1. Explain why the used car market is both an adverse selection and an asymmetric information problem.

In attempts to correct market failures, a government policy is proposed. Assume that the costs of a potential new government program will be paid now by many individuals. The benefits will be received by a relatively small number of individuals several years in the future. Why might these conditions affect a government's success or failure in attempting to decide whether or not to establish the new program?

1. Give an explanation of the median voter model. Why might a minority say that democracy can never represent their interests?

1. Give three ways in which the government can intervene and solve for spillover costs.

how would decisions about managing forests for carbon sequestration be affected by the speed at which wood building material decay?

1. Explain why pollution is considered a negative externality. Give two possible government solutions to the problem. Then give a possible economic reason why government might fail to resolve the problem.

1. Explain what the principal agent problem is. Suppose you have a teacher who only talks about his private life in class rather than teaching. What are some ways the college can insure that their teachers are teaching?

1. Find an example of each of the following: moral hazard problem, asymmetric information problem, and the adverse selection problem. Explain how each leads to an overallocation or underallocation for society. How can each be fixed?

True or false. Food pyramids have changed over time. Is it time to quit consuming dairy products?

2. Consider a hypothetical beauty contest, where there are five finalists (i.e., final candidates) and seven reviewers (i.e., voters) who jointly decide Miss KU. The five finalists are Aram,

Bora, Chanhui, Dahye, and Eunmi. The seven reviewers have the following order of preferences over the five finalists.

Adam: Aram-Bora-Chanhui-Dahye-Eunmi

Ben: Aram-Dahye-Bora-Eunmi-Chanhui

Chris: Aram-Dahye-Bora- Eunmi -Chanhui

David: Chanhui-Bora-Dahye- Eunmi -Aram

Eileen: Chanhui-Dahye-Bora-Aram- Eunmi

Fred: Bora-Chanhui-Dahye-Aram- Eunmi

Gale: Eunmi -Chanhui-Dahye-Boram-Aram

Because different reviewers have different orders of preferences over the five finalists, they agreed to choose the winner(s) democratically, but they could not agree on a voting procedure.

(1) If the plurality rule is used, who is selected as Miss KU? Among the seven reviewers, who has an incentive to defend the plurality rule as the voting procedure?

(2) If the Borda count is used, who is going to be Miss KU? Who has an incentive to defend the Borda count as the voting procedure?

(3) If the STV rule is used, who will be Miss KU? Who has an incentive to defend the STV rule as the voting procedure?

(4) If Gale is the dictator who has the ultimate power in the decision making, who will be selected as Miss KU?

Using Gretl, derive the potential output trend for the economy of your choice. Indicate the periods of inflationary/deflationary gaps

How Corona Virus impact the following groups economically?

1. International students

2. Small businesses

3. Airlines

4. First Nation People

12. According to the AD/AS model, which of the following statements is (are) correct?
(x) Changes in the money supply will not shift the long-run aggregate supply curve because the availability of resources does not change as the money supply changes if monetary neutrality is present.
(y) The verticality of the long-run aggregate supply curve suggests that in the long run, the economy will always return to the level of output that occurs when the rate of unemployment is at its natural level.
(z) An increase in the availability of resources would cause the long-run aggregate supply curve to shift to the right. As a result of that supply curve shift, the price level will fall and real output will increase if aggregate demand is unchanged.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only
13. According to the AD/AS model, which of the following statements is (are) correct?
(x) The sticky-wage theory of the short-run aggregate supply curve says that wages tend to be sticky because of contracts, social norms, and notions of fairness.
(y) The sticky-wage theory of the short-run aggregate supply curve says that when the price level rises more than expected production is more profitable and employment rises.
(z) Sticky nominal wages can result in higher profits for firms when the price is lower than expected because the real wage falls when output prices fall.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

15. According to the AD/AS model, which of the following statements is (are) correct?
(x) Ceteris paribus, a decrease in the price of a major input would cause production costs to fall and the short-run aggregate supply curve would shift to the left.
(y) An increase in demand would cause movement along the SRAS since the increased demand would cause the price level to rise.
(z) When production costs rise for the economy as a whole, the short-run aggregate supply curve shifts to the left.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) on

Which of the following statements about the sticky wage theory of the short-run aggregate supply curve (SRAS) is (are) correct?
(x) Wages are “stuck” because contracts typically require that input prices must change at the same rate as output prices in order to keep firms from increasing profits as they increase production.
(y) Wages and other input prices are “sticky” because contracts fix some input prices and firms are unable to change the input prices they face as output prices are changing.
(z) The sticky wage theory of the short-run aggregate supply curve says that when the price level rises
more than expected, real wages fall because nominal wages are increasing at a slower rate than the price level.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Which of the following statements about the sticky price theory of the short-run aggregate supply curve (SRAS) is (are) correct?
(x) Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.
(y) The sticky price theory of short-run aggregate supply says that when the price level falls unexpectedly, some firms will have higher than desired prices which depresses their sales.
(z) An increase in aggregate demand will cause an increase in price in the output market. Sticky input prices will force firms to take losses since they can’t increase the prices of inputs that are used in the production of the output.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

4. Which of the following statements about the misperceptions theory of the short-run aggregate supply curve (SRAS) is (are) correct?
(x) The theory is used to explain the upward sloping SRAS curve since an increase in prices, ceteris paribus, will increase the output supplied in the short run.
(y) The theory says that if the price level increases more than people expect, firms believe that the relative price of what they produce has increased, so they increase production.
(z) Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production of their product.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (z) only

Jessica Alba, a famous actress, starts the baby and family products business, The Honest Company, with Christopher Gavigan. Alba and Gavigan set up their site so families can choose what kinds of non-toxic, all-natural products they'd like to use and get them in a bundle. Families can choose all kinds of products from food to hygiene necessities and cleaning supplies. Suppose they are thinking of expanding their business into five domestic markets: Phoenix, Dallas, Chicago, New York, and Atlanta. Assume their primary goal of business is to maximize economic profits, although they want to do business honestly.

Show all your calculations and process. Describe your answer for each question in three- to five-complete sentences.

1. You are a business adviser for Alba and Gavigan. Describe a skimming price and a penetration price, and advise them whether they should charge a skimming price or a penetration price, with supportive reasoning for and against each pricing alternative.
2. Are they likely to make economic profits initially? Can they continue to make economic profits in the long term? Why or why not? Discuss.
3. What advice would you give to Alba and Gavigan to help them make more profit in the long term?