Consider the following two investment alternatives, in which Alternative II is more economically attractive than Alternative I:

                                                        Alternative I                Alternative II

            Initial Investment                    $10,000                       $40,000

            Useful life                               5 years                         10 years

            Terminal market value            $1,000                         $5,000

            Annual expenses                     $20,000                             $7,000

            EUAC (12%), approx.            $22,617                         $13,800

Determine the percent change in the annual expenses for Alternative I that would make the two investments equally attractive. (Enter your answer as a positive or negative number without the percent % sign.)

1. Suppose a market is in equilibrium (i.e., S=D and profits are normal). If demand increases in this market, the equilibrium price will _____________. Ceteris paribus, what effect will this have on profits?  ______________. What happens next to this market and why? __________________. As a result, what happens to price at the new equilibrium? _______________

2. What does the “double price move” or “price reversal” refer to?

3. At equilibrium in an oligopoly, the size of economic profits will usually depend on the strength of ____________

4. Cartels – What they are and what they seek to do?

5. Suppose a market that had been in equilibrium experiences an increase in demand that result in a higher price for the product. What should you expect to happen to the price in the future and why?

6. We have described oligopoly as often having two very different faces. On the one hand, we often see oligopolies where the firms behave as __________________. On the other hand, we often see oligopolies where firms behave as ______________________

7. In a purely competitive market, an innovation that lowers cost will cause the market price to _________________________

8. Do cost reductions in monopolies or oligopolies usually lead to price reductions? __________. What might happen instead? _______________________________

9. What produces a “natural monopoly?” ____What are patent monopolies? ____

Please describe how an union may behave by strategically exploiting Marshall’s 4 rules.

Marshall's Rules:

Marshall rules for the elasticity of labor demand Alfred Marshall (1842-1924) described the “rules of derived demand”: Labor demand is more elastic the greater...

1 ... the elasticity of substitution; - the more capital and labor are substitutes, the more easily the firm can replace capital for labor when w increases;

2 ... the price elasticity of output; - w ?? p ?, so the more output responds to p the more the firm wants to reduce labor when w increases;

3 ... the labor share in total cost of production; - w ? increases total costs more when production is labor intensive; when w ? firms reduce labor more in sectors where labor share of costs large. (note: true if elast. product demand > elast. substitution)

4 ... the supply elasticity of the other inputs; - if the supply of factors that can replace labor is large, the firm will substitute away from labor more easily when w increases;

20 Simple Ways to Improve Capitalism for the Better with international example

1. What is the impact of a business cycle recession on the interest rate? Show graphically using S and D for bonds and using Liquidity preference framework. How are the results different?

Use the monopolistic competition model to analyze the potential effects of trade
(importing and exporting) on the pharmaceutical industry. (hint: highlight the tradeoffs).

1. In the collusion game, we found that collusion was only sustainable in the infinite horizon repeated game. One Nash Equilibrium of that game can be found when all players play a “grim trigger” strategy, where they collude until an opponent chooses to compete, and then compete for all future rounds as a punishment. In such a game, if the one period bonus that comes from competing is low enough, firms always collude and the punishment is never triggered. However, let’s think a little deeper about this Nash Equilibrium. Is the punishment (vowing to compete forever after one deviates) realistic, especially if firms can communicate freely? Why or why not? (Hint: Is a grim trigger Nash Equilibrium a Subgame Perfect Nash Equilibrium? What kinds of Nash Equilibria does Subgame Perfection rule out in sequential games?)

The rise of MBS, mortgage-backed securities, and other somewhat complex financial instruments is thought to be one the primary causes behind the Global Financial Crisis and the Great Recession following the crisis. Describe what securitization means and how incentives of all participants (i.e. borrowers, local banks, national banks, investment banks, insurers) led to the incredible rise of MBS in the leadup to the crisis.

What advantages do markets offer when viewed as selection devices for the evolution of an economy? (Beinhocker Chapter 13)

Respond to the following in a minimum of 175 words:

Discuss the limitations of GDP as a measurement tool.

What types of political, economic, and competitive challenges does MTV Networks International face by operating worldwide?

In fewer than 500 words, argue that beauty is an objective quality,and not a subjective taste.5(Hint: first, define beauty in a reasonable manner. Then,destroy the subjective argument, by showing that it is logically empty based on yourdefinition.)