Part A: Microeconomics and MacroeconomicsQuestion 1:Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:Output (Q) Total Cost0 251 502 1003 1204 1555 1906 2507 390a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC) and Average Cost (AC).b) What is the profit maximizing output level?c) Is this firm is making a profit or loss at profit maximizing output level? Explain.d) Do you think the firm will continue its production in the short run?e) What will be the long-run price in this market?Question 2:Assume the current price of corn chips is $2 per packet. The demand elasticity is 1 (ignoring thenegative sign) and current consumption (i.e. quantity demanded) is 40 million packets per week.Suppose that the manufacturer raises the price of corn chips to $4 per packet.a) Derive the demand equation.b) What will happen to weekly consumption as price increases to $4?c) Suppose the supply equation is P=2+Q. Find out the market equilibrium price and equilibriumquantity.d) Given the above supply and demand equations, calculate the surpluses for both consumer andproducer.e) Now suppose the supply curve shifts and the equation of new supply curve is P=4+Q. Do youthink market exist? Question 3: Suppose that the demand equation: P = 10 – Q and supply equation: P = Q.a. Calculate the equilibrium price and quantity.b. Calculate the consumer surplus, producer surplus and total surplus at equilibrium.c. Suppose the government imposes a tax of $2 for each unit bought. Derive the new equilibrium price that consumers pay, the price that firms receive, and quantity.d. Calculate the deadweight loss of this tax.e. In a diagram, show the equilibrium in part a and the equilibrium in part c; and the areas that you computed in part b and d.Question 4:Consider perfect competition, a non-discriminating monopoly and a perfectly discriminating monopoly. a. Comparing and contrast the equilibrium price and quantity in each of the market structure and identify for each market structure whether it is efficient or results in deadweight loss. b. Why do governments control certain monopolies? Provide at least one real world example in supporting your argument.c. Why do governments create certain monopolies?Question 5:Using a simple example, explain the Comparative Advantage Theory and how Countries can benefit from international trade. What type of economic policy does this theory call for?Question 6:Assume that Bob can either type 6 pages per hour or bake 2 cakes. His wife Mary can type 12 pagesper hour or bake 4 cakes.a) What is comparative advantage? Explain.b) Calculate the comparative advantage of each person in the above example.c) In this example, do you think that complete specialization is possible? Explain.d) Will there be any trade between Bob and Mary?Question 7:The elasticity demand plays a crucial role in determining the incidence of tax between buyers and sellers. Explain with proper diagram(s).Question 8:Starting from an above full employment equilibrium, briefly explain with the aid of a diagram, theshort-run effect on the price level and real GDP of an open market purchase of securities by thecentral bank. Does such an action lower real GDP in the long run?Question 9:What is deflation? Discuss the appropriate government policies to deal with a problem of deflation;and also provide diagram (s) and at least one real world example in supporting your argument.Question 10:Using the AS/AD model, discuss the likely impact of the following events with proper diagram(s):a) An increase in petrol price (starting from the full-employment level).b) A rise in the general price level (starting from below the full-employment level).c) The world economy enters into a recession (starting from the full-employment level).d) The Real Estate business in Australia booms (starting from the full-employment level).Question 11:Two prisoners, A and B, alleged to be conspirators in a crime, are put into separate rooms. A police officer goes into each room and says:If your partner confesses and you confess also, you will only get 3 years in prison.If your partner remains silent and if you are silent also, you will get 1 year in prison.However, if your partner confesses and you remain silent, you will get 5 years in prison.But if your partner remains silent and you confess, you will be out in 0.3 years.a. If prisoner A confesses, what would be the best strategy for prisoner B?b. If prisoner A does not confess, what would be the best strategy for prisoner B?c. Define Nash equilibrium: what is the Nash equilibrium for this question?Question 12:Does a minimum wage law always lead to unemployment? When does the minimum wage law lead to an efficient outcome in a competitive labour market? Explain with an appropriate diagram.Question 13Suppose that the demand equation: P = 12 – Q and supply equation: P =2 Q.a. Calculate the equilibrium price and quantity.b. Calculate the consumer surplus, producer surplus and total surplus at equilibrium.c. Suppose the government imposes a tax of $3 for each unit bought. Derive the new price that consumers pay, the price that firms receive, and quantity.d. Calculate the deadweight loss of this tax.e. In a diagram, show the equilibrium in part a and the equilibrium in part c; and the areas that you computed in part b and d.PART B: STATISTICSQuestion 1. The final exam marks for 10 students taking MPE781 are given as follow:9 8 5 8 3 4 7 8 6 7a) Calculate the mean, median and mode.b) Calculate the first quartile, third quartile, and interquartile range. Interpret these values.c) Calculate the sample standard deviation and interpret this value. d) What is the main advantage of the sample standard deviation over the sample variance as a measure of variability?Question 2.Each partner in a sample of 10 married couples was asked how happy each is in their own marriage on scale 1 to 100. The ratings by these couples (husband, wife) were:(60,50), (70,65), (80, 81), (80,79), (80,85), (40,35), (50, 55), (60,55), (65,65), (65,60).a) Just by looking at the responses without doing any formal calculation, can you arrive at any conclusion about the relationship between the husband and wife responses? Explain your answer.b) Calculate the sample covariance and interpret the result.c) Calculate the sample coefficient of correlation and interpret the result. Question 3.Define � as the number of heads observed in an experiment that flips a balancedcoin 3 times. Calculate:a) The expected value of �.b) The probability that � = 2.c) The probability that � ≥ 2.Question 4.A real estate developer is interested in the relationship between the price of houses in Melbourne and their distance to the CBD. Using data collected from real estate agents, he performed the following simple linear regression model: �! = �! + �!�! + �!,where the dependent variable (�) is the price of houses (measured in thousands of Australian dollars); the explanatory variable (�) is the distance to the CBD (measured in km); �! and �! are unknown parameters; and � is the disturbance term. The regression results are given in the following Table.Table: Excel Output for Linear Regression ModelRegression StatisticsR Square 0.4615Standard Error 137.1313Observations 10CoefficientsStandard Error t Stat P-valueIntercept 865.87 A 16.30 0.00Distance -14.75 3.01 B 0.00a) What are the values of A and B?b) What is the interpretation of the two parameter estimates? Do they correspond to your expectation?c) What are the predicted prices for a house in Burwood, which is 15 km from the CBD and a house in Yarra Glen, which is 60 km from the CBD? Are these predictions reliable?d) Is this prediction of above Table reliable? Explain.Question 5.A statistician is interested in the relationship between the salary of graduates from a Master program at a university and the number of years after their graduation. Using data from a random survey with recent graduates, he performed the following simple linear regression model:�! = �! + �!�! + �!,where the dependent variable (�) is the salary of the graduates (measured in thousands of Australian dollars); the explanatory variable (�) is the number of years after graduation; �! and �! are unknown parameters; and � is the disturbance term. The regression results are given in the following Table.Table: Excel Output for Linear Regression ModelRegression StatisticsR Square 0.8643Standard Error 9.4531Observations 30CoefficientsStandard Error t Stat P-valueIntercept 40.73 3.62 11.24 0.00Years 6.42 0.48 13.35 0.00a) What conclusions can you reach about the relationship between salary and number of years after graduation?b) What is the predicted salary for a person in the survey in 2012, who graduated from the Master program in 2008? Comment briefly on how safe you think it is to rely on this prediction.c) Find and interpret the value of the standard error of the estimate.d) What assumptions have been employed in order to obtain these regression resultsUSEFUL STATISTICS FORMULAESample Mean: � = !! !