Introductory Microeconomics — DU B.A. (Hons.) Economics Previous Year Question Papers

(i) The following table shows the number of units of wheat and cloth that two countries: India and Bangladesh. — can produce in one day using all their available resources: Country Wheat (units/day) Cloth (units/day) (a) Which country has the absolute advantage in the production of each good? (2). (b) Which country has the comparative advantage in each good? (3) (i Using the above data, draw a Production Possibility Frontier (PPF) for India and Bangladesh on separate diagrams. Show the trade-off between wheat and cloth, and explain how specialization according to comparative advantage can lead to gains from trade. (4). (iii) (a) Distinguish between public and private approaches to regulating. externalities. Explain in detail one example of each. (5) (b) Explain how Pigouvian taxes and tradable pollution permits help correct negative externalities. Support your answer with suitable diagrams. (4) 2. (i) What are the economic effects of a tariff for an importing country? How do economists respond to arguments given in support of trade restrictions? (6,4) (i) Maria spends one-third of her income on clothing. What is her income elasticity and price elasticity of demand for clothing? (4) (iii) If Maria's taste changes and she decides to spend only one-fourth of her income on clothing, how does her demand curve change? What is her income and price elasticity now? (4) 3.. (i The supply and demand equations are given as following : (a) If the government imposes price ceiling of $90, what are the price, quantity demanded, quantity supplied and size of shortage or surplus. (3) (b) If the government imposes price floor of $90, what are the price, quantity demanded, quantity supplied and size of shortage or surplus. (3) (c) Instead of a price control, the government levies a tax on producers of $30 per unit. What are the price, quantity demanded, quantity supplied and size of shortage or surplus? (3) (i) Below is the value (willingness to pay), Rohit places on per unit bottle of water Value of first bottle $7 Value of second bottle $5 Value of third bottle $3 Value of fourth bottle $1 (a) From this information, derive Rohit's demand schedule: Graph his demand. curve for bottled water (3) (b) If the price of a bottle of water is $4, how many bottles does Rohit buy? How much consumer surplus does Rohit get from his purchases? Show Rohit's consumer surplus in your graph: (3) (c) If the price falls to $2, how does quantity demanded change? Diagrammatically show the change in the consumer surplus? (3) 4: (i) Two firms, A and B, must decide whether to advertise or not. Their payoffs (profits in million dollars) are shown below : Firm B: Advertise Firm B: Do Not Advertise Firm A: Advertise (4, 4) (10, 2) Firm A: Do Not Advertise (2,10) (6, 6) (a) Identify the dominant strategy (if any) for each firm. (2)" (b) Determine the Nash Equilibrium of this game. (3)