2) Looking at a competitive oligopolistic firm, selling at a price of €50 and quantity per minute sold is 600; if the firm were to decrease price,
what is the area of TR gain?
P
a
b
c
€50 P*
d
e
g
h
f
i
j
Q*
600
Q
D/AR
Answer: ____ (transfer to the Answer Sheet)
3
Paper 1
(3) Looking at a competitive oligopolistic firm, selling at a price of €50 and quantity per minute sold is 600; if the firm were to decrease price,
what is the area of TR loss?
P
a
b
c
€50 P*
d
e
g
h
f
i
j
Q*
600
Q
D/AR
Answer: ____ (transfer to the Answer Sheet)
4
Paper 1
(4) Looking at a competitive oligopolistic firm, selling at a price of €50 and quantity per minute sold is 600; if the firm were to increase price,
what is the area of TR gain?
P
a
b
c
€50 P*
d
e
g
h
f
i
j
Q*
600
Q
D/AR
Answer: ____ (transfer to the Answer Sheet)
5
Paper 1
(5) Collusion: if firms decide to act together and increase the price of their product; what area represents TR gains and losses for the firm
below.
P
a
b
c
r
d
f
e
g
h
€50 P*
I
j
k
o
l
m
n
p
Q*
q
Q
Answer: ____ (transfer to the Answer Sheet)
6
Paper 1
(6) What is the level of market demand (Q) for Firm B; if Firm A starts with a potential demand of 20,000?
Firm A
Firm B
(Q)?
20,000
AR/D
AR/D
Answer: ____ (transfer to the Answer Sheet)
7
Paper 1
(7) What is the re-adjusted level of market demand (Q) for Firm A, when Firm B has entered the market?
Firm A
Firm B
60,000
AR/D
AR/D
Firm A (re-adjusts)
(Q)?
AR/D
Answer: ____ (transfer to the Answer Sheet)
8
Paper 1
(8) If n = 2, and Q = 12,000
Then the equilibrium level of Q per firm in this duopoly according to the Cournot formula =>
(a) 2,000 each.
(b) 4,000 each.
(c) 6,000 each.
(d) 8,000 each.
(e) none of the above.
Answer: ____ (transfer to the Answer Sheet)
(9) If n = 5; Q = 30,000
Then the equilibrium level of Q per firm in this market according to the Cournot formula =>
(a) 5,000 each.
(b) 10,000 each.
(c) 20,000 each.
(d) 30,000 each.
(e) none of the above.
Answer: ____ (transfer to the Answer Sheet)
9
Paper 1
Using the below diagram, answer Q (10), Q (11) & Q (12)…..
P
P
a
o
b
f
c
p
d
e
g
t
h
i
j
l
k
q
r
m
s
Q
Q
10
Paper 1
(10) What area represents the area of total CS in the overall market?
Answer: ____ (transfer to the Answer Sheet)
(11) What area represents the area of TR for the cheating firm.
Answer: ____ (transfer to the Answer Sheet)
(12) What area represents the area of loss for the firm that complied as the other cheated.
Answer: ____ (transfer to the Answer Sheet)
11
Paper 1
given that (∑ MC = S), the aggregation of the individual supply curves of perfectly competitive firms = the market Supply curve under
perfect competition, thereby….
(13) What is the € amount of consumer surplus (CS) if the market was perfectively competitive.
(if AC and MC are constant at €40; AR = €70; noting that each square = €400 ie. €20 x 20units).
Answer: €__________ (transfer to the Answer Sheet)
12
Paper 1
(14) Single-Priced Monopoly: what is the € amount of deadweight loss (D.Loss) under a singled-priced monopoly rather than a perfectively
competitive market; noting outline same as Q13.
Answer: €__________ (transfer to the Answer Sheet)
13
Paper 1
(15) Price Discriminating (1st degree) Monopoly: what is the € amount of SNP lost if a first degree monopolist market opened up to perfectly
competitive conditions; noting same outline as others.
