Economics Answers

Let assume, Ann and Bob plan a common activity during lock down. Their alternatives: 

• А - watch a movie;
• B - read a book;
• C - attend a lecture online;
• D - create a TikTok video;
• E - cook a special dish.

Ann’s preferences are designed in such way that utility from alternative A is 22, B - 16, C - 18, D - 25, E - 30.

Bob’s preferences are designed in such way that utility from alternative A is 21, B - 16, C - 4, D - 3, E - 7.

Choose all Pareto-efficient alternatives.

 A researcher estimated the following regression equation , 

Yt from the use of various amounts , X1 and X2 on a hectare 

basis using time series data from 2001 to 2010.

The operation model is:

Yt = B0 + B1X1 + B2X2 + ei

The estimated regression equation is:

Yt = 31.98 + 0.65X1 + 1.10X2

(0.24) (0.27) (0.25)

Adjusted R2 = 0.989

Figures in parenthesis are standard error of estimates.

i) Estimate the t-values for each of the coefficients

ii) Interpret the results 

A Rs 1,000 par value bond carries a coupon of 10 percent (payable annually) and has a remaining maturity of four years. The bond is presently selling for Rs.1020. The reinvestment rate applicable to the future cash inflows of the bonds is nine percent per annum. What will be the realised yield to maturity?

Question 2

a. Mention any 5 concepts used interchangeably with:

i. Lending rate. (5)

ii. Strict monetary policy (5)

iii. Accommodative monetary policy (5)

b. Mention the types of inequality that were seen most during the period of hard lockdown in South Africa.

a. Discuss South Africa as:

i. An upper middle income economy.

ii. A commodity-based economy.

iii. Small open economy.

iv. Dualistic economy. vs. safe-haven economy.

a.Clearly explain any 3 characteristics of a developing economy. (9)

b. Mention any five challenges to the South African economic growth. (5)

c. Which challenge is at the top list of South Africa’s priorities and why? (3)

d. Mention the three main rating agencies. (3)

Consider two digital startups S and T. Following information about fixed and marginal cost in the short run is available: • Fixed cost FCS = 5000; constant marginal cost MCS = 40, • Fixed cost FCT = 100; marginal cost MCT = 10Q, where Q is the quantity of output produced.

a) State both startup’s total cost function !

b) What are the average cost AC(Q) of the two firms ?

c) Suppose government imposes a digital tax of 0.5 per unit of output. How does this tax affectmarginal, averageandtotalcost? Ifgovernmentchargedalump(fixed)sum,which cost would be affected ?

d) Suppose the startups are successful and stay in the market. Would you expect long run average cost to smaller or larger than average cost in the short run ? Briefly explain.

e) Can you say something about long run marginal cost, if you know that long run average cost is constant ? Does this imply anything with regard to returns to scale ? Briefly explain.

Consider an investment fund that builds its portfolios with help of humans H and robots R. The human employees receive a wage w = 40 per hour. The rental rate of robots r = 60 per hour. Suppose that inputs H and R are perfect substitutes and a portfolio can be created by 2 humans only, one robot only or any combination in between (assuming for computational reasons that humans and robots can contribute part-time also).

a) Draw isoquants for F(H,R) = {10,20,30}, i.e. production levels of 10, 20 and 30.

b) To produce 20 portfolios, the company chooses to employ 10 humans and 15 robots. Does this input combination minimise cost and, therefore, optimise production ? Add the corresponding isocost line to your graph of isoquants !

c) Whichinputcombinationwilloptimiseproduction

The following budget data are for a country having both a central government and provincial governments:

Central purchases of goods and services 200

Provincial purchases of goods and services 150

Central transfer payments 100

Provincial transfer payments 50

Grants in aid (central to provincial) 100

Central tax receipts 450

Provincial tax receipts 100

Interest received from private sector by central government 10

Interest received from private sector by provincial governments 10

Total central government debt 1000

Total provincial government debt 0

Central government debt held by provincial governments 200

Nominal interest rate 10%

Calculate the overall and primary deficits for the central government, the provincial governments, and the combined governments.

Determine multiplier

C=120billion+ 0.8Yd, 1= R150 billion