1. Suppose you are studying the market for employees in a given competitive labor market in the US. The labor supply is given by: Supply : w = L+2 where w is the wage per hour worked and L is the number of employees in thousands. The demand for labor in this industry is given by: Demand : w = 20 − L, with L the number of employees in thousands.

(a) Based solely on the information given, can leisure be a normal good? If yes, underwhich condition?Currently there is a national minimum wage policy at $7 dollars per hour worked.

(b) Find the equilibrium wage and employment in the market. What is the effect of the minimum wage? Will there be unemployment? If yes, how many people?

(c) One of the candidates supports raising the minimum wage to $15 per hour. How will this policy affect employment and unemployment? Be precise. In what way is it different from the previous minimum wage? Now, suppose that, for some cities in the US, the industry you are studying is actually composed of a single firm hiring workers. Suppose that the labor supply is still the same, which yields the following marginal cost of labor: MCL = 2L+2

(d) On the graph below, draw the demand, supply and marginal cost of labor in such a case. Make sure to label all intercepts. Explain why the marginal cost of labor is higher than the supply for labor.

wage

Labor (thousands)

(e) Find the monopsony wage wm and level of employment Lm, and label them on the graph in part (d). What is the unemployment level? Show your work.

(f) A competitor candidate claims that the $15 minimum wage per hour is too high and says: “We indeed need to raise the minimum wage, but a rise to $9 dollars per hour will be best. It will both create jobs and prevent people being from being fired”. Compare the effect of the three minimum wage policies ($7, $15, and $9 an hour) in single employer cities in terms of the employment level and unemployment. Be precise.

In 2012, presidential candidate Mitt Rommey proposed extending the cut in marginal income tax rates passed during the Bush administration. Explain why theory alone cannot predict how labor supply would be affected if this proposal were implemented. If there were no political or legal impediments to doing so, how could you design an experimental study to estimate the impact of lower marginal tax rates on labor supply?( Says theoretical approach, what the process and the consequences are, and premise)

In this question, we’ll analyze the labor market for IT workers in the Silicon Valley. Suppose the labor market is perfectly competitive and it is characterized by a downward sloping and upward sloping supply curves.

(a) Draw the graph for this market. Mark the equilibrium wage and employment and unemployment.

(b) Is the outcome efficient? Why? Mark any DWL. Suppose all the IT firms unite into an employers’ organization and coordinate their actions in the labor market so that now they behave as a single employer.

(c) Draw a new graph incorporating this information.

(d) Marktheequilibriumwageandemploymentandunemploymentunderthisassumption.

(e) Is the new outcome efficient? Why? Mark any DWL. Suppose the labor market is back to perfect competition. Soon, the US Congress may vote a new bill increasing the annual cap of available H1-B visas. Those are visas for temporary skilled workers and the IT industry is one of the largest users (in 2013 they counted for about 70% of all H1-B visas requested).

(f) Steve, currently employed in the IT industry, is strongly against the bill. He argues “The increase in H1-B visas will lower our wages and make us worse off.” Is he correct? Explain in words and graphically.

(g) Tim disagrees with Steve: “Working with people from different countries and backgrounds improves my creativity and helps me find new ideas. I don’t think the increase in H1-B visas will necessary imply lower wages”. Under what assumption is this scenario possible? Explain the reasoning in words and graphically.

1. Consider a price-taking firm operating in a market with price, p. The production function for the firm is FK,L=KαLβ. Where K is units of Capital and L is units of Labour. If the cost of each unit of capital is r and the cost of each unit of labour is w.
   1. Is the production function homogenous? If so, what is the degree of homogeneity?
   2. Under what conditions does the production function exhibit increasing, constant or decreasing returns to scale?
   3. Write out the Cost Function CK,L. Is the cost function homogenous? If so, what is the degree of homogeneity?
   4. Write out the profit function π(K,L). Is the profit function homogenous? If so, what is the degree of homogeneity?
   5. Find the critical values for the profit function, L*and K*.
   6. Under what conditions are the values in part e. profit maximizing?
   7. Find the maximum profit under the condition specified in part f.
   8. What can you say about the case where the conditions in part f. are violated.

2. For the function z=fx,y=x3- 3xy-y3
   1. Find the equation of this function when y is fixed at the following values: -2,-1,0,1,2. Plot these equations on the same axes, carefully labelling each line.

Given: When entering a highway, a driver saves 300 seconds minus 5 seconds per driver in the highway. The driver gets personal benefits = 300 - 5N and the external costs imposed on all drivers = 5N, where N is the total number of drivers.

1. What is the number of entrants that maximize net benefits for the highway? And what what is the number of entrants at the market equilibrium? (assume no cooperation or regulation, this is an example of the tragedy of the commons).

a) 45 and 90, respectively

b) 30 and 60, respectively

c) 15 and 30, respectively

d) 60 and 120, respectively

2. The Net Benefits from the highway at the optimal level of entrants equals $4500 every year, starting today. Assume the highway generates these benefits for an infinite period (forever). What is the present value of net benefits (NPV) for this highway? Assume r = 5%.

a) 90000

b) 4500

c) 9000

d) 45000

3. Now assume we start receiving these benefits ($4500/year) 10 years from now (every year, forever). What is the new NPV? Assume r still = 5%.

a) 2762.6

b) 55252.2

c) 5525.2

d) 27626.1

3. Draw and label the bond market graph covered in chapter 5. Then, using the graph, illustrate how the equilibrium price, yield to maturity, and quantity changes as a result of:

A) an increase in expected inflation. Explain the movement from one equilibrium to another.

B) A decrease in the riskiness of bonds. Explain the movement from one equilibrium to another.

C) an increase in the government budget deficit. Explain the movement from one equilibrium to another.

You are given the following information about a country's international transactions during a year: Merchandise exports $2,000 Merchandise imports 1,800 Service exports 1.500 Service imports 1,600 Income flows, net 800 Unilateral transfers, net −1,200 Increase in the country's holding of foreign assets, net (excluding official reserve assets) 3,000 Increase in foreign holdings of the country's assets, net (excluding official reserve assets) 2,200 Statistical discrepancy, net 88 Required: a) Calculate the values of the country's goods and services balance, current account balance, and official settlements balance. b) What is the value of the change in official reserve assets (net)? Is the country increasing or decreasing its net holdings of official reserve assets?

What do you think are sources of economic growth in Europe and North America? Why does convergence occur among OECD countries rather than all around the world?

How does Amazon compete against Walmart? What are their strategies and what makes them unique?

As a detective seeking evidence [need to know investor]:

Does Ford Motor have an effective leadership model (that supports the objectives) fostered and effectively deployed ?

·         What are Intellectual Property Rights?

·         Why are they important?

·         Why be concerned about IPR on a global level?

·         What can or should firms do to protect their IPR?

(a) Name three key elements that distinguish managed care from traditional FFS insurance. What was the primary change from traditional FFS insurance?

(b) Describe how incentives may di§er between traditional FFS insurance and HMOs from a dynamic perspective

During the 1920s, the U.S. government, under the guidance of Harding and Coolidge, took a backseat in issues pertaining to the economy. They believed in capitalism as the driving force behind the economy and decreased regulation by the federal government. During this period, big businesses regained a lot of power and grew exponentially, labor unions became ineffective without the support of government regulations, and consumer spending increased. While the economy looked great, warning signs pointed to problems that will eventually lead to the stock market crash and the Great Depression of the 1930s.

After analyzing the political and economic policies of Harding and Coolidge, do you believe the federal government of the 1920s could have taken a more active role in helping to regulate the economy and would this have prevented the stock market crash of 1929 and the Great Depression? Is it the government’s responsibility to be involved in the economy? Support your answer with specific examples and make sure to cite all of your sources.