# Final Exam
Review Session 1 Problems
Questions; Answers will NOT be posted.
Review Session 2 Problems
Questions; Answers will NOT be posted.
Note: these problems are longer than the ones on the exams, but they have similar level of difficulty as the exam questions.
Final Exam Coverage (Updated August 1):
(1) First half of the course + Firm Supply and Industry Supply
(2) General Equilibrium Theory (Exchange, Production, Welfare)
(3) Game Theory (Strategic Form, Extensive Form)
(4) Game Theory Applications (Mixed Strategy NE)
(5) Monopoly, Monopoly Behavior and Factor Markets
(6) Oligopoly (Cournot, Bertrand, Stackelberg)
(7) Asymmetric Information (Signalling Game, Adverse Selection, Moral Harzard)
📗 You do NOT need to be able to solve the following problems on the final exam because there are pieces of mathematics that you do not need to know:
PS1Q3, PS3Q1, PS6Q3, PS6Q5, PS7Q3, L7Q2, L9Q1, L9Q2
📗 You do NOT need to be able to solve the following problems on the final exam because the algebra is way too complicated for the final exam:
PS0Q4, PS5Q6, PS5Q7, PS8Q2
📗 You do NOT need to be able to solve the following problems because they are not covered in the lectures.
PS2Q2, PS2Q3, PS3Q3, PS3Q4, L7Q4
📗 You DO need to know the method of approaching ALL of the problems in the lecture notes and problem sets (but not the mathematical details for the questions listed above).
📗 You do NOT need to memorize ANY definition and statement and proof of theorems from the lecture notes.
📗 You DO need to know how to apply ALL the algorithms I listed in lecture notes to solve problems.
The following is the link to all lecture problems and problem sets problems:
L0:
Questions
L1:
Questions
L2:
Questions
L3:
Questions
L4:
Questions
L5:
Questions
L6:
Questions
L7:
Questions
L8:
Questions
L9:
Questions
PS0:
Questions
PS1:
Questions
PS2:
Questions
PS3:
Questions
PS4:
Questions
PS5:
Questions
PS6:
Questions
PS7:
Questions
PS8:
Questions
PS9:
Questions
# FAQs
Emails (for course content questions): eco206.utoronto@gmail.com
Emails (for administrative questions): yiyang.wu@mail.utoronto.ca
Office Hours (second half): IN313 (Innis) 1:00 - 3:00 pm and 7:00 - 9:00 pm every Wednesday
(i.e. July 8, July 15, July 22, July 29, August 5)
I will be somewhere in Robarts Library second floor from 4:30 - 6:30 on August 10, 11, 12, 13
L2
(41) How to solve for CE for Pure Exchange Economy where both consumers have substitute preferences? A: See videos:
Part I,
Part II.
L9
(40) How do I know which IC or IR are binding? A: This is hard to answer in general, see problem 9 questions 2 and 4 videos:
PS9 Q2 Video and
PS9 Q4 Video
L9
(39) Is it possible that both IC and IR are not binding? A: Yes, see problem set 9 question 4:
Video.
L8
(38) How to find NE of Stackelberg with Cournot outcome? A: See video:
Link.
L8
(37) How do I know if a punishment strategy is credible or not? A: If the punishment strategy profile forms a NE, then it is credible and the equilibrium for the whole game is SPE; otherwise, it is not credible and the equilibrium is a NE but not SPE.
L7
(36) How to solve the Bertrand Food Truck game? A: See videos:
Part I;
Part II.
L7
(35) How to writing the best response correspondences for auctions and how to find NE given these correspondences? A: See videos:
Part I;
Part II.
L8
(34) How to find minimax payoff and punishment strategy? A: See in videos: discrete
Repeated Split Steal Game; semi-continuous
Repeated Study Dates; fully continuous
Modified Group Work.
L7
(33) Can we write down the best response correspondence directly without going through all the comparing utility stuff? A: YES! Video explanation for two examples of finding the correspondence intuitively without all the algebra:
Bertrand Wage and
Food Truck Hotelling
L6
(32) When should I solve a continuous action game using best response function / correspondence? A: Whichever one the question asks, full correspondence is always preferred, but sometimes when the algebra is too difficult, do not bother. The fixed cost duopoly problem can be solved with or without the full best response correspondence. This video explains how to do it with the correspondence method:
Video Explanation
L5
(31) How to write the indifference condition for more than two players A: See the last question of the problem set:
Video Explanation.
L5
(30) How do I know when the indifference method does not work? A: When the mixing probability you found is less than or equal to 0 or larger than or equal to 1. One example is the asymmetric study date problem:
Video Explanation.
L4
(29) How to get the best response function for the Course Selection problem on PS4? A: See video
Link.
L2
(28) How to find the production set (PPF) to set MRTS = MRS when solving for Pareto set for an economy with production? A: We never did that in class, and that's not how we solved the competitive equilibrium. Only the diagram looks like that, when we actually solve, we never set MRS = MRTS, we used two market clearing conditions.
