4. Suppose we have a market for coffee and pastries.
a. Graph the market (no need to give numbers for endpoints of the budget constraint) and show an optimal consumption bundle.
b. Suppose the price of coffee drops. Graph the new budget constraint.
c. Now, illustrate the INCOME and SUBSTITUTE effects of the price change and show the new optimum. Remember, you must draw the imaginary budget constraint and then find the tangency on the new budget constraint.
In: Economics
|
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Cardtown reveals that a 13% increase in income leads to the following changes:
Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)
|
In: Economics
A large manufacturing company in Jubail is considering
an electric power plant project in order to save on their electric
power consumption by generating its own power supply. The company
currently uses 552,000 kW of electric energy a year and pays an
average of $3.05 per kwh. The construction of the power plant would
require an initial cost of $1,600,000 now plus an additional
$950,000 investment at the end of the first year. It is expected to
be operational for 10 years with an estimated residual value of
$160,000 at the end of the 11th year. Since the installation of the
project would take about one year, the annual benefit (in terms of
savings) as well as the annual costs would occur only starting at
the end of the second year. At that time, the annual operation and
maintenance cost is estimated at $750,000 and expected to increase
by 5% annually until the end of its useful life. As the capacity of
the power plant would be more than adequate what the company
needed, the excess energy could be supplied to the neighboring
establishments from the fifth year up to the end of the productive
life of the project, thereby creating an additional income of
$105,000 per year.
Suppose MARR=15%, evaluate this project proposal using all relevant
and applicable project assessment tools and techniques. Based on
the analysis results, write a detailed recommendation report
explaining and justifying your decision whether the project
proposal should be accepted or rejected.
In: Economics
An industry's inverse demand was P^D = 20 - 0.1Q and its inverse supply was P^S = 4 + 0.1Q.
Calculate the consumer surplus, producer surplus, government revenue and deadweight loss for taxes of $4, $8, $12 and $16 per unit sold.
Graph government revenue and deadweight loss as functions of these tax rates.
What tax maximizes government revenue?
In: Economics
All firms in an industry are identical with fixed costs (FC) of $160 and variable costs (VC) of
$22q + 0.1q^2
What is the equation of average variable costs?
What is the equation of average total costs?
What is the equation of marginal costs?
At what level of output are average total costs at their minimum?
At what level of output are average variable costs at their minimum?
What is the equation of this firm’s short-run supply curve?
Explain all answers
In: Economics
1. Suppose price-taking firms have cost functions given by C(q) = 90 + 5q + 0.025q .
What are the equations of marginal costs and average costs?
How much would the firm produce at prices of $9, $10, $11, and $12?
How much profit would the firm earn at prices of $9, $10, $11, and $12?
Graph the MC, AC. Indicate the profits at a price of $9 per unit.
What price would be charged in the perfect competitive equilibrium?
Explain answers.
In: Economics
Your company is considering expanding by opening new representative offices in the European Union (EU). Nevertheless, the size of the investment is significant and top management wishes to have a clearer picture of the current and probably future economic status of the EU. Work out an executive summary describing the features you consider as crucial in making such a decision.
In: Economics
13. Firms in a perfectly competitive firm make 0 economic profit in the long run.
True or False
14. A firm in a perfectly competitive market, finds that it's MR = MC occurs at Q = 100, at which point the market Price is $8. The firm's ATC = AFC+AVC = $6; Is the firm making a profit or loss at this point of production?
a.Loss of $200
b.profit of $600
C.loss of $600
D. profit of $200
15. A perfectly elastic demand curve has an elasticity of
a. infinity
b. 0
c. 1
d. 100
16. The Cross-Price elasticity of demand Between X and Y will always be negative if the goods are Complements.
True or False
In: Economics
Dear Economic Analyst,
I need your expertise in determining how many workers to hire and how much feed to purchase. The current price of labor is $60 per day, and feed costs $75 per ton. Below is my marginal physical product of both labor and feed.
First, my current budget is unknown. Can you tell me the order in which I should purchase labor and feed? This order will provide priority when deciding on my level of inputs.
Secondly, although my budget is not completely known, I am guessing I will have around $480 to spend. If this amount becomes my true budget, what combination of labor and feed should I choose?
In your report, please give me all the data you are using for your analysis in a simple table. Clearly state how you are reaching your recommended decision.
Thank you in advance,
Donna Pigtail
Owner, Fat Pigs Inc.
|
X1 (labor) |
MPP1 |
X2 (feed) |
MPP2 |
|
0 |
|
0 |
|
|
|
210 |
|
278 |
|
1 |
|
1 |
|
|
|
186 |
|
255 |
|
2 |
|
2 |
|
|
|
162 |
|
240 |
|
3 |
|
3 |
|
|
|
144 |
|
218 |
|
4 |
|
4 |
|
|
|
120 |
|
188 |
|
5 |
|
5 |
|
|
|
102 |
|
173 |
|
6 |
|
6 |
|
In: Economics
9. If the Price of a related good A changes, then for good B stay on the same demand curve, and move along it, as opposed to shifting to a new demand curve.
