QUIZ

Odd Semester 2017/2018

ECON 10101-Mikroekonomi 1

No Lecturer Tutor
1 Maddaremmeng A. P. (English) Assyifa Szami Ilman
2 Uswatun Hasanah (English) Agung Romy Hasiholan
3 M. Shauqie Azar (English) M. Anggada P. Prabowo
4 Widyono Soetjipto Aurora Maria Sarah
5 Willem Makaliwe (English) Auliya Devaldi Wiratama
6 Dwini Handayani Arianto / Niniek L. Gyat Restananda N. Yusacc
7 Widyanti Soetjipto Ayu Dwi Putri
8 Lydia Napitupulu (English) M. Agung Lazuardi

Please answer all questions below.

Problem 1 (25 Points)
Aji and Apung live in Micronesia. Everyday, they consume two goods, Hiloo dan Miloo.
a. Assume that Aji and Apung have different preferece: Aji has diminishing MRS (marginal
rate of subtitution), while Apung has constant MRS. Please draw indifference curve of
Aji and Apung in the same quadrant! Explain! (note: the assumption only apply just for
question a) (5 points)

Price of Hiloo is twice of the price of Miloo. Apung’s income is twice of Aji’s Income.
b. Please draw the budget line of Aji and Apung in the same quadrant! Explain! (5 points)

In Micronesia, Miloo is the food for low income group. There is an income threshold (X) that
people will reduce their consumption on Miloo as income increases if their income lie above
the threshold. Aji’s income is far below the threshold X while Apung’s income far above the
threshold X.
c. Using Engel Curve, please draw Aji and Apung position in the same quadrant! Explain! (5
points)
d. Suddenly the Government of Micronesia imposed additional tax that makes the price of
Miloo increase by 1.5 times. How is the impact of the price increase to Aji and Apung
consumption on Miloo? Please draw in separately for each individual! Explain! (hint:
analyze using subtitution and income effect) (5 points)

Ninety nine percent of Micronesian income are below the income threshold X, while in
Macronesia, Micronesian neighbour, 90 percent of its people have income more than the
income threshold X. Population in Macronesia is twice from Micronesia.
e. Please draw the demand curve of Miloo in Micronesia and Macronesia in the same
quadrant! Explain! (hints: relates the condition of Engel curve, analyze subtitution and
income effect, and how its derived to individual demand curve until its aggregated to
market demand curve). (5 points)

Problem 2 (25 Points)
Choco Late’s Factory produces chocolate according to the following production function: q = (K
– 800)1/4L1/4.

a. Determine whether the production function is IRS or DRS! Give example. (5 points )
b. Assuming that the unit cost of capital (r) and the unit wage (w) are both equal to 1,
derive Choco Late’s Factory’s demand for inputs – capital and labor, respectively – as a
function of its choice of output (q) (Hints: Use lagrange by minimising cost s.t isoquant
𝑞= (K – 800)1/4L1/4.) (5 points )
c. Show Choco Late’s Factory’s long run total cost (5 points )

Supposed that chocolate market are perfectly competitive (i.e. Consumers think that chocolate
is a homogenous product, there are no costs of entry or exit for a firm on the market, and any
firm in this market will have access to same technology as Choco Late’s Factory ).

d. If the market demand for chocolate is given by P = 4000 – Qd, what will the price be
inthe long run in this market? How much will each firm produce in this market in the
long run? (5 points )
e. How many firms will there be in this market in the long run? (5 points )

Problem 3 (25 Points)

Tol Jasa Warga (TJW) is a toll-road operator which operates around Srengseng Sawah. TJW has
100% monopoly right in operating the toll. If you are appointed as the operation director of
TJW, using your understanding in market power:

a. What are programs you may offer for TJW if you attempt to apply 1st, 2nd, and 3rd degree
price discrimination? (5 points)
b. If the demand for TJW service is 𝑄 = 55 − 𝑃 with constant marginal (and average) cost
5, what are the value of 𝑃 and 𝑄 under profit maximization? (5 points)
c. How much TJW’s profit/loss if the fixed cost is 1000? (5 points)
Furthermore, TJW’s consumers can be divided into two groups, i.e group 1 (users in weekdays)
and group 2 (users in weekends). Demand of both groups can be represented as 𝑄' = 55 − 𝑃'
and 𝑄( = 70 − 2𝑃( , respectively

d. If you as the director cannot apply any price discrimination strategy, what is the
combination of 𝑃 and 𝑄 that maximizes the profit? (5 points)
e. In contrast, if you can apply the discrimination, what is the new combination? (5 points)

Problem 4 (25 Points)

PT Coblos is a monopolist in the printing industry of Nowhere country. The cost of the
monopolist is TC = 200 – 10Q + Q2 and its demand is P = 100-4Q
a. Find production (Q), price (P), and profit of PT Coblos if the firm want to maximize its
profit. (5 points)
b. If PT Coblos acted as if the firm in the competitive market, find its production, price, and
profit of the firm. (5 points)
c. Calculate consumer surplus when PT Coblos as monopolist (case “a” above) and as in
perfectly competitive market (case “b” above). (5 points)
d. Provide evidence based on the condition above (case a) that shows that “the mark up
over marginal cost is equal minus the inverse of the elasticity of demand. (5 points)
e. Economists and Policy Makers concern about the social cost created by the monopolist.
What is the social cost of the monopoly and provide calculation of the social cost from
the monopolist. (5 points)