Consider a market for a homogeneous good with a demand curve P = 100 − Q. Initially, there are three firms in the market. All of them have constant marginal costs and incur no fixed costs. The marginal cost for firms 1 and 2 is 20, while the marginal cost for firm 3 is 40. Assume now that firms 2 and 3 merge.

a. Calculate the post-merger Cournot equilibrium quantities.
b. Calculate the post-merger Cournot market quantity and price.
c. Calculate the post-merger firm profits.
d. Calculate the post-merger HHI.
e. Calculate the post-merger market-wide Lerner index.
f. Calculate the post-merger consumer surplus.
g. Calculate the post-merger total surplus (firm profits plus consumer surplus)

Develop a framework to assess/find the probability that COVID-19 pandemic is to be over by the end of May 2020. There is no textbook answer to this question; so, use your creativity and knowledge up to now in ECON 221. Notice that, the expected answer is not a simple “I think...” kind of basic opinion. Notice also that, the expected answer is not a purely verbal one.

Thanks

To reduce reliance on their local water company, the city of St. Augustine has decided to build their own municipal water supply. They must now decide what price to charge consumers. After some careful research, you estimate the following demand curve and marginal revenue curve for water per month:

P = 76 – 3Q

MR = 76 – 6Q

where Q represents the quantity of water used per month in 1,000 gallons. The marginal costs of water purification and delivery are a flat $4 per 1,000 gallons. The fixed costs of running the water treatment plant come to $200 per month.

a) Because the municipal power plant is the only source of water for local residents, the city can act like a monopolist provider of water. Councilman Alexander argues that acting as a monopolist and maximizing profits from the power plant will bring in needed revenue to the city. Find the amount of water purchased per month, along with the price per month, if the city maximizes profits as a monopolist.

b) How much profit does the city make if it acts as a monopoly? (Hint: Profit = TR – TC = TR – TVC – TFC)

c) Draw a graph using the information from part (a) and show the deadweight loss from this pricing strategy. You do not need to calculate the values for these areas, but simply show where they are represented on the graph.

d) Councilwoman Eliza believes that the city is providing a vital public service, and so should provide water without any deadweight loss. To completely eliminate the deadweight loss, what should the price of water be? How much water will citizens purchase at that price? Will the city make money, break even, or lose money at that price? Explain.

Using four basic strategies of international business, use appropriate diagram to discuss in detail the factors would affect choice of strategy? (Maximum words, 3000)

What is Capital and why have economists kept inventing new forms of capital (human capital, social capital, cultural capital, knowledge capital, etc)? (2-3 Pages) (Do Not plagiarize, cite your sources)

Think about the following issues:

1. We have defined capital as costly to acquire, durable (with depreciation), and increasing future productivity.  Does this cover all the theorists in the course?
2. Is there a move from capital as specific tangible productive asset to capital as intangible general aspect of productivity in society?
3. Why do we call acquired skills human capital, network connections social capital, and specific cultural knowledge cultural capital?  What intellectual or political work is this relabeling doing?

How will investment spending be effected when greater level of taxes are placed on business earnings?

How will investment spending be effected when greater level of taxes are placed on business earnings?

Read Jon Gartner - Rise and fall of GDP (2010). There are free pdf online

and answer the questions

Gertner (2010) discussion questions

1. Why was the GDP concept invented?

2. What does it measure? What does it not measure? What would you like it to measure?

3. Is economic growth a necessary condition for economic development? Is it possible to

improve a nation’s well-being/living standards without economic growth? Explain.

4. Is HDI a good measure of national well-being? Explain why yes/no.

5.If you were to improve GDP and HDI as concepts/measures, how would you

modify/revise these indicators?

Explain the transmission mechanism regarding exchange rate effects on balance sheets of nonfinancial firms (for emerging market countries).

read Zhu (2012) Understanding China’s Growth: Past, Present, and Future (free pdf online)

answer discussion questions

1. What distinct periods of China’s economic growth does the article describe? What are

the distinct characteristics of China’s economic performance during each of these

periods?

2. Why was China unable to maintain its world economic power in the 1500-1950s?

3. Why did China’s economic growth and performance differ in 1952-1978 vs post-1978

period?

4. What were the sources of China’s productivity growth after 1978?

5. In your opinion, can China sustain rapid economic growth rates well into the future?

Explain why yes/no and how this may happen.

article from link https://www.aeaweb.org/articles?id=10.1257/jep.26.4.103

Based on the following information, is this good price elastic or price inelastic and is it income elastic or income inelastic. Explain your answer

Here, the basic (Harris-Todaro) model, also shown in the class slides, is shown:  

M = β(W_U^e – W_R), where

M = migration from the rural to the urban sector

W_U^e= the expected urban wage = pW_U, where W_U is the actual urban wage,

p is the probability of finding an urban job, i.e., the employment rate measured as E/(E+U),

where E = employed and U = unemployed.

W* = the subsistence wage in the rural sector that exists in the present of surplus labor.  

W_R = the actual rural wage, which = w* in the presents of surplus labor.

β = a coefficient that represents the responsiveness of migration to rural-urban wage disparities, e.g. if the hukou (household registration) system is

      rigorously enforced, then β is small).

Now use the migration model to explain the following (a diagram is optional):

1. The known agricultural wage is 10. With robust productivity growth, the industrial wage rises to 20.   Rural workers anticipate that if they migrate, the fixed probability of finding a job is 75%.  How is the new equilibrium achieved?

2. Now suppose that the economy is initially in equilibrium. The Chinese government raises the minimum wage in the urban-industrial sector by 20%. However, the number of jobs in the urban industrial sector is fixed.  How is the new equilibrium achieved?

Suppose that the demand for a monopolist's product is estimated to be Q^d = 100 − 2P and its total costs are C(Q) = 10Q. Under first-degree price discrimination, the optimal price(s), number of total units exchanged, profit, and consumer surplus are:

Multiple Choice

• 10 ≤ P ≤ 50; Q = 80, Π = $1,600; CS = $0.

• 10 ≤ P ≤ 100; Q = 80; Π = $1,600; CS = $1,600.

• P = $30; Q = 40, Π = $800; CS = $400.

• P = $30; Q = 40, Π = $600; CS = $0.

Demand: P = 100-2Qd+I

Supply: P = 15 + 3Qs

Suppose that consumer income (I) is 15. Using excel plot how the tax revenue changes as T increases. HINT: Revenue will be on your y axis and the tax (0,1,2,3,…) will be on your x-axis.  Find the revenue maximizing tax. What would be the tax revenue generated and the quantity of goods sold at this tax rate.