True or False
10.If the Income Elasticity of deamnd for a good is negative, we can say that the good is normal good.
True or False
11. Own price elasticity of demand is always negative, because of the law of demand.
True or False
12. A firm in a perfectly competitive market, finds that it's MR = MC occurs at Q = 100, at which point the market Price is $8. What is the firm's TR at this point?
a.100
b.8
c.800
d.10.50
In: Economics
Autoworkers agree to a cut in the nominal wage rate. This event ________ short-run aggregate supply and ________ long-run aggregate supply.
|
A. |
does not change; does not change |
|
|
B. |
decreases; does not change; |
|
|
C. |
increases; does not change; |
|
|
D. |
increases; increases |
Discretionary fiscal policy
|
A. |
involves only a change in personal income tax rates. |
|
|
B. |
requires action by Parliament. |
|
|
C. |
occurs during recessions but not during expansions. |
|
|
D. |
is triggered by the state of the economy. |
If the current account is in surplus and the capital and financial account is also in surplus, then the official settlements account balance is
|
A. |
probably close to zero, but could be either negative or positive. |
||||||||||||||||
|
B. |
zero. |
||||||||||||||||
|
C. |
negative. |
||||||||||||||||
|
D. |
equal to the sum of the current account and the capital account. |
||||||||||||||||
|
Suppose the Bank of Canada follows a fixed exchange rate of $1 U.S. per Canadian dollar. If the demand for Canadian dollars temporarily increases, to maintain the target exchange rate, the Bank can
|
A technological advance shifts
|
A. |
both SAS and AD rightward. |
|
|
B. |
both SAS and LAS rightward. |
|
|
C. |
LAS rightward but leaves SAS unchanged. |
|
|
D. |
SAS rightward but leaves LAS unchanged. |
Choose the correct statement.
|
A. |
Tax cuts increase aggregate supply and aggregate demand. |
|
|
B. |
Tax cuts strengthen the incentive to work and to invest. |
|
|
C. |
The tax multiplier becomes smaller as time passes. |
|
|
D. |
Both A and B are correct. |
A tax on labour income
|
A. |
decreases the supply of labour and has no influence on the real wage rate. |
|
|
B. |
has no effect on the demand for labour. |
|
|
C. |
increases the supply of labour and lowers the real wage rate. |
|
|
D. |
decreases the demand for labour but does not change the real wage rate. |
Important factors that change the demand for dollars and hence shift the demand curve for dollars include which of the following?
I. interest rates around the world
II. the current exchange rate
III. the expected future exchange rate
|
A. |
I and II |
|
|
B. |
II |
|
|
C. |
I, II, and III |
|
|
D. |
I and III |
In: Economics
Which one of the following variables is not held constant along a given aggregate demand curve?
|
A. |
expectations about inflation |
|
|
B. |
the exchange rate |
|
|
C. |
the price level |
|
|
D. |
fiscal policy |
Everything else remaining the same, an increase in the interest rate increases saving and
|
A. |
decreases aggregate demand through the intertemporal substitution effect. |
|
|
B. |
increases aggregate demand through the intertemporal substitution effect. |
|
|
C. |
increases aggregate demand through the international substitution effect. |
|
|
D. |
increases aggregate demand through the wealth effect. |
Discretionary fiscal policy is risky because it is hampered by
|
A. |
recognition lag, impact lag, and law-making lag. |
|
|
B. |
recognition lag, inflation lag, and law-making lag. |
|
|
C. |
recognition lag, impact lag, and business cycle lag. |
|
|
D. |
recognition lag, business cycle lag, and law-making lag. |
Foreign exchange dealers expect the Canadian dollar next year to appreciate against all currencies. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?
|
A. |
Canadian aggregate demand decreases. |
|
|
B. |
Canadian aggregate demand increases. |
|
|
C. |
The quantity of Canadian real GDP demanded decreases. |
|
|
D. |
The quantity of Canadian real GDP demanded increases. |
In: Economics
This question is based on the current Covid-19 pandemic. Suppose the risk of being infected or infecting others while eating in restaurants is high. Consider the market for dine-in restaurant meals. Is there a discrepancy between the marginal private and social benefit (or cost)? Show on a graph the quantity of restaurant meals that would be sold and the quantity that would maximize economic surplus. Is there a discrepancy between the two? What solution do you think would be most appropriate to deal with this? What solution was taken by most governments? Do you agree with it or not?
In: Economics
What do you mean by information architecture and information technology infrastructure?
Why are they important concern for managers?
In: Economics
In: Economics