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ADVANCED MICREOECONOMICS PAST EXAM QUESTIONS FEEDBACK OPPORTUNITY 2025

Here is a list of past exam questions. (We have not had the lectures for question 4 yet, but will do the next time we meet.) To help you with exam preparation, I am giving you the opportunity to send me your answer for 1 of these questions. Given the size of the student cohort, feedback must necess arily be minimal and Peter and I will highlight - if any - the biggest, or easiest thing you can do to improve your answer. Your attempts will also directly feed in to a revision lecture in week 11.

If you want to take advantage of this opportunity, please send me your answer by Thursday 17 April at 12:00 noon (BST) via email.This deadline is strict. Also please give your email one of the following as its subject: PAST EXAM QUESTION 1A,PAST EXAM QUESTION 2,PAST EXAM QUESTION 3,PAST EXAM QUESTION 4.(This is very important, and failure to do so may result in no or late feedback.)

Question 1A

Assume the existence of an economy consisting of identical consumers each with the following utility function: U =xa4ya6.

Further suppose there is only one factor of production,Labour (L).lt takes 5 units of labour to produce one unit of x and 10 units of labour to produce one unit of y, and there are 1000 units of labour available.

Please answer the following questions (using diagrams where appropriate):

(i) Write the equation for the Production Possibilities Frontier(PPF) and plot it on a diagram. Why does it have this particular shape, and what factors, in general, will affect the shape of a PPF? (8 + 7 = 15 marks)
(ii) What are the Pareto optimal levels of output of each good?What set of prices will achieve these output levels? (10 +5= 15 marks)
(ii) Explain, the implications for Pareto optimality and welfare in the case where good x is produced by a monopolist and good y is produced by firms in a perfectly competitive market. You should include a diagram to illustrate your explanation. (15 marks)
(iv) Set out and briefly explain the necessary conditions and assumptions needed to achieve Pareto optimality.Bearing in mind the doubts expressed by Blaug in the quote below, do you think the First and Second Fundamental Welfare theorems have anything useful to offer in terms of policy guidance?

"Any doubts about the cogency of the first fundamental theorem are as nothing compared to the widely shared misgivings about the second fundamental theorem. How can something [Second fundamental theorem] that is so patently impractical be a useful reference point?" Blaug, M.(2007), ‘The Fundamental Theorems of
Modem Welfare Economics, Historically Contemplated, History of political economy, 39 (2): 185-207. (25+30 =55 marks) (Total 100 marks)

Question 2

Discuss the relative merits of the compensation test and social welfare function approaches to social cost benefit analysis (SCBA) as a means of making public investment decisions.Your answer should address both theoreticaland practical considerations.

Question 3

With examples, explain how economists (and others) can put a value on something for which there is no existing market. In your answer include a critical assessment of the advantages and disadvantages of the methods of non- market valuation you discuss, and explain the relevance of Hicksian welfare measures in this context.

Question 4

Compare and contrast how auction theory predicts that bidders will act in the following four auction types: English, Dutch, First Price Sealed Bid and Second Price Sealed Bid? Explain the strategy regarding how these mechanisms would be used by govemment when auctioning something of potentially great value to the private sector? Your answer should be based on theory, but include examples.