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Final Exam Microeconomics 1, Odd-2021-22

1. The document provides instructions for a final exam in Microeconomics 1 to be held on December 21, 2021 from 1-3:30 PM. It allows open book and calculator use but requires students to work alone. 2. The exam consists of 4 questions covering topics like monopoly pricing and production, monopolistic competition, monopsony labor markets, and using graphs to analyze carbon taxes and production possibility frontiers. Students must show calculations and use diagrams to fully answer questions. 3. Students are warned that similarity between answers will result in a grade of zero for the exam. Detailed submission instructions will follow the previously announced exam guidelines.

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Rifqi Rinaldi
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187 views3 pages

Final Exam Microeconomics 1, Odd-2021-22

1. The document provides instructions for a final exam in Microeconomics 1 to be held on December 21, 2021 from 1-3:30 PM. It allows open book and calculator use but requires students to work alone. 2. The exam consists of 4 questions covering topics like monopoly pricing and production, monopolistic competition, monopsony labor markets, and using graphs to analyze carbon taxes and production possibility frontiers. Students must show calculations and use diagrams to fully answer questions. 3. Students are warned that similarity between answers will result in a grade of zero for the exam. Detailed submission instructions will follow the previously announced exam guidelines.

Uploaded by

Rifqi Rinaldi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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FINAL EXAM

ODD SEMESTER 2021/2022

Course Title : Microeconomics 1


Day/Date : Tuesday, 21 December 2021
Time : 1.00 – 3.30 p.m. WIB
Duration : 150 minutes (2.5 hours)

Instructions:
1. Open book (online and offline sources allowed).
2. Free to use calculator
3. Students have to work alone. Any similarity among the students' answers, will cause the
students’ answer papers to be marked "zero" or the exam is considered as "fail."
4. Detailed instruction on the submission of the answer sheets should follow the exam guideline
that has been announced prior to the exam.

1. Sulfikar firm is the monopolist in block-ice market in Selayar Island, South Sulawesi. In
theory, a monopolist is a price-maker.
a. Explain why being a price-maker does not mean a monopolist can set the market price
unlimitedly? Use a graphical illustration to support your explanation. (5 points)
b. To bring the product close to his consumers, the firm uses two factories with the cost
functions 𝐶 (𝑄 ) = 200 + 2𝑄 for the first factory and 𝐶 (𝑄 ) = 100 + 3𝑄 for the
second factory. 𝑄 dan 𝑄 are the number of ice blocks produced by Sulfikar firm from
its first and second factories, respectively.
i. If Sulfikar firm faces the (inverse) demand 𝑃(𝑄) = 1000 − 2𝑄, write its profit
function from selling the ice blocks produced by both of its factories. (4 points)
[𝑄, the firm's total production of ice blocks, is the sum of production in the two
factories, or 𝑄 = 𝑄 + 𝑄 , while 𝑃 is the price of ice blocks in the market]
ii. What would be the total production, price, and maximum profit for Sulfikar
firm? (6 points)
c. The firm is also supplying the neighbouring island, Kabaena Island. After few years of
production, Sulfikar realises that the demand behaviours are different between the
Selayar and the Kabena Island. To focus on the production, Sulfikar decided to close-
down both factories and create a new one. The new cost function is 𝐶(𝑄) = 300 +
0.5𝑄 , where 𝑄 is the total production of ice blocks sold on Selayar Island of 𝑄 and
on Kabaena Island of 𝑄 , or 𝑄 = 𝑄 + 𝑄 .
i. If the demand function of Selayar Island is 𝑃 = 1000 − 2𝑄 and the demand
function of Kabaena Island is 𝑃 = 1500 − 𝑄 , what are the firm’s optimum
prices and outputs in each island? (6 points)
ii. What is the maximum profit for the Sulfikar firm?(4 points)
2. a. Explain the following aspects of a monopolistic market using the relevant graphs:
i. the difference between the monopolistic firm's equilibrium conditions in the short
run and in the long run; (3 points)
ii. the efficiency condition in a monopolistic market; and (3 points)
iii. whether government intervention is reqired in a monopolistic market. (3 points)

b. Fargo Brothers Company is the only company that has served marine tourism in the
Anyaria Islands for many years. Tourists are interested in visiting Anyaria because the
conditions are still natural and the variety of its marine life is rarely found elsewhere.
The (inverse) demand function for marine tourism services is expressed as 𝑃 = 140– 𝑄,
where 𝑃 and 𝑄 are the price and output levels, respectively, while the firm's marginal
cost is constant at 20 dan it has no fixed cost.
i. What is the maximum profit of Fargo Brothers Company? (4 points)
ii. A family dispute causes the company to split in two. Kak Fargo runs one marine
tourism company and Dik Fargo runs the other company. If these two new firms
still have the same marginal costs as before and they operate in a Cournot
competition, what is the maximum profit of Kak Fargo's and Dik Fargo's
companies? (4 points)
iii. Show and explain the results of your calculations in points (i) and (ii) in one
diagram. (4 points)
iv. How much profit does the Fargo family lose after Fargo Brothers Company
splits in two? (4 points)

3. PT Boekit Acem (PT BA) is the only coal mining company in Province X and is a
monopsonist in the labor market. The supply of labor in Province X follows the function
𝐿 = 100𝑤, where 𝐿 is the quantity supplied of labor and 𝑤 is the wage rate. Labor
productivity in digging coal is assumed to be constant at 2 tons per hour. Meanwhile, coal
is sold at $10 per ton.
a. What is the optimal number of mining workers and wage level for PT BA? (8 points)
b. If the labor market is now competitive, or PT BA cannot exercise its monopsony power,
calculate the optimal number of workers and the wage rate. (5 points)
c. Compare the calculation results in (a) and (b), then show and explain the two conditions
in one diagram. (5 points)
d. In a monopsony market (as in question a), if the selling price of coal increases by 50%,
will it affect the number of workers PT BA recruits? How does it affect worker wage?
Explain and include calculations in your explanation. (7 points)

4. a. Researchers found that carbon emissions from motor vehicles have negative impact to
people’s health, and propose accordingly that vehicles are charged a carbon tax. Explain
how a carbon tax on vehicles can reduce negative health impacts. Use a graph in your
explanation. (10 points).
b. Jaka has a new hobby during the pandemic – growing chilis and tomatoes that his family
can eat. He found that each month he can spend 12 hours growing chilis and tomatoes
and that his production possibilities frontier (PPF) is 12 = 𝐶 + 3𝑇 (where 𝐶 is chili and
𝑇 is tomato, in kilograms).
i. Draw Jaka’s PPF (with chili production on the vertical axis and tomato on the
horizontal axis) and calculate his marginal rate of transformation (MRT)
(5 points)
ii. Jaka is wondering how much chilis and tomatoes he should produce for his
family. He consulted his daughter, who is a student at FEB UI. After observing
the family preferences, his daughter found that the family’s utility function from
consuming chili and tomato is as follows: 𝑈 = 100𝐶 . 𝑇 . . Given this
information, how many chili and tomato should Jaka produce each month, given
his PPF? (10 points)

*** Enjoy working alone ***

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