## Tuesday, May 19, 2009

### Microeconomics 2006 Paper: Answers/Hints/Solutions to Past year Papers/Exam of Delhi School of Economics (DSE)

This is the third series in solutions to Microeconomics problems asked in DSE Past years papers

Microeconomics 2006

Ans 1 (b) Pareto efficient. Since both prefer more to less, if you take any chocolates from A and give it to B, then you would make B better off and A worse off, so PE.

Ans 2 (d) all of the above

Ans 3 (b) a private good

Ans 4 (b) Monopsony

Ans 5 (d) C = Q(wr)^1/2

Ans 10 (d) Do yourself

Ans 11 (b) Quasilinear Utility function. (Income elasticity of good x is zero)

Ans 13 (c) remains constant. ( Think what will happen if you have CRS and IRS)

Ans 21. (b) Not a competitive equilibrium allocation but is Pareto efficient. (x1,y1) =(3,3) & (x2,y2)= (7,2). Here PE allocations would be a band of PE Allocations. Find demand functions of agent 1 and 2, for both goods, you will get an equation, where what value you should keep for p1 to equate demand and supply

Ans 22. (a) A competitive equilibrium allocation and is Pareto efficient. (x1,y1) =(10,5) & (x2,y2)= (0,0).

Ans 23 (b) {p1,p2} = {0,1}

Ans 29 (b) {q1,q2}={2,2} (MR1=MC, MR2=MC}

Ans 30 (b) A has x=2,y=0 and B has x=0 and y=2 (Generally, where does PE Allocation of max{x,y} lies? What if you have max{x,2y} or max{2x,y}?)

Ans 40 (b) {x,y} = {2/18,5/18}

Ans 41 (c) x1 increases and x2 decreases

Ans 42 (c) {x1,x2} = {15,7}