Policy Enforcement: The text states that stiff penalties (sanctions) for environmental violators can be much more complicated than the simple economic model suggests (which simply assumes: Higher the penalty, greater the deterrence!).     Explain.

Question

Tesco is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits Tesco House, head office in Cheshunt, Hertfordshire. (after Wal-Mart). It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand. Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 49 Tesco and Tesco Extra stores.

Assume the role of a management consultant reporting to the CEO and Board of Directors at TESCO Malaysia, prepare a report based on the following questions below. In your report, address the following points:

1. Define the current strategic problems and opportunities faced by TESCO in Malaysia or in selected branches in Malaysia.

2. Analyze TESCO’s marketing and innovation strategy transformation designed to position the company on the cutting edge of consumer trends.

3. Evaluate TESCO’s strategy of developing healthy lifestyle or go green concept in Malaysia.

4. Compare and contrast the performance of TESCO with the nearest competitor of a kind in Malaysia.

5. Provide recommendations to management of TESCO on ways to improve strategically in Malaysia.

Tomato yields

Number of plants 3 4 5 6 7 8 Pounds of tomatoes 42 54 65 75 84 92

Chris runs a CSA (“community sponsored agriculture”) farm, and they are trying to determine the optimal amount of “investment” in tomato seedlings. The table above shows the plot’s (expected) yield as a function of the number of tomato plants.

1. (a) Tabulate the MPK, in terms of pounds of tomatoes, as a function of the number of tomato plants.

2. (b) Assumetheinterestrateis7%(r=0.07),thepriceofaseedlingis$1,andtomatoessellfor$0.10/pound.

   Tomato plants are annuals (they live only one year) so d = 1. Calculate the user cost.

3. (c) Find the optimal amount of investment (the number of seedlings to plant).

4. (d) Repeat the calculation with:

   1. (i) A 5 percentage point increase in the interest rate, to 12%.

   2. (ii) A drop on the price of tomatoes, to $0.09/pound (r = 7%).

   3. (iii) A drop in the price of seedlings, to $0.90 (r = 7% and tomato price = $0.10).

   4. (iv) The introduction of a new variety of tomatoes with a 10% higher yield, regardless of the number

      planted (r = 7%, tomato price = $0.10 and seedling price = $1).

The market demand curve for a pair of Cournot duopolists is given as: P = 60 – 3Q. The constant per unit marginal cost is $6/unit for each duopolist. (Round your answers to two decimal points)

a) Find the Cournot equilibrium price, quantity, and profits

b) Solve the same problem as a Bertrand equilibrium. Find the longrun equilibrium price, quantities, and profits.

c) Solve the same problem as a Stakelberg Leader-Follower equilibrium. Assume Firm 1 is the leader.

Which of the following is true regarding the expansion of railroad after the Civil War?

a. all of these are true

b. The expansion of the railroad system generated productivity gains by reducing transportation costs

c. The expansion of the railroad system benefited from large land grants from the federal government

d. The expansion of the railroad was strongly correlated with the business cycle.

1. Suppose that a widget is considered a normal good. What is the impact of a decrease in income on the perfectly competitive market for widgets?

1. The price of widgets will increase and the quantity exchanged will decrease.
2. The price of widgets will decrease and the quantity exchanged will decrease
3. The price of widgets will increase and the quantity exchanged will increase.
4. The price of widgets will decrease and the quantity exchanged will increase.

2. What is the absolute value of price elasticity of demand from (P =6, Q=900)   to (P = 8, Q= 800)

Round your answer to 3 decimal points and interpret the meaning of your answer.

3. A decrease in demand for oil and an increase in supply of oil will:

     A) quantity decreases, but price may either increase, decrease, or remain unchanged.

     B) price increases, but quantity may either increase, decrease, or remain unchanged.

     C) quantity increases, but price may either increase, decrease, or remain unchanged.

     D) price decreases, but quantity may either increase, decrease, or remain unchanged.

4. A firm in a perfectly competitive industry is producing where short run marginal cost is less than price. Total revenue is $1700; short run total cost is $1800 and total fixed cost is $500. The firm’s best strategy in the short run is to

A) Increase its price.              B) Increase its output.

C) Decrease its output.           D) Shut down.

E) Maintain output at its present level.

5. A firm in a perfectly competitive industry is producing where short run marginal cost is equal to price. Total revenue is $700; short run total cost is $800 and total fixed cost is $300. The firm’s best strategy in the short run is to

A) Increase its price.              B) Increase its output.

C) Decrease its output.           D) Shut down.

E) Maintain output at its present level.

6. Productive efficiency refers to:

A) maximizing profits by producing where MR = MC.              B) setting TR = TC.

