Select any engineering company and assume you are an engineering manager working in that company. Your department has been awarded an external grant of $1M to select 1 project of your choice. You have identified 5 mutually exclusive projects to choose from. However, you can only select one and you have decided to select the 1 project by using NPV-based analysis. For this question, you do not have to calculate NPV or show any calculations.

(a) List your 5 hypothetical project choices with hypothetical NPV values.

(b) Select your 1 project and explain why you have selected that project.

(c) Explain the value of using NPV for such economic analysis.

Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves.

What is the required reserve ratio?

10%

40%

5%

25%

Suppose that the Federal Reserve (the "Fed") sells $4 million of bonds to a bond dealer, who pays the Fed by writing a check against the funds in her checking account. What is the initial impact of this transaction?

The banking system's holdings of securities fall by $4 million, and the banking system's total reserves rise by $4 million.

Checkable deposits fall by $4 million, and the banking system's holdings of securities fall by $4 million.

Checkable deposits fall by $4 million, and the banking system's total reserves fall by $4 million.

The banking system's holdings of securities rise by $4 million, and the banking system's total reserves fall by $4 million.

As a result of the Fed's sale of $4 million of securities, checkable deposits in the banking system can potentially   by as much as   .

Firm A: initial pollution level = 120, cost to reduce pollution 1 unit = $75

Firm B: initial pollution level = 150, cost to reduce pollution 1 unit = $100

a. Assume that the government decides to cut pollution by 1/3, telling firms that “Starting next year, you will only be permitted to emit 2/3 as much pollution as you currently do.” What is the cost for each firm under this policy?

b. Suppose instead that the government issued permits to each company, entitling them to emit up to 2/3 of their current pollution output. Firms may buy and sell these permits. What is the possible range of prices for which both firms would be willing to buy/sell?

c. Assume that the firms agree to a price in the range you found in part b. What firm buys permits and which sells? How many permits are exchanged?

d. What is the total cost of pollution reduction now? Hint: your answer should make sense when you compare it to part a

Outline how counter cyclical fiscal policy and balanced budget fiscal policy would close a recessionary gap. Be specific on goals, how each theory would achieve those goals, how they would close the gap, and potential negative effects.

In what way were the 1990s like the 1920s? Also, list multiple ways in which the two were different

Question 2

By Economic Growth we mean that:

1 The quality of the goods and services offered in the country is increasing.

2 The GDP per capita is growing from year to year.

3 There are more goods and services offered in the country.

4 The GDP is growing each year.

Question 3

Innovation is the key to economic growth because...

[Multiple correct answers]:

1 It allows greater output from the same labor and capital.

2 Many people can benefit from it simultaneously.

3 It has no decreasing marginal return (or it decreases only in the long run relative to capital and labor).

4 It allows higher productivity.

Smelling of Tulips, Inc., a perfume company, estimated its short-run costs using a U-shaped average variable cost function of the form and obtained the following results. Total fixed cost (TFC) at S.T. Inc. is $1,250.

a.    What level of output (Q) is associated with the minimum AVC? What is the value of AVC at this minimum?

b.    Determine equations for ATC, TC, and MC. Graph one scatterplot of Q vs. TC, and another scatterplot of Q vs. ATC, AVC, and MC.

c.    When output is 9, how much is TC, AVC, ATC, and MC?

d.    At what amount of output does labor change from exhibiting increasing returns to decreasing returns?

Question 1

1. Describe briefly the three hypothesis testing procedures that are available under maximum likelihood estimation. Which is likely to be calculated in practice and why?  
2. What stylized fact of financial data cannot be explained using linear trend models? ( 10 marks)
3. Which of these features can be modelled using a GARCH (1,1) process? ( 10 marks)

IS-LM closed economy – SR

The Economy of North Haverbrook is described by the following agents and characteristics.

consumers C = 50 + 0.85 (Y-T)

(taxes) T = 100

(government expenditures) G = 100

(investments) I = 500 – 50r

(money supply) M = 3,000

(price levels) P = 1

(money demand) L (r,Y) = Y – 10r

(potential output) Y* = 3200

The goods and services markets in equilibrium is described as: Y = AE, where AE = C + I + G, and money market is in equilibrium when M/P = L(r,Y).

[2 points each, except for h) 4 points]

1. Find the aggregate expenditure function

2. Find the IS curve

3. Find the LM curve

4. Find the equilibrium exchange rate and output (Y, r)

5. Find the aggregate demand curve

6. Find Private savings, Public Savings and National savings

7. Do we have an expansionary gap or recessionary gap? What size?

8. If fiscal policy is used (government expenditure: G), how much +/- change will be required to close the gap?

1. If fiscal policy is not used, how will the gap close? (impact on prices and output – you can graph a diagram if it helps)

Consider an individual making choices over two goods, x and y with initial prices px= 2 and py= 1, with income I= 100: (a) If an individual has the utility function u(x;y) = 3x+y. what would the total, income and substitution effects of a price of x increase to 5? Show your work (b) If an individual has the utility function u(x;y) =x^2+y^2; what would the total, income and substitution effects of a price of x decrease to 0:50? Show your work

Suppose members of the United States, Mexico, and Canada trade agreement (USMCA) agree to reduce imports of foreign oil and set a price floor for North American oil. Briefly describe the impact this might have for Alberta oil producers, and for Canadian oil consumers. (200 words)

Firms that have market power can apply the mixed bundling strategy to increase their profits. Some researchers claim that even if a firm does not have any market power, i.e., even in a competitive market, firms can use mixed bundling (for example, those small restaurants/fast food restaurants located in the shopping malls). Explain why and how firms in competitive markets may apply mixed bundling. Provide a numerical example to prove your case.

Explain how the value of a social media network increases with the number of connections. Apply concept to explain why Facebook or Google often purchase new, unprofitable startup social media companies for billions of dollars.