Assume that there are 2 firms locating in Hotelling’s linear city of length 1. Each firm has a constant marginal cost of c. Consumers are uniformly distributed and have identical preferences represented by U=V-Pi-t(x*-xi)2 . where V-is consumer’s reservation value (consumer surplus from consuming her ideal product at zero price), Pi is the price of firm i’s product, x* is consumer’s location, 0≤x 1 and xi is firm i’s location. a) If both firms are required to locate in the middle, what price would they charge? b) If both firms are required to locate at two different ends of the city what price will they charge?

Explain why stagflation (rising prices coinciding with declining output) is difficult to reconcile with a stable FE curve.

Write an essay (not less than 500 words) on the following subject:
- The effects of the world epidemic of Corona virus on the Egyptian international
companies: the opportunities and threats.

3.

Discuss the validity of the following statement “Economic models play an important role when it comes to developing sound economic policies.”

Answer the following questions about trading strategies in efficiently inefficient markets.
(a) Discuss how active investors can be compensated for their information collection. Give examples of how you could try to collect information about specific firms and how you could trade on this.
(b) You work as an analyst at a hedge fund. Your manager suggests an investment strategy involving mergers and acquisitions (M&A). He provides anecdotes that suggest that the stock price of the target firm seems to go up once the deal is successful. He suggests a trading strategy that involves buying such firms right after the merger announcement, but before the actual merger. Should the hedge fund follow this trading strategy and, if so, what are the risks?
(c) Your manager also notes that the price of the target firm jumps right after the merger announcement. Suggest a trading strategy that might allow the hedge fund to profit from this occurence.

1.

Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. Then the consumption function is given by

2.

Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. At what level of income is saving = 0?

3.

The saving function

(3) The money supply is fixed at $60billion and the equilibrium value of money 1/P = 1/2. The Federal Reserve increases the money supply by $20 billion and as a result the new equilibrium price level is 5. Use the Money Supply-Demand Model (Diagram) to explain clearly how equilibrium is restored in the model. If money supply increases the value of money will not increase but will go down.

*What are the causes/ sources of economic growth. Highlight positive n negative effects of economic growth.

Just-in-time (JIT) strategy reduces inventory (storage/waste) costs. This method requires producers to forecast demand accurately. Explain (briefly) how you would use “Big Data” to help implementing JIT?

There are many cryptocurrencies in the world today. If apple made a cryptocurrency, how would it compete to the rest? What marketing strategy could they use?

Discuss the differences and similarities between the Ricardian model and the specific factors model

Taxi-drivers are now faced with competition from ridesharing services like Uber and Lyft. Assume that consumers see traditional taxis and ridesharing services as perfect substitutes. Assume that there are no barriers to entry to become a ridesharing driver. What will happen to supply and demand for traditional taxi-services in the long run? What will happen to the price consumers pay, the price taxi-drivers receive, deadweight loss and profits of taxi-drivers? And in short run? What if ridesharing services and traditional taxis are complements?

4. To retire at a decent age and move to Hawaii, an engineer plans to trust her account to an investment firm that promises to make a real rate of return of 8% per year when the inflation rate is 2% per year. The account currently is valued at $290,000 and she wants to retire in 12 years. Determine how much (in then-current dollars) will be in the account for the realized rate of return to be a real 8% per year.

Set up the specific factors model with assumptions and conclusions