Why might price collusion occur in oligopolistic industries? Assess the economic desirability of collusive pricing.

What are the main obstacles to collusion?

In Economics we differentiate between peoples’ “wants and needs” and their “resources”. Explain what these terms mean and how they are used in understanding economic decision-making.

(a) If your utility is represented by u(x,y) = min(x+2y,2x+y);what do you indifference curves look like?

(b) Given your answer in (a), obtain the MRS (marginal rates of substitution).

(c) Suppose the prices of x and y are px = $3 and py = $1 and you have 100 dollars. What would you choose?

(d) If px decreases to $1; what would you choose?

(e) Use the Slutsky decomposition to decompose the total price effect into the substitution effect and income effect when px decreases from $3 to $1

1.) The competitive firm's demand curve is

a.) unit elastic over the relevant range of output.

b.) perfectly elastic over the relevant range of output

c.) perfectly inelastic over the relevant range of output

d.) elastic above the market price and inelastic below the market price

.

2.) If you were operating a fast-food restaurant, which of the following would represent a fixed cost of production in the short run?

a.) an annual business license fee paid to the local government

b.) wages paid to workers

c.) the cost of electricity to light the restaurant

d.) the cost of paper supplies (napkins, bags, etc.

.

3.) If MR > MC, then

a.) profits will be at their maximum.

b.) the firm is producing too much of the good to be maximizing profits

c.) the firm can increase its profits or minimize its losses by increasing output.

d.) the firm is necessarily incurring losses

Let a perfectly competitive industry have 100 identical firms with a marginal cost curve given by MC = Q/2.

a. Construct the short run industry supply curve with 100 firms.

b. Let the market demand curve be Q = 4000 – 200*P. Find the short run equilibrium price, industry quantity, and firm quantity.

c. This is a constant cost industry with a cost of $8. Will firms be making profits or losses in the short run equilibrium in b?

d. Find the long run equilibrium price, industry quantity, firm quantity, number of firms, and profit for each firm.

Choose one of the candidates who has currently announced (or is rumored to be considering a run) as a candidate for president in 2020. Describe the candidate’s main policy positions and why you would support or oppose this candidate.

What is Cost-Benefit Analysis? Why is it hard to do?

1. In New York, a can of coffee costs about $5 and in Saudi Arabia, it costs about 20 Saudi Riyals. If the exchange rate is about 0.27 dollars per riyal, what is the real exchange rate?
2. Analyze the impact of Saudi Riyal appreciation in US dollar for each of the following cases
   1. A US firms plans to invest in Saudi Arabia

2. You are planning to visit USA in summer holidays ​​​​​​

Explain what will happen to the size of both M1 and M2 in each of the following situations:

1. Sahar withdraws $300,000 from her checking account to pay for her admission fee in US.
2. Muntaha transfers $5,000 from her checking account to her saving account. decrease M1 and not change M2.

What are the 4 types of goods? For each one, say whether they are excludable and whether they are rival in consumption.

Briefly discuss what causes short run and long run changes in exchange rates. Be sure to include key terms such as asset market approach to exchange rates, purchasing power parity, and the monetary approach to exchange rates.

Should the government regulate monopolies? If yes, outline the economic implications and process of regulation. Watch the video below and from the resources in the course, give an answer to this question.

To what extent has game theory improved our understanding of how the market
structure is formed and how it evolves? Discuss and explain. How can we
characterize market structure in a meaningful way? Be sure to also discuss the
conceptual issues, especially those pertaining to oligopoly, price coordination, and
collusion

1. Show the impact of consumers becoming less present focused on the real rate of return in both the real and modern monetary theories of interest rates. Explain your results.

1. An energy company has recently enhanced its capabilities for generating electricity, resulting in a 10% reduction in the cost/kwh. The company, which is regulated by the state, is required to pass the savings on to consumers via a 10% reduction in rates/kwh. Assume that the company has 100,000 residential customers who paid an average of $60/month consuming each 500 kwh/month in the year prior to implementing the new system; the same 100,000 customers paid $58/month following the shift to the new system with its lower prices. The total revenue therefore dropped from $6 million per month to $5.8 million per month. Based upon these facts,

1. • What was the increase in volume of electricity that was generated? What was the percentage increase?

Hint: Evaluate first what would have been the average bill if the volume had stayed the same after the fare reduction

1. • Was there a change in the demand function? If so, what is the new demand function? If not, why did the power company have to produce more electricity?

1. • What was the price elasticity in the demand for electricity?  

1. • What was the increase in consumer surplus as a result of the reduction in prices?

1. Liz has utility given by ?(?1,?2)=?1^7?2^3. If ?1=$10,?2=$15,and I = $100, find Liz’s optimal consumption of good 1. (Hint: you can use the 5 step method or one of the demand functions derived in class to find the answer).  

a) Using the information from question 1, find Liz’s optimal consumption of good 2.

3. Lyndsay has utility given by ??(?1,?2)=min {?1,?2}. If ?1=$2,?2=$4, ? ?=$12, find Lyndsay’s optimal consumption of good 1. (Hint: this is Leontief utility).

a) Using the information from question 3, find Lyndsay’s optimal consumption of good 2.

5. Anya has utility given by ??(?1,?2)=12?1+9?2. If ?1=$4,?2=$2, ?=$20, find Anya’s optimal consumption of good (Hint: this is linear utility).

a) Using the information from question 5, find Anya’s optimal consumption of good 2.