Uber has long been criticized for its use of surge pricing, setting prices based on current supply and demand factors, which, at times, results in a sudden and drastic increase in prices. In a Wall Street Journal article, the CEO of Uber was asked if we are seeing the end of surge pricing. His response: “. . . at the end of the day, Friday night is three or five times bigger than a Sunday night in any city around the world. And if you’ve got enough supply on the system so that we were perfectly supplied on a Friday night for as much demand as a city could ever throw at us, then the rest of the week you have drivers not making a living.”

a. Draw a demand and supply graph for Uber rides in Miami on a Sunday night. How does demand change on a Friday night? How does the supply of Uber rides change? Label the shortage of Uber cars that results on a Friday night without surge pricing.

b. Show what happens to consumer and producer surplus on a Friday night without surge pricing.

c. How does surge pricing change consumer and producer surplus?

A U.S. electronics firm is considering moving its production to a plant in Mexico. Its estimated production function is q = L^0.5K^0.5. In the U.S., the wage, w is ten dollars, and the cost of capital, r is also ten dollars. In Mexico, the wages is half that in the U.S., but the firm faces the same cost of capital: w^∗ = 5 and r = r^∗ = 10. If the firm wants to produce q = 100 units of output, what amount of labor and capital will it choose to utilize in the U.S.? What amount of labor and capital will it choose to utilize in Mexico? What are the total costs of producing at each plant? (Hint: With q = L^0.5K^0.5, M P_L = 0.5L^−0.5K^0.5 and M P_K = 0.5L^0.5K^−0.5.)

1. Suppose a fair, two-sided coin is flipped. If it comes up heads you receive $5. If it comes up tails you lose $1. The expected value of this lottery is (a) $2 (b) $3 (c) $4 (d) $5 (e) None of the above

2. An individual has a vNM utility function over money of u(x) = p3 x , where x is final wealth. She currently has $8 and can choose among the following three lotteries. Which lottery will she choose? • Lottery 1: Give up her $8 and face the gamble (0.1, 0.5, 0.4) over final wealth levels ($1, $8, $27). • Lottery 2: Keep her $8. • Lottery 3: Give up her $8 and face the gamble (0.2, 0.8,0.0) over final wealth levels ($1, $8, $27) (a) Lottery 1 (b) Lottery 2 (c) Lottery 3 (d) She is indifferent between the three lotteries.

3. An individual has a vNM utility function over money of u(x) = px, where x is final wealth. Assume the individual currently has $16. He is offered a lottery with three possible outcomes; he could gain an extra $9, lose $7, or not lose or gain anything. There is a 15% probability that he will win the extra $9. What probability, p, of losing $7 would make the individual indifferent between to play and to not play the lottery? (a) p = 0.15 (b) p = 1.08 (c) p = 0.415 (d) p = 0.05 (e) None of the above

Part A: Briefly discuss some of the pricing techniques uses by businesses, and explain the differences between “Direct Price Discrimination” and “Indirect Price Discrimination” (Include one example).

Part B: Data Mining or a practice of collecting and examining large amounts of data (example consumer purchasing or internet search activities) has become a common practice for many businesses. Consider the practice of data mining (pros and cons) and briefly discuss how data mining activities impacts or relates to Direct Price Discrimination and/or Indirect Price Discrimination. You are encouraged to provide an example or personal experience in your response to “Part B” of this discussion question.

How would you change a typical tariff structure like in the Texas Electrical Provider market to take into account social considerations (e.g., favoring low‐income consumers)? (Remember that you are analyzing residential rates, which are generally separate from commercial consumers’ tariffs.) Explain your answer.

From the microeconomics theories that you have studied, provide TWO suggestions for the cement industry to achieve a sustainable growth. 8 marks

Credit card is a convenient medium to conduct transactions. However, according to The Star Online (2018), 47% of Malaysian youths have high credit card debts.

Q1. What are the causes of this phenomenon? What can we do to curb this? Write an essay about it.

• Use 6 paragraphs for your essay.

• Your essay should have an introduction, two (2) reasons Malaysian youths have high credit card debts, two (2) solutions to curb this situation and also a conclusion.

• Give your essay an appropriate title. You do not have to attach an essay outline for this essay.

One theory of oligopoly is the cartel theory.

1. State the key behavioral assumption of the cartel theory.

b. Describe the problems associated with forming and maintaining a cartel.

Suppose the Fed increases the nominal money supply. Use the AD/AS model to illustrate and discuss the impact on inflation and real GDP, short run and long run.

Consider an airline trying to sell plane tickets to business travelers and tourists. The airline cannot distinguish between the two at the point of sale, but knows that in general, business travelers have higher willingness to pay for better seats. Let PF and PC be the price of first class and coach tickets respectively. Suppose that business travelers are willing to pay $1000 for a first class seat and $400 for a coach seat, whereas tourists are willing to pay $500 for a first class seat and $300 for a coach seat.

(a) If the airline wants to implement second-degree price discrimination so that business travelers buy first class seats and tourists buy coach seats, what are the incentive compatibility constraints they face?

(b) Using your incentive compatibility constraints, find the price that the airline will charge for a coach seat.

(c) What are the information rents that the airline must leave to business travelers? What is the price of a first class seat?

Assume you are thinking of starting your own business. You need to consider some of the ideas covered in this course, including scarcity, supply and demand, and economic indicators.

1. Give a brief description of the business, including a description of the major product/service you would offer.
2. Explain the factors that would affect the supply and demand for your major product/service.
3. List some economic resources you would need to produce your product/service. What scarcity, or opportunity costs do you need to consider?
4. Describe the economic indicators would you be most interested in knowing more about before starting this business and the current levels of these economic indicators. How will they affect your planning?

Assess your product/service against existing competitors (or providers of near-substitutes). What comparative advantage do you have?

1. You are on the phone with the project sponsor of a project you are managing. He informs you that he accepted the role reluctantly and now, two months into this eight month project, he is considering withdrawing as a project sponsor. He does not see the need for this role and is extremely busy with his other responsibilities. How do you respond?
2. You are surprised when your project team "pushes back" on your request for them to schedule a full-day offsite to work with you to develop a risk management plan. They state that they are simply too busy to afford time for this activity. And besides, they feel that if something unforeseen occurs, it is your responsibility to react to it. How do you respond to your team?

In recent years the Fed’s monetary target has been the federal funds rate. How does the Fed raise or lower that rate, and how is that rate related to other interest rates in the economy such as the prime rate?

In your reasoned opinion, is the current economic and regulatory environment in the United States conducive to small business growth and entrepreneurship? Why or why not?