Terminal Exam

Moiz Ali Abbas

SP18-BBA-165

Microeconomics

BBA-1D

MCQS
Answers

1. C
2. C
3. B
4. A
5. D
6. B
7. A
8. A
9. D
10. B
11. A
12. C
13. D
14. D
15. A
16. A
17. C
18. C
19. A
20. D
21. C/D
22. B
23. C
24. A
25. B
Short Answer 1)
a. Positive externality

b. The market equilibrium price and quantity are $6 and 16 units respectively.

c. The area of deadweight loss is the triangular region bound by points D,E,F

d. The value of per-unit subsidy that would achieve the socially optimum quantity is $2

e. The units that the consumers and producers will exchange at price floor of $8 will be 24 units

Explanation:

A Positive Externality occurs when the consumption or production of a good causes a benefit to a third
party. For example: When you consume education you get a private benefit. But there are also benefits
to the rest of society

In a market where a positive externality is present, the market equilibrium occurs where Marginal
Private benefit equals the marginal private costs i.e. MPB = MPC

In a market where a positive externality is present, the deadweight loss is represented by the area above
the marginal cost curve and below the marginal social benefit curve and bound by the equilibrium prices
of the market and the socially optimal price.

The value of the subsidy is the one that would bring the market from the equilibrium to the socially
optimal level( For our example above, the subsidy will be $8-$6=$2).

A price floor is the lowest price beyond which the regulations dictate that they cannot go below. For our
example above, a price floor of $8 is above the equilibrium and the producers will be willing to supply a
quantity of 24 units at this price. Similarly, the consumers will be willing to consume 24 units at this
price since the market equilibrium was still below the optimal level.

Answer 2
The labor demand is a derived demand as a consequence of the demand for the goods and services. As
such, the employees alone do not provide utility function for the producers. They only allow producers
to fulfill the demand of consumers for the products.

Under the competitive firm, there is no significant impact to the quantity demanded for the labor force.
At the labor market equilibrium, there is no surplus or shortage of employment. The higher the wages
the lower the labor shortage. The lower the wages the lower the labor surplus.

On the other hand, under monopolistic competition where there is only one buyer in the labor marker,
generally, the producer only employs fewer workers and pay less than competitive ones. Because there
is only one which demands labor in the market, it has the power to pay below the marginal revenue
product of labor and to employ fewer workers than a perfectly competitive firm. However, this can
cause exploitation of employees.

Discuss the various aspects of wage differentials. Why are some people paid better than
others? How are earning and discrimination related to employers, consumers and
governments? Is the system fair?

Answer 3)
Wage Differentials:

Types and Implications If we consider different unforeseen variables, we find that there might be
contrasts in pay and pay structures. These differentials might be mechanical and word related, local,
hierarchical and individual.

In the event that we consider different unexpected variables, we find that there might be contrasts in
compensation and pay structures. These differentials might be mechanical and word related, local,
authoritative and individual.

Modern and Occupational Differentials:

Industrial and word related differentials exist due to prerequisite of various range of abilities and
irregularity popular and supply of faculty having such aptitudes. Wages and compensations are typically
fixed based on aptitudes needed to play out a work. Along these lines, profoundly particular positions
requiring more elevated level of aptitudes are connected with more significant salary as well. Combined
with this, lack of supply of such staff additionally instigates the installment of more significant
compensation.

Provincial Differentials:

Apart from mechanical dry word related differentials, there might be contrasts in wages and
compensations area smart additionally inside a similar industry and occupation gathering. Such
contrasts are obvious in various nations of the world just as various locales inside a nation. Such
contrasts exist as a result of the distinctions in average cost for basic items speed of modern turn of
events and absence of satisfactory portability of work force starting with one area then onto the next.
For instance, wages and pay rates are higher in metropolitan urban communities when contrasted with
different urban areas; higher in urban communities when contrasted with country zones.

Authoritative Differentials:
 Different associations are falling in a similar industry gathering and at a similar area offer various wages
and pay rates to people having comparative foundation. The primary purposes behind authoritative
differentials are association’s strategy to enroll explicit kinds of work force and their ability to pay. For
instance, the vast majority of the global associations working in India offer a lot more significant
compensations to their representatives when contrasted with their partners of Indian inception.
Essentially, bigger associations offer a lot more significant compensations when contrasted with more
modest associations.

Individual Differentials:
Wage and pay differentials exist at individual level as well. Various people having comparative
capabilities are offered various pay rates in similar associations. This happens on the grounds that they
have gained various aptitudes notwithstanding the way that they may have comparative instructive
foundation. This happens all the more so when ability based compensation framework is embraced as
against work based compensation.

Compensation differentials have various ramifications both at full scale and miniature levels.

At the full scale level, these differentials decide the assignment of HR and non-HR. This distribution
decides the development design in the financial framework. At the point when a specific industry or
occupation offers higher wages and pay rates, the monetary assets are outfitted to grow such staff. For
instance, in India, instructive exercises have expanded in the regions of the board and data innovation
on the grounds that these regions extend to more significant compensations and better open positions.

Explanation:

Segregation includes following up on the conviction that individuals from a specific gathering are second
rate exclusively on account of a factor, for example, race, sex, or religion. There are numerous sorts of
separation however the spotlight here will be on segregation in labor markets, which emerges if laborers
with a similar ability levels—as estimated by instruction, experience, and aptitude—get diverse
compensation get distinctive compensation or have diverse open positions in view of their race or sexual
orientation.

Profit GAPS BY RACE AND GENDER

A potential sign of work market segregation is the point at which one gathering is paid not exactly
another. As per the U.S. Evaluation, the hole between the profit of blacks and whites lessened during
the 1970s, however has not changed in 50 years. In both sexual orientation and race, a profit hole
remains.

Compensation Ratios by Sex and Race. The proportion of wages for dark laborers to white specialists
rose considerably in the last part of the 1960s and through the 1970s, yet has not changed much from
that point forward. The proportion of wages for female to male specialists changed minimal through the
1970s, yet has risen considerably since the 1980s. In the two cases, a hole stays between the normal
wages of high contrast laborers and between the normal wages of female and male specialists.

An income hole between normal wages, all by itself, doesn't demonstrate that separation is happening
in the work market. We need to apply similar efficiency attributes to all gatherings (workers) included.
Sex separation in the work market happens when ladies are paid not as much as men regardless of
having tantamount degrees of training, experience, and aptitude.

Similarly, racial segregation in the work market exists when racially different representatives are paid
not exactly their collaborators of the larger part race in spite of having practically identical degrees of
instruction, experience, and skill. To bring an effective sex separation claim, a female worker should
demonstrate that she is paid not exactly a male representative who holds a comparative work, with
comparative instructive fulfillment, and with comparative ability. In like manner, somebody who needs
to sue on the grounds of racial segregation should demonstrate that the individual in question is paid
not exactly a worker of another race who holds a comparable work, with comparable instructive
fulfillment, and with comparable mastery.