Answer: €________ (transfer to the Answer Sheet)
14
Paper 1
Using the diagram below, answer Q (16), Q (17), Q (18) & Q (19).
a
d
b
c
g
f
i
e
h
j
15
Paper 1
(16) What area represents the area of PS before the tax was introduced.
Answer: ____ (transfer to the Answer Sheet)
(17) What area represents the area of tax revenue after the tax was introduced.
Answer: ____ (transfer to the Answer Sheet)
(18) What area represents the area of total surplus after the tax is introduced.
Answer: ____ (transfer to the Answer Sheet)
(19) What area represents the area of pollution before the tax is introduced.
Answer: ____ (transfer to the Answer Sheet)
16
Paper 1
(20) What area represents the net* gain in producer surplus (PS) when the US economy opens up to laissez-passer (free trade) with its
neighbour:
US Economy (advantage in high-tech production)
Low-tech Sector (labour-intensive)
High-tech Sector (capital-intensive)
Textiles Market
a
Pharma Market
f
i
b
c
d
g
h
j
k
e
Answer: ___________ (transfer to Answer Sheet)
17
Paper 1
(21) What area represents the loss and gain in consumer surplus (CS) when the US economy opens up to laissez-passer (free trade) with its
neighbour:
US Economy (advantage in high-tech production)
Low-tech Sector (labour-intensive)
High-tech Sector (capital-intensive)
Textiles Market
a
Pharma Market
f
i
b
c
d
g
h
j
k
e
Answer: ___________ (transfer to Answer Sheet)
18
Paper 1
(22) What areas represents the total transfers in producer surplus (PS) and consumer surplus (CS) when the economy opens up to laissez-passer
(free trade) with its neighbour:
US Economy (advantage in high-tech production)
Low-tech Sector (labour-intensive)
High-tech Sector (capital-intensive)
Textiles Market
a
Pharma Market
f
i
b
c
d
g
h
j
k
e
Answer: ___________ (transfer to Answer Sheet)
19
Paper 1
(23) What area represents the gain in consumer surplus (CS) when the Mexican economy opens up to laissez-passer (free trade) with its
neighbour:
Mexican Economy (advantage in low-tech production)
low-tech Sector (labour-intensive)
high-tech Sector (capital-intensive)
Textiles Market
Pharma Market
a
b
e
c
d
h
f
i
j
k
l
Answer: ___________ (transfer to Answer Sheet)
20
Paper 1
(24) What area represents the gain and loss in producer surplus (PS) when the economy opens up to laissez-passer (free trade) with its
neighbour:
Mexican Economy (advantage in low-tech production)
low-tech Sector (labour-intensive)
high-tech Sector (capital-intensive)
Textiles Market
Pharma Market
a
b
e
c
d
h
f
i
j
k
l
Answer: ___________ (transfer to Answer Sheet)
21
Paper 1
(25) What area represents the area of transfer gains (T) from producer surplus (PS) to consumer surplus (CS), as the economy opens up to
free trade.
Mexican Economy (advantage in low-tech production)
low-tech Sector (labour-intensive)
high-tech Sector (capital-intensive)
Textiles Market
Pharma Market
a
b
e
c
d
h
f
i
j
k
l
Answer: ___________ (transfer to Answer Sheet)
22
Paper 1
(26) What area represents the area of loss in producer surplus (PS), as the US economy closes* to regional free trade.
US Economy (advantage in high-tech production)
Low-tech Sector (labour-intensive)
High-tech Sector (capital-intensive)
Textiles Market
a
Pharma Market
f
i
b
c
d
g
h
j
k
e
Answer: ___________ (transfer to Answer Sheet)
23
Paper 1
(27) What areas represents the total transfer of surplus, the Mexican economy closes up* to regional free trade.
