Final Exam 2017/18 PDF

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The final exam for the year 2016/2017 in Economics & Society...

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SEMESTER 2 EXAMINATIONS ACADEMIC YEAR 2017/2018

ECON 10040 Economics and Society Professor Oliver Morrissey Professor Karl Whelan Professor Paul Devereux*

Time Allowed: 2 Hours Instructions for Candidates Please answer all questions Please keep your answers concise and to the point. All questions carry equal points.

Instructions for Invigilators Non-programmable calculators are permitted Programmable calculators are not permitted

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Question 1 Using diagrams, explain the effects of a minimum wage on (1) low-skill workers and (2) consumers. Question 2 A. Describe the availability heuristic and provide an example. B. Bill is described as "intelligent but unimaginative". Many people reading this character description rated "Bill is an accountant who plays jazz for a hobby" as more likely than "Bill plays jazz for a hobby". Discuss this finding in the context of behavioural economics. Question 3 A. What is the difference between the three main types of taxation (progressive, regressive, and proportional)? B. Provide a real-world example of a regressive tax. Question 4 The government is considering subsidising vaccinations against influenza. A. Why might the government want to do this? B. Using diagrams show the effect of (1) a cash payment per vaccination to the firms providing vaccinations. (2) a cash payment to people who get themselves vaccinated. Question 5 What are the main differences between taste-based discrimination by employers and statistical discrimination in the labour market? Question 6 A. Why is it difficult to assess the effect of policing levels on crime rates? B. Briefly describe one economic study that examined the effects of the level of policing on crime.

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Question 7 Assume two employees (Jane and Kate) compete for a promotion in a firm. The winner gets paid 20 and the loser gets paid 10. Employees choose an effort level: They can choose low effort (e = 0) or high effort (e = 1). Low effort costs the employee 0 and high effort costs the employee 4 (these are non-pecuniary costs). If both employees choose the same effort level, they each have probability of 0.5 of winning. If an employee chooses a higher effort level than the other, she wins and the other employee loses. Assuming the employees maximise their expected payoffs, find the best effort choice for Jane. Question 8 What is the optimal bidding strategy in a second-price sealed bid auction? Explain why.

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