Name student: ______________________________________________________________
ID:________________________________________________________________________
Exam:
Code:
Date:
Time: 9:00-12:00
This exam contains two types of open questions: Essay-type questions with very
short answers and mathematical questions. Read the instructions provided which
each category of questions closely!
Write your name and ID number on each sheet and hand them all in!
You are allowed to make use of scrap paper and a calculator.
Good luck.
SHORT ESSAY QUESTIONS
Each correct question will be awarded with a maximum of 4 points
The answers should be short, thus for these first 10 questions YOU MAY NOT use extra
sheets. Write your answers on this sheet ONLY in the space provided for the answer.
1) Please, indicate the (analytical) property that is common to monopoly and
duopoly which makes these market types less efficient than perfect
competition. What is the reason that leads to this common property?
The analytical property that is common to monopoly and duopoly is that the
efficiency equation P=MC does not hold, P>MC, leading to a profit making firm. The
reason for this is market power, the possibility for a firm to influence the market price.
2) Consider the following statement: "equilibrium is sufficient for social
optimality, because that is where marginal social costs are equal to marginal
social benefits.". Is this statement is correct? If yes why, if no why not?
This statement is incorrect. An equilibrium is more than MSC=MSB, in an
equilibrium MC=MB, including both social and private costs/benefits. In therefor
does not garantue that MSC = MSB
3) Are 'health care' and 'education' public goods? Explain why or why not?
Health care is excludable, just as education is, thus it does not qualify as a public
good. Also, they are rival goods, the consumption of one person influences the ability
of another person to consumer the good (get health care/educated).
4) Please explain the “problem of the second best”
The problem of the second best…
1
ID:________________________________________________________________________
Exam:
Code:
Date:
Time: 9:00-12:00
This exam contains two types of open questions: Essay-type questions with very
short answers and mathematical questions. Read the instructions provided which
each category of questions closely!
Write your name and ID number on each sheet and hand them all in!
You are allowed to make use of scrap paper and a calculator.
Good luck.
SHORT ESSAY QUESTIONS
Each correct question will be awarded with a maximum of 4 points
The answers should be short, thus for these first 10 questions YOU MAY NOT use extra
sheets. Write your answers on this sheet ONLY in the space provided for the answer.
1) Please, indicate the (analytical) property that is common to monopoly and
duopoly which makes these market types less efficient than perfect
competition. What is the reason that leads to this common property?
The analytical property that is common to monopoly and duopoly is that the
efficiency equation P=MC does not hold, P>MC, leading to a profit making firm. The
reason for this is market power, the possibility for a firm to influence the market price.
2) Consider the following statement: "equilibrium is sufficient for social
optimality, because that is where marginal social costs are equal to marginal
social benefits.". Is this statement is correct? If yes why, if no why not?
This statement is incorrect. An equilibrium is more than MSC=MSB, in an
equilibrium MC=MB, including both social and private costs/benefits. In therefor
does not garantue that MSC = MSB
3) Are 'health care' and 'education' public goods? Explain why or why not?
Health care is excludable, just as education is, thus it does not qualify as a public
good. Also, they are rival goods, the consumption of one person influences the ability
of another person to consumer the good (get health care/educated).
4) Please explain the “problem of the second best”
The problem of the second best…
1
