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Old Sunday, February 23, 2014
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shtanzeel shtanzeel is offline
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2. Given the profit function of a firm
Using the Lagrange Multiplier Method, find the maximum of the profit function subject to the constraint that X+Y=12

3. Using the Utility Maximization Model show that total price effect is equal to the sum of income and substitution effects.

4. Differentiate between monopoly and perfect competition. How price and output is determined under monopoly in the short run.

5. a. Define and explain the concept of AFC, AVC, ATC, and Marginal Cost with the help of diagram.
b. What is the significance of the point where Marginal Cost is equal to Average Cost? Describe this relation mathematically as well as graphically.

6. Given below is the information about money market in a economy (all values in billions).
C= Currency in circulation
D=Demand Deposits
X=Excess Reserves
r=reserve requirement on demand deposits=0.05
Calculate the value of the following:
a. Monetary Base
b. M1 Money Supply
c. Money Multiplier
d. Change in Monetary base required to achieve M1=$800

7. Use the keynesian cross to predict the impact of:
a. An increase in government purchases.
b. An increase in taxes
c. An equal increase in government purchases and taxes

8. Write Short Notes on the following:
a. Consumers and producer surplus
b. Compensating and Equivalent Variation
c. Phillips Curve.
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