2.EXERCISE 15.7 FISCAL OR MONETARY POLICY? Think back to the discussion of the government finances in Unit 14.

a. In the event of a financial crisis, would it be preferable for the government to stabilize the economy using fiscal or monetary policy?

b. What are the dangers of using fiscal policy?

c. When might the government have no choice but to use fiscal policy?

John is an accountant and just earned your CPA. John has decided to open up John’s Tax Service on Main Street. He leases a storefront:   his office in the storefront has glass all around it. John has hired an administrative assistant who sits outside his office. His administrative assistant answers phones, receives and sends emails, sets appointments and other administrative type work. Assuming that John spends most of his time inside the office, should John pay his administrative assistant an hourly wage, piece rates or a % or profits? Explain why.

Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign country exports pomegranates (the size of Foreign is not important for this question). What would happen to the equilibrium world price of pomegranates if demand for pomegranates in the Foreign country's market increases?

a.The equilibrium world price will increase

b.The equilibrium world price will decrease

c.The equilibrium world price will not change

part2

Imagine two countries are trading flower pots. The Home country is “large” and imports flower pots. The Foreign country exports flower pots (the size of Foreign is not important for this question). Because Home is large,

a.Home welfare will always increase as a result of instituting a tariff on flower pots.

b.Home will always pay a smaller fraction of a tariff they institute on flower pots, relative to the fraction Foreign pays.

c.there exists an optimal tariff that Home can institute on flower pots that will maximize their welfare.

d.Home will always pay a larger fraction of a tariff they institute on flower pots, relative to the fraction Foreign pays.

part3

Which of the following assumptions in the Ricardian model is most responsible for the laborers' wages being equal between the cheese and wine industries?

a.Labor can move costlessly between industries

b.Labor is paid their productive value

c.There are only two goods: Cheese and Wine

d.The countries have the same homothetic preferences

In a duopoly, each firm has marginal cost MC = 100, and market demand is Q = 500 - 0.5p.

Assuming average cost is the same as marginal cost.

In which oligopoly, Cournot or Stackelberg, do firms have more market power?

a. Cournot since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model.

b. Stackelberg since the Lerner Index in the Cournot model is twice as much as that in the Stackelberg model.

c. Cournot since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model.

d. Stackelberg since the Lerner Index in the Cournot model is about 1.08 times as much as that in the Stackelberg model.

Please answer both questions

1. Ore-Ida is the one of the largest potato processors in the world. Explain why Ore-Ida buys it potatoes from farmers instead of growing potatoes itself?
2. Why would Ikea, a wood furniture and home furnishings manufacturer, buy forests and woodlands?

What is the intution in Thomas Sampsons paper from 2016 "DYNAMIC SELECTION: AN IDEA FLOWS THEORY OF
ENTRY, TRADE, AND GROWTH".

Over the last month or so, the value of stocks have fallen because of the corona virus? Which determinant(s) of aggregate demand are affected when the value of stocks fall? How has the drop in the value of stocks affected the aggregate demand curve?

Bread and Roses, Too is a fictionalized example of the widespread shift to industrialized capitalism in the United States during the late nineteenth and early-twentieth centuries. What tensions or difficulties does the book document? What were the desires and needs of workers and management? What were the shared labor concerns among workers in early twentieth-century America?

Suppose you borrow $11,000 at an annual interest rate of 7% compounded monthly over 36 months. At the end of the first year, after 12 payments, you want to pay off the remaining balance in 8 equal MONTHLY installments. If the interest rate and the compounding frequency remain the same, how much is each of the 8 payments.

4. Answer the following question on the impact of economic policy.

1. To answer this question, assume you are a Keynesian economist. What will happen to the real output of the economy if the government decides to raise income taxes? Explain why Keynesians make this argument. (Hint: Focus on Short Run Aggregate Demand/Aggregate Supply analysis but answer with words not a graph.)

2. Student A argues that the government has just implemented a contractionary monetary policy because increasing taxes sucks money out of the economy. Is student A correct? Why or why not?

3. Student B argues that raising taxes will have no effect on the output levels of the economy because the economy always operates at full employment. Is Student B using classical macroeconomic analysis or Keynesian macroeconomic analysis? If Student B is correct, what would happen to the price level if the government introduced a tax increase? Explain why.

1. Many Americans are experiencing disruptions in their employment situations due to the COVID-19 crisis. The Bureau of Labor Statistics continue to collect and publish unemployment data using the same definitions we studied in class. Categorize the following individuals as employed, unemployed, or out of the labor force.

a. A college student who has stopped driving for Uber 15 hours a week has stopped doing so because of decreased demand. On the other hand, he has started delivering food for Postmates for 10 hours per week.

b. A college student whose unpaid internship was suspended while the K Street office think-tank she works for is closed.

c. A waitress who has been furloughed from Guapos in Tenleytown and is not looking for work because no restaurants are hiring.

d. A waiter who has been furloughed from Chef Geoff’s and is applying for a temporary job at an Amazon Warehouse.

e. A woman who works 40 hours per week but has not been working this week because she has COVID-19.

f. Briefly describe someone you know whose employment situation has changed in the past month. Which category were they in a month ago? Now? Defend your answer using the definitions given in class.

In addition to its regular license plate, the state of Texas sells personalized “vanity” licenses for additional fees. When the State increased the price for such plates $25 to $75, the number of people who ordered vanity plates dropped from 150,000 to 60,000

(a) Calculate the price elasticity for the vanity plate. Is it elastic?

(b) Assume the main objective of Texan government is to maximize the revenue of the state, what is the optimum price to charge to the vanity plate? What is the total revenue at that price?

In mid-December 2018, the manager of Beau Apparel was preparing the firm’s production plan for the first quarter of 2019. The fore cast of the wholesale price of shirts would be used in making the production decision. The marketing researchers provided the manager with three price forecasts based on three different assumptions about economic conditions in the first quarter of 2019.

High: $20 Medium: $15 Low: $10

The total fixed costs of the production is $30,000. Beau Apparel also estimated an average variable cost function as followed:

AVC=20-0.003Q+0.00000025Q2

Under the high-price forecast, middle-price forecast and low-price forecast, answer the following questions respectively:
(a) Should the firm produce or shut down?
(b) If production is warranted, how much should the firm produce?

(c) Calculate the estimated profit or loss under the three forecasted price levels.

Suppose that the production function is given by: ? = ?(?, ?) = ?(?)^1/3(?)^1/3

where ? > 0 is total factor productivity, ? indicates the amount of capital employed and ? the amount of labor employed. Wages are ? and the rental cost of capital is ?. Suppose that in the short run capital is fixed, i.e., ? = ?bar. Moreover, the firm must pay ??bar regardless of the production level

a) Solve the cost minimization problem. That is, determine the amount of capital and labor that THE firm employs in the short run. Hint: Capital is trivial because it is fixed.

b) Compute the short run cost function. Also indicate variable and a fixed cost, and compute average variable cost, marginal cost and average total cost.

c) Suppose that the price of ? is ?. Compute the level of output that maximizes the profits of the firm. Also compute the corresponding level of ?.

d)Explain how the supply curve of the firm is affected by the following variables: the wage rate ??, the rental cost of capital ?, the fixed capital ?bar, and total factor productivity ?. Hint: You only need to check if the quantity supplied at each price (that is, the supply curve) increases or decreases with each variable.