3) Suppose the real interest rate falls in the two-period model (where income and taxes are exogenous). Consider the income and substitution effects and explain in words and through diagrams how this change affects current consumption, future consumption, and savings of a consumer who is a

a) lender

b) borrower

c) Which type of consumer (lender or borrower) becomes better off after the interest rate change? Explain in words.

Firm Q offers a fairly lucrative defined benefit pension. However, the full benefit is reserved for those who stay at

least 30 years. Moreover, in order to qualify for any reasonable pension a worker must first be vested. A worker is

only vested (eligible for full retirement benefits) at Firm Q after having been there at least ten years. According to

the Lazear contract model this combination of vesting and a lucrative defined benefit pension plan is designed

to:  

An increase in investment creates a ______ ______ in aggregate demand, the aggregate demand curve shifts ________ potentially brining ________ phase of the business cycle.

larger; increase; rightward; expansion

larger; decreases; leftward; recession

smaller; increases; rightward; expansion

smaller; decreases; leftward; recession

1. ( A ) What is the WACC (weighted cost of capital) for a company if it borrows from two sources: bank loan of 25 million at 6% per compounded monthly, and retained earning of 10 million with earnings per share of 35 cents and price per share 14.00 dollars. Income tax rate is 35%.

( B )When using the “longest life” planning horizon what issue (or issues) might you have to consider for alternatives whose cash flow profiles are shorter than the “longest life”?

- Choice a    determination of salvage values for any truncated cash flows

- Choice b    the validity of the assumption that cash flow profiles are repetitive

- Choice c    both choice a and choice b

- Choice d    Neither choice a nor choice b

( C ) . What is the future worth of the following: At t = 1 you deposit 10,000   At t= 2 you deposit 10,500 .   Every year you increase your deposit amount by 500.   This goes on until t = 60.   I = 6%. How much is in the account at t = 60?

What are the main arguments made by opponents of government “stimulus” spending? How does Wolfson address each of these points? How is this question especially relevant in spring 2020?

Part II.

Suppose there are students living in two dorms, called Gold and Blue. Students are each one of two types, Partiers and Studiers, which determines their preferences. Each dorm will vote on a tax rate, the proceeds of which will be used to fund a party. The mean of the votes will become the effective tax rate, and all residents of the dorm will be required to pay that fee. To simplify the problem, assume that all people may vote for either a tax of $0 or a tax of $100. (For example, if half of all people vote for $100 in a dorm, then the tax rate will be $50. The tax rate must be between $0 and $100.)

All students have a payoff (utility) equal to (1000−T)+μ(N ×T)

where T is the tax that they pay, and N is the number of people living in the dorm (so N × T is the total money spent on the party). The parameter μ is 0 for Studiers and 0.2 for Partiers.

Suppose that there are 100 Partiers and 100 Studiers. Initially, there are 70 Partiers and 30 Studiers in Gold Dorm, with the remainder in Blue. Given that allocation of people, what will be the tax rates in Gold and Blue? (2 points) (There will be two different tax rates.)

1. What is the total utility (payoff) in society (i.e., add up the payoff of all 200 students)?

2. Suppose now that people can move and sort. Suppose further that people choose where to go assuming that the tax rate and party size tomorrow is the same as it was yesterday. What will be the new tax rates in Gold and Blue after people sort?

3. What is the total utility (payoff) in society (i.e., add up the payoff of all 200 students)?

QUE// VIVDLY DISCUSS IN A LENGTHY THE MAJOR MACROECONOMIC INDICATORS AND ITS IMPACT ON THE DEVELOPMENT OF BRAZIL ECONOMY.

Discuss the following topic in adequate detail ( The five competitive forces that determine industry profitably.) With examples and references

Everyone knows what money is. It is the collection of coins and bills that we carry around in our pockets, purses. and wallets. Or at least that people often think that is what money is? In fact, “money” is merely a “social convention” as described by the text – Money is “what it does” rather than “what it is.”

i.     (1) Briefly describe three (3) of the four (4) functions that must be present to make money, well, money, AND; (2) It is often debated whether “crypto-currencies” such as BitCoin or Ethereum or perhaps the forthcoming “Libra” from Facebook, actually are “money?” WHICH “function” of money causes the biggest question for these crypto-currencies and WHY is this the case?

1. When a firm’s ATC of production increases as it increases production, this firm is said to be experiencing:

A) diseconomies of scale. B) economic profit. C) economies of scale. D) a barrier to entry.

2. Suppose you represent the student government on campus. What sort of profitable price discrimination

practices can you engage in on the following services? Be specific and use different techniques for each

part.

A) Parking spaces

B) Theater productions

C) Sports events

Consider the monopoly producer of Green Tractors whose demand function is P = 100 – Q and total cost TC = 16 + Q^2. Based on this information, answer the following questions. Hint: It might be helpful to sketch a diagram but you are not required to do so.

(4)a. What output level and price will Jim choose? (4)b. How much economic profit will Jim earn? (4)c. If Jim's total cost function changes to TC = 32 + Q^2, what, if anything, would change about his price and output decisions? Explain briefly. (4)d. If Jim is able to implement a first-degree price discrimination scheme, how many units will Jim sell and what will be the price of the last unit he sells? (4)e. Given your answer to part “d,” how much producer surplus will Jim earn?