L1
(27) How to draw the indifference curves from a utility function? A: Set the utility function equal to a fixed u, solve for either x or y, then draw the resulting function.
L4
(26) How to find all NE of an extensive form game? A: The adjustment method cannot be used to find all NE: it can only find NE that are "close" to the SPE. Only conversion into strategic form can be used to find all NE.
L1
(25) When can MRS method be used? A: You can use MRS method when there won't be any corner solutions. When x = 0 and y = 0 are clearly not the optimal, for example Cobb-Douglas, then you know there won't be corner solutions.
L3
(24) For the Asymmetric Cobb Douglas economy problem in the economy, when solving for the welfare maximizing allocation, how to get x_1 in terms of y_1? A: Set the two terms inside the min{..., ...} equal to each other to solve for x_1 in terms of y_1, and then substitute this expression back into the original maximization.
L2
(23) In which step should we solve which variables when solving for the competitive equilibrium with production? A: The main idea to solve CE with production is solve for the 3 prices using the two market clearing conditions. The goal is to express everything in terms of the prices p, w, r, and solve for these with the four equations. You can have any kind of intermediate steps in the demand / supply computations.
L1
(22) Why is the price p = -1 for the Bad Good question in the problem set? A: This is just one of infinite number of CEs. In order to have both x >= 0 and y >= 0 feasible. p = -1 is one price such that when you substitute it into the demands, you get all x_A = y_A = x_B = y_B = 0 all feasible.
L1
(21) How to solve for the PE set for the substitute utility functions algebraically? A: Mistake in the steps are fixed now July 18. Video explanation:
Link.
L1
(20) How to deal with max{x, y} utility functions? A: Their indifference curves are L shapes rotated 180 degrees. See video:
Link.
L4
(19) Is the midterm similar to the past midterms? A: NO! The coverage is completely different! Out midterm 3 is a combination of Midterm 2, 3, and final from the past few years. The midterm is very similar to the sample midterms, tutorial problems, other problem set problems, lecture examples, in that order.
L4
(18) How to solve the Hunger Games? A: ... Mockingjay Part 2 opens November 20 ... Well, for the problem in the problem set, see video here:
Link.
L4
(17) Can you repeat how to solve the Vaccination game in a video? A: Yes.
Video
L4
(16) In the veto game in the lecture what actions are dominated? A: No dominated action for player M and strategy BAB is strictly dominated by CCA for player A because no matter which action M chooses, BAB always gives a strictly lower payoff. BAA, BCB, CAB, BCA, CAA, BCA are weakly dominated by CCA for player A because no matter which action M chooses, CCA always gives either equal or better payoff.
Video.
L4
(15) Can you repeat the two ways of finding NE of an extensive form game? A: See videos in the Algorithms section of the Lecture 4 page. Links here:
Video - Conversion Method ;
Video - Adjustment Method ;
Video - Adjustment Method 2.
L1
(14) How to solve for the PE set and CE for substitute and complement utility functions? A: See problem set: complements:
Video ; substitutes:
Video Part I ;
Video Part II
L1
(13) Why are there two horizonal pieces in the Pareto set when both utilities are quasilinear? A: See video:
Link
L2
(12) Do I need to know how to solve an exchange economy with production for the exam? A: Yes.
L1
(11) Can you explain the fundamental theorems again? A: Yes.
Video.
L1
(10) How to find upper contour set on the Edgeworth box? A: See video:
Link.
L1
(9) How to understand the numbers inside the Edgeworth box? A: They are utility of consumer A and utility of consumer B:
Video Explanation.
L0
(8) Why is the long run cost curve a piecewise function? A: No, it is just a constant. The piecewise function is just using more precise mathematical notations, there is no need to do that for the exam:
Video Explanation.
L0
(7) How to Lagrange the cost minimization problem in the lecture? A: Don't do it. But, video:
Link.
L0
(6) Why can we set MC = AC to find long run industry supply? A: LRIS is constant at min AC, and finding minimum AC is the same as finding the intersection of MC and AC, because MC always intersect AC at its minimum. Also explained in a video:
Link.
L0
(5) Is the supply curve the same as MC? A: Supply curve is NOT MC: (1) Supply is quantity as function of price; MC is cost as a function of quantity. (2) Supply is never negative, and is strictly positive only above shutdown price: MC can be negative.
L0
(4) Why is long run industry supply equal to MC in Fall 2013 Midterm 2 Q4(b)? A: Because MMC is constant, AC is also constant, meaning the minimum AC occurs at that same constant. Therefore, LRIS which is equal to min AC is also the same constant.
L0
(3) Why is shutdown price equal to minimum AVC? A: Explained in video:
Link.
L0
(2) If the minimizer of AVC or AC is x* = 0, is AVC = VC / x or AC = TC / x undefined? A: Yes, in that case, technically, we should use pi(p) = -FC and pi(p) = 0 to find shutdown and exit prices, I have updated the slides to show this alternative method. The problem is also explained in the video:
Link
L0
(1) Could you explain the difference between demand derivation and supply derivation again? A: Yes, in video:
Link