Mexican Economy (advantage in low-tech production)
low-tech Sector (labour-intensive)
high-tech Sector (capital-intensive)
Textiles Market
Pharma Market
a
b
e
c
d
h
f
i
j
k
l
Answer: ___________ (transfer to Answer Sheet)
24
Paper 1
The following represents the US textile market………
(28) Starting from the fact that the US has free trade with Mexico, and then decides to introduce a tariff (t) on Mexican imports of textiles, then
the area of (PS) gain is…
P
S
a
(R* + t)
g
b
c
d
e
R*
f
D
Qs
Qm
Qd
Q
Mexican imports
Answer: ____________ (transfer to Answer Sheet)
25
Paper 1
(29) Starting from the fact that the US has free trade with Mexico, and then decides to introduce a tariff (t) on Mexican imports of textiles, then
the area of deadweight loss (D. Loss) is…
P
S
a
(R* + t)
g
b
c
d
e
R*
f
D
Qs
Qm
Qd
Q
Mexican imports
Answer: ____________ (transfer to Answer Sheet)
26
Paper 1
(30) Starting from the fact that the US had* a protectionist tariff with Mexico, and then decides to introduce free trade, then
the total area of (CS) is …
P
S
a
(R* + t)
g
b
c
d
e
R*
f
D
Qs
Qm
Qd
Q
Mexican imports
Answer: ____________ (transfer to Answer Sheet)
27
Paper 1
Using the diagram below, answer Q30 through to Q35.
International Mobility of Labour Model
e
a
f
g
h
b
c
d
i
j
k
28
Paper 1
(31) What area represents the area of income to (K) in the high-waged country before international mobility of labour was introduced.
Answer: ____ (transfer to the Answer Sheet)
(32) What area represents the area of deadweight loss (D. Loss), before international mobility of labour was introduced.
Answer: ____ (transfer to the Answer Sheet)
(33) What area represents the area of income gain to (K) in the high-waged country after international mobility of labour was introduced.
Answer: ____ (transfer to the Answer Sheet)
(34) What area represents the area of loss in total for (L) and (K) in the region as a whole, after international mobility of labour was introduced.
Answer: ____ (transfer to the Answer Sheet)
(35) What areas represents the areas of total gains for (K) and (L) in the region after international mobility of labour was introduced.
Answer: ____ (transfer to the Answer Sheet)
29
Paper 1
(36) If the MPC = ∆C/∆Y, then the multiplier for the following economy below is…
2019
2020
AD
=
€15,000m =
€20,000m =
C + I
€12,000m + €3,000m
€14,000m + €6,000m
(a) 0.2
(b) 0.4
(c) 1.66
(d) 5
(e) none of the above.
Answer: ____ (transfer to the Answer Sheet)
(37) If the marginal propensity to consume is 0.8, the marginal propensity to tax is 0.1 and the marginal propensity to import is also 0.2, in an
open economy with government current expenditure, then an increase of €100m in exports (X) will result in AD increasing….
(a) €80m.
(b) €125m.
(c) €200m.
(d) €800m.
(e) none of the above.
Answer: ____ (transfer to the Answer Sheet)
30
Paper 1
(38) Given the following economy; where the MPC = 0.75; if the government spends €100m on (Ig), then…….
AD = C
+ I
€1,000m = €700m + €300m
what is the amount € spent by the consumer in the fourth round of spending?
(ie. the first round of spending was the government spending of €100m)
Answer: ____ (transfer to the Answer Sheet)
(39) If the marginal propensity to consume (MPC) = 0.75, and the marginal propensity to import (MPM) = 0.25, calculate the changes in the
economy below if exports (X) were to increase by €100m.
AD =
C
+
I
+ (X - M)
€12,000m = €8,000m + €1,000m + (€6,000m - €3,000m)
Answer:
€
=
€
+
€
+
€
+ (€
-
€
)
31
Paper 1
(40) The marginal propensity to consume is 0.8, the marginal propensity to tax is 0.4 and the marginal propensity to import is also 0.2, in an
open economy with current government expenditure and taxation, then what will be the effect of a €100m increase in government current
expenditure (G) on the economy below.
.
AD
=
C +
I
+
G
+
(X - M)
€30,000m = €18,000m + €2,000m + €5,000m +
Answer:
€
=
€
+
€
+
(€10,000m - €5,000m)
€
+ (€
-
€
)
End of the Examination
32