C) cost minimization, where P = minimum ATC.                D) equilibrium, where MB = MC

1. Cross Price elasticity of demand between two substitute goods is:

     A)   positive.    B) unitary.    C) zero.    D) negative.

2. Allocative efficiency occurs when producing the quantity where:

A) Marginal Revenue = Marginal Cost.                          B) Marginal Benefits = Marginal Cost.

C)   Price = minimum Average total Cost.                      D) Total Revenue = Total Cost.

3. A normative statement is one which

A) is based on the law of averages.                                       B) is based on generalizations.

C) is based upon, subjective beliefs or opinions.                  D) is based on facts.

4. Which of the following goods has the characteristic of non-rivalry, and non-excludability?

A) congested highway with a toll booth.                            B) A cell phone signal

   C) a pair of pants.                                                                D) asteroid defence.

Describe and illustrate the difference between perfect competition and monopolistic competition in the long run. Comment on long run profit, price sensitivities that firms are responding to as well as welfare and efficiency outcomes in both cases.

1. If a country faces a trade deficit,
   1. What fiscal policy would you propose to reduce the trade deficit?
   2. What monetary policy would you propose?

2. What fiscal, monetary, and exchange rate policies would you propose if a country wanted to eliminate a trade surplus so that its citizens would have access to more consumer goods?

3. Explain what is lilkely to value of the dollar if the following economic conditions change. (You can use a supply-demand drawing or reason with words.)

1. The Federal Reserve decides to lower interest rates.
2. A crisis causes foreign holders of finance to buy safe assets.
3. A big economic expansion in Europe leads to a surge of demand for American exports.
4. The United States experiences a big economic expansion and this leads to an increase in the demand for imports from China.

Suppose Voodoo Donuts and Stumptown Coffee are perfect complements, consumed together one donut to one cup of coffee. Suppose the price of a donut is $1 and the price of a cup of coffee is $3. Use both graphs and words to explain income and substitution effects when the price of coffee to rise to $4.

Suppose Oreos and Hydrox are perfect substitutes, one for one. If Oreos currently sell for 50 cents and Hydrox sell for 75 cents, use both graphs and words to explain income and substitution effects that occur when the price of Oreos to rise to $1.

In a restaurant that allows smoking, your consumption of cigarettes may have a negative effect on my enjoyment of a restaurant meal. Yet you do not in any way pay for this negative effect on me.

a. (5 points) From this information, decide on the type of externality your consumption creates in the market for cigarettes. Explain in detail, using words and an appropriate graph, the nature of the externality.

b. (5 points) In your graph denote the magnitude of the excess burden (deadweight loss) arising from this externality.

c. (5 points) Now assuming that this externality is the pre-existing distortion in the market, there is an additional tax imposed on the buyers of cigarettes. What do you expect would happen to the excess burden (deadweight loss) of this tax? Describe in words how the graph would alter with the tax and draw a new graph to show the effect on the excess burden (deadweight loss).

d. (5 points) Discuss if the theory of second best holds in this case.

We have seen in class that the labor force participation of women has increased considerably in the last 50 years in many countries of the world. Unfortunately, during the same time, in some countries, gender wage gap has increased. Newspapers in these countries have reported this increase in the gender wage gap as evidence that there have been an increase in the number of discriminating firms or in how discriminating they are. Using the model of discrimination learned in class, provide an alternative explanation of what could have increased the gender wage gap. Use a graph.

Drug law enforcers can concentrate their efforts on reducing supply or demand,
removing suppliers or removing demanders.
a. Assuming that your goal is to raise the price of drugs to a prohibitive level,
should you pursue suppliers or users? What does your answer assume about
elasticities of demand and supply?
b. If instead you want simply to reduce consumption and are uninterested in what
happens to price, under what assumptions about elasticities should you target
users rather than sellers?

Please justify with relevant economic concepts.

Developing a new product has taken longer and required more work than was
expected at the time the decision to develop was first made. Should the firm raise
the price of the product above what it originally planned to sell it for because the
costs are higher than before?

Please justify with relevant economics concepts.

Airlines routinely overbook flights, selling more tickets than seats available. If too
many ticketed passengers show up, they offer payments to volunteers who are
willing to give up their seats. These take such forms as cash vouchers for future
flights and upgrades to first class on the next flight out.
a. Why is this situation more efficient than a simple rule that prohibits airlines
from overbooking? (Be sure to say precisely what you mean by efficiency.)
b. Why do you (probably) not object to the airline practice of bribing passengers
off the plane, but you (probably) would object if you learned that the airline had
bribed a local politician to obtain airport gate space that would otherwise have
been used by a competitor?

Please justify with relevant economic concepts.