Transcript information sharing social software

THE ECONOMY: THE CORE PROJECT
UNIT 1. THE CAPITALIST REVOLUTION
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T1.2 Nominal and real GDP
Eden, a country, produces just two output goods: apples and
snakeskin handbags. In 2014 the prices of apples and hand bags
were 10 and 24, respectively. In 2015, the prices increased to 12
and 25. The quantities produced of the two goods were unchanged
in both 2014 and 2015, at 100 and 20. From this information, we
can conclude that:
Select all correct answers
a.
The nominal GDP in 2014 is 1,480.
b.
The real GDP is unchanged between 2014 and 2015.
c.
The nominal GDP growth rate between 2014 and 2015 is
14.9%.
d.
The economy of Eden grew between 2014 and 2015 in real
terms.
Section 1.2
T1.4 Economic inequality
You are given the following graph of Gini coefficients for Britain, the
United States and the Netherlands. The information in the figure
suggests that:
Select all correct answers
a.
Capitalist economies tend to have similar degrees of equality.
b.
The Netherlands was the most equal country over the past
three centuries.
c.
The US and British economies are currently at their most
unequal level since the 1750s.
d.
Over time, capitalist economies can become less as well as
more equal.
Section 1.13
T1.5 Lorenz curves and Gini coefficient
The following diagram shows the Lorenz curves for the factor (the
market) income and the disposable income of the Netherlands in
2010. The disposable income is the factor income plus any taxes
and government transfers. A’ is the area between the perfect
equality line and the disposable income Lorenz curve, while B’ is the
area under the disposable income Lorenz curve. Based on this
information, which of the following statements are correct?
Select all correct answers
a.
The Gini coefficient is the ratio A’/B’.
b.
The Gini coefficient for the factor income is higher than that
for the disposable income.
c.
The taxes and the transfers reduce income inequality in the
Netherlands.
d.
After the taxes and the transfers, the poorest 50% of the
population receive about 20% of the total income.
Section 1.13
UNIT 2. TECHNOLOGICAL CHANGE, POPULATION AND
ECONOMIC GROWTH
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T2.3 Average product of labour
The following diagram depicts the production function of the farmers,
where diminishing average product of labour is assumed. At A the
average product of labour is 500,000/800 = 625 kg of grain per farmer.
At B the average product of labour is 732,000/1,600 = 458 kg of grain
per farmer. If you know that for 2,800 farmers the grain output is
894,000kg, then which of the following is/are correct?
Select all correct answers
a.
The average product of labour when the labour input is 2,800 is
300.
b.
The decreasing slopes of the rays from the origin to the
production function along the curve indicate the decreasing
average product of labour.
c.
If the production function curve is an upward-sloping straight
line, then there is no diminishing average product of labour.
d.
It is possible that initially there is an economy of scale: for
example, going from one farmer to two, the average output
increases as they efficiently share the workload.
Section 2.5
T2.4 The Malthusian trap
The following figures show the real wage index in England from
1750 to 2000, and the explanation of how England escaped the
Malthusian trap in the period up to 1900. Based on this information,
which of the following statements are correct?
Select all correct answers
a.
The above shows evidence that increased productivity of
labour increases wages immediately.
b.
Throughout the 1800s political development led to a fall in the
workers’ bargaining power, keeping the real wage low.
c.
England was able to escape from the Malthusian trap after the
1830s by being able to increase the workers’ share of the
rising output, due to the increase in the workers’ bargaining
power.
d.
The above demonstrates that the size of pie (the total output)
does not determine the wage rate, but it merely sets a limit on
how high the wage could possibly be.
Section 2.8
UNIT 3. SCARCITY, WORK AND CHOICE
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T3.3 Average product of labour
The average product of labour is diminishing when:
Select all correct answers
a.
The marginal product of labour is diminishing.
b.
The production function is of a concave shape.
c.
The marginal product of labour is smaller than the average
product of labour.
d.
The marginal product of labour is negative.
Section 3.0
T3.4 Indifference curves
Consider an individual’s indifference curves for the consumption of
two goods (things you would like to have more of). In this case:
Select one answer
a.
