1. Create a descriptive statistics table for our variables in word for submission (simply export from excel and cleaning it up a bit)

2. Create a table showing the variable names, coefficients, and p-values, indicating which variables are statistically significant for submission (export from excel and clean up a bit)

3. Write out the regression equation for sales here based on excel output:

4. Interpret the coefficient on our own price here:

5. If a manager increases our price by $2 then what is the predicted impact on sales?

Imagine the New Zealand economy is initially at the potential level of output, but that due to a decrease in house prices, the level of consumption within the economy falls (because consumer confidence decreased).

(a) Show what effect this has on the New Zealand economy in the context of an AD-AS diagram.

(i) Label the original long-run equilibrium point "A". Label the short-run equilibrium outcome of the decrease in house prices "B"

(ii) Briefly explain what happens to output and the inflation rate.

(b) Explain and show on your diagram in part (a) what would happen to output and the inflation rate in the long-run if the government does nothing to accommodate this shock. Label this long-run outcome "C".

(c) If the government accommodates this shock, what policies would return the economy to the potential level of output? Explain how these would work, and make sure you also explain what happens to output and the inflation rate.

Which of the following statements is (are) correct?
(x) A choice by Molly to buy more muffins at $2 per muffin than at the price of $3 per muffin is an example of
the law of demand and it is illustrated as a movement along Molly’s demand curve for muffins.
(y) A choice by Albert to buy more Tony’s pizza because of a recent increase in the price of Polly’s pizza is
illustrated as a shift to the right of Albert’s demand curve for Tony’s pizza and reflects an increase in
demand for Tony’s pizza.
(z) If George has a change in behavior and is now willing to buy less apple pie at every price, then his
demand curve for apple pie will shift to the left.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following statements is (are) correct?
(x) Assume pizza and soda are complements. If the price of pizza decreases, then both the demand for soda
will increase and the demand curve for pizza will shift to the right.
(y) Assume Lipton green tea and Arizona green tea are close substitutes. If the price of Lipton tea decreases,
then the quantity demanded of Lipton tea will increase and the demand for Arizona tea will decrease.
(z) Assume Hershey chocolate bars and Mars chocolate bars are substitutes. If the price of Hershey chocolate
bars decreases, then the demand curve for Mars chocolate bars will shift to the left.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following is NOT a determinant of demand?
A. the expected price of the good next month
B. the price of a resource that is used to produce the good
C. the price of a complementary good
D. the price of a substitute good
E. A and B, only

Discuss how x-inefficiencies arise and how they explain why the measure of the deadweight loss of a monopoly (i.e., Harberger’s) may be too low? Include a graph in your answer that shows the increase in deadweight welfare loss due to x-inefficiencies.

Consider a monopolist with a linear demand curve: q = a − bp, where a;b > 0. It produces at constant marginal cost c and has no fixed cost. Assume that 0 < c < a b.
(a) Find the monopoly price, quantity, and profits. (b) Derive the inverse demand curve P(q). Draw P(q), the MRcurve, and the MC-curve in a diagram. Explain why we need the assumption c < a b. (c) Does it matter that the monopolist sets price instead of quantity? (d) Calculate the deadweight loss of monopoly. (e) A change in b results in two opposing effects on the deadweight loss. Calculate the effect of a change in b on the deadweight loss. (f) Derive the price elasticity of demand η for any price. How does η change with p? (g) Show mathematically as well as graphically that the price elasticity of demand η > 1 at the monopoly price.

Corporate Finance I

What are some implicit assumptions that are made when valuing a firm using multiples based on comparable firms?

The main participants/ competitors in food/groceries industry?

If a centrral bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

a. would have to increase the money supply. This would move unemployment closer to the natural rate.

b. would have to increase the money supply. This would move unemployment further from the natural rate.

c. would have to decrease the money supply. This would move unemployment closer to the natural rate.

d. would have to decrease the money supply. This would move unemployment further from the natural rate.

Explain the customer-based equity pyramid

Discuss role play by Bank in the monetary system? How do bank create money?

[10 Marks]

Foreign Exchange Markets

a. Define an exchange rate and Graph the foreign exchange market illustrating the dollar price of the pound - label all curves and each axis

b. Explain what the demand and supply curves in this market measure

c. Explain how the exchange rate automatically eliminates surpluses and shortages in the Foreign Exchange Market.

d. If the foreign exchange ratio for USD/British Pound = $1.35; how much will it cost for an American to buy a $50 pair of shoes imported from Britain; How much will it cost an Englishman to buy a $50 pair of shoes exported from the US to Britain?

e. Identify one factor that causes a currency to depreciate - graph the solution. Repeat for depreciation.

A frequently heard complaint about merit raises is that they do little to increase employee effort. What are the causes of this belief? Suggest ways in which the motivating value of merit raises may be increased.

Four economic profit theories are: Frictional Profit Theory, Monopoly Profit Theory, Innovation Profit Theory, and Compensatory Profit Theory. For each one discuss how it may affect the efficiency and the allocation of resources in the economy.