(PPP in China) The International Comparison Program (ICP) reported a price level index (PLI) for China of 42 in 2005 and 54 in 2011. Recall that, by construction, the PLI for the United States is always 100. 1. Find the percent change in the Yuan-dollar real exchange rate between 2005 and 2011. 2. In 2005 the size of the Chinese economy, at PPP exchange rates, was 43 percent that of the U.S. economy. Ignoring growth in physical output, find the size of the Chinese economy, at 2011 PPP exchange rates, relative to that of the U.S. economy. 3. Suppose instead that all of the observed real appreciation of the yuan was due to the imposition of import tariffs by China. Assume that in the U.S. and China the price level is given by P = Pγ XP1−γ M , where γ = 0.5, PX and PM denote export and import prices, respectively, and that absent tariffs the law of one price holds. Find the size of the import tariff.

Answer one of the questions please

Give and example of a negative or a positive externality. What type of Pigovian solution would you propose to equalize the private and social cost or benefit? Can a private solution be reached (following the ideas of Ronald Cause?) Why or why not?

What are the two important functions that profits and losses perform, according to Ludwig von Mises, which cannot be replicated under socialism?

Explain Arrow's impossibility theorem. What is Arrow's main conclusion? What is his main contribution ?

Define Pareto Optimality. State the three conditions for Pareto optimum. What are the four main criticisms to Pareto's welfare theory?

2. Suppose a video game company sells the following two products separately: console and headset. Through a consumer survey group, it has estimated that the following individuals value the two products at the following prices:

a) If the