The indifference curves are downward-sloping.
b.
The indifference curves can sometimes cross.
c.
The indifference curves cannot have sections that are straight
lines.
d.
The indifference curves cannot have kinks.
Section 3.2
T3.5 Choice of goods
Consider indifference curves for consumption of milk and
chocolates (you may assume that both are "goods"). The
indifference curves are drawn with the number of chocolate bars on
the horizontal axis and pints of milk on the vertical axis. You are
given that consumer A has a flatter indifference curve than
consumer B. In this case, we can conclude that:
Select one answer
a.
Consumer A likes chocolate more than consumer B.
b.
The price of milk relative to the price of chocolates is higher
for consumer A than for consumer B.
c.
The indifference curves of the two consumers cannot cross.
d.
Given the same amount of chocolates, consumer A is willing
to swap one bar of chocolate with a smaller amount of milk
than consumer B.
Section 3.2
T3.7 Budget constraint
A worker has two jobs that he can choose to work any number of
hours in a day, up to the upper limit (if any). The first job pays £10
an hour and has an upper limit of 6 hours a day. The second job
pays £6 an hour and has no upper limit. The worker will always
choose the first job if he can. Consider his budget constraint with the
amount of free time on horizontal axis and his consumption
expenditure (which equals his daily income) on the vertical axis.
Based on this information, which of the following is correct?
Select one answer
a.
The worker’s budget constraint is kinked at 6 hours of free
time.
b.
The worker will never choose to consume exactly 18 hours of
free time.
c.
The slope of the budget constraint is -6 when the hours of free
time is small and -10 when the hours of free time is large.
d.
For the choice of 8 hours of free time, the maximum
expenditure for the day is £96.
Section 3.6
T3.8 Substitution effect income effects
A consumer, who has a fixed income in dollars, consumes petrol
and bread. When the price of oil increases:
Select one answer
a.
The substitution effect on the consumption of petrol is
positive, as the consumer would have to increase his
expenditure on petrol due to its higher price.
b.
The income effect on the consumption of bread is negative,
i.e. the consumer would consume less bread.
c.
If the income effect dominates the substitution effect, then the
consumer would consume more bread.
d.
If the income effect dominates the substitution effect, then the
consumer would consume more petrol.
Section 3.7
UNIT 4. SOCIAL INTERACTIONS
Les Joueurs de Carte, Paul Cezanne, 1892-95, Courtauld Institute of Art
T4.1 Prisoners’ dilemma
In a simultaneous one-shot prisoners' dilemma game:
Select one answer
a.
The players’ payoffs are lower in the dominant strategy
equilibrium than in some other outcomes.
b.
The players will choose to cooperate to attain the socially
optimal outcome.
c.
Each player’s payoff is the highest in the socially optimal
outcome that would be attained by cooperation.
d.
Each player would choose the cooperative strategy if he or
she knew that the other player would definitely also choose
cooperation.
Section 4.3
T4.2 Altruistic preferences
The following diagram shows Anil’s preferences when he is either
completely selfish or somewhat altruistic, when he and Bala
participate
in the prisoners' dilemma game with the payoffs shown below.
Based on the graph, which of the following are correct?
Select all correct answers
a.
The outcome (I, T) is attained as the dominant strategy
equilibrium if Anil is completely selfish and Bala is somewhat
altruistic.
b.
The outcome (I, T) is attained as the dominant strategy
equilibrium if Anil is somewhat altruistic while Bala is
completely selfish.
c.
The outcome (I, T) cannot be attained as the dominant
strategy.
d.
The outcome (I, I) is attained as the dominant strategy
equilibrium only if both Anil and Bala are somewhat altruistic.
Section 4.5
T4.3 Public goods game
Bruce owns a cooperative project with two other members. One day
of work by any member costs that member £50; this produces a
total income of £120 which is shared amongst the three. So, for
example, if Bruce and one other member put the work in, then the
income per member is £120 × 2 ÷ 3 = £80, leaving Bruce with a net
income of £80 - £50 = £30. Assume that a member must either put
in a full day of work or none at all. Based on this information, we can
conclude that:
Select all correct answers
a.
The socially optimal outcome (one with the highest total net
income) is when all work.
b.
The dominant strategy equilibrium of this public goods game
is when no one works.
c.
Bruce is better off not working, irrespective of the actions of
the other members.
d.
Bruce’s net income when all three members work is £80.
Section 4.6
T4.5 Multiple equilibria
The following game represents the interaction between two software
engineers, Astrid and Bettina, who are working together writing
code as a part of a project. Astrid is better at writing Java code,
while Bettina prefers C++. The numbers represent the pay in dollars
for completion of the project. Based on this information, which of the
following are true?
Select all correct answers
a.
There are two Nash equilibria: (Java, Java) and (C++, C++).
b.
If Astrid can choose the format first and commit to it, then
(Java, Java) will be chosen.
c.
If the two can make an agreement, including a transfer of
$500 from Bettina to Astrid, then (C++, C++) will be chosen.
d.
If the two cannot make an agreement then they may end up
with the (Java, C++) outcome.
Section 4.11
UNIT 5. PROPERTY AND POWER : MUTUAL GAINS AND
CONFLICTS
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T5.1 Pareto efficiency
Anil and Bala have the choice of using either Integrated Pest
Control (IPC) or Terminator (T) to solve the problem of pest insects.
The table below shows their payoffs depending on their choice. The
following diagram shows these possible outcomes on a graph.
Based on the information above, which of the following is correct?
Select one answer
a.
(I, I) is the unique Pareto efficient outcome.
b.
Anil and Bala can Pareto improve by moving from (T, T) to (T,
I).
c.
(T, T) is the only Pareto inefficient outcome.
d.
Anil and Bala will both be happy to move from the Pareto
efficient (I, T) to the "fairer" Pareto efficient outcome (I, I).
Section 5.2
T5.2 Coercion vs take-it-or-leave-it
The figure below shows Angela and Bruno’s feasible frontier,
Angela’s biological survival constraint and her reservation
indifference curve. You are also given that the total amount of grain
produced is 8 bushels if Angela works for 8 hours and 10 bushels if
she works for 11 hours. From this, we can conclude that:
Select one answer
a.
Bruno can devise a take-it-or-leave-it offer under voluntary
exchange such that he is just as well off as the best outcome
under coercion.
b.
Bruno can claim an economic rent of 5 out of the total surplus
of 6 under his best voluntary exchange outcome.
c.
Angela will choose not to work if she is offered 2 bushels of
grain for 16 hours of free time under voluntary exchange.
d.
Bruno can increase his share by 2 bushels if he could coerce
Angela to work 11 hours compared to under the voluntary
exchange outcome.
Section 5.8
T5.3 The reservation indifference curve
The figure below shows Angela and Bruno’s feasible frontier,
Angela’s biological survival constraint and her reservation
indifference curve, when Angela would accept any offers strictly
better than her reservation position of no work and 2 bushels of
survival rations from the government. Now consider the case where
Angela cares about the fairness of distribution, such that she can
reject an offer that she considers unfair and choose not to work. In
such a case Bruno will also receive no income. Then, compared to
the reservation indifference curve depicted above, Angela’s new
reservation indifference curve is:
Select one answer
a.
Shifted higher.
b.
The same.
c.
Steeper and goes through Z.
d.
The midpoint between the feasible frontier and the biological
survival constraint.
Section 5.8
T5.4 Gini coefficient when sharing a surplus
The figure below is the Lorenz curve when 90 farmers and 10
landowners share the crop 50:50 (the kinked solid line) and 75:25
(the kinked dotted line). Recall that the Gini coefficient is calculated
by A/(A + B), where A is the area between the 45 degree line and
the Lorenz curve, and B is the area below the Lorenz curve. Based
on this information, which of the following are correct?
Select all correct answers
a.
A + B = 10,000.
b.
Under the 50:50 sharing, A = 2,000.
c.
Under the 75:25 sharing, A = 1,500.
d.
The Gini coefficient under 75:25 is
A/(A + B) = 750/5,000 = 0.15.
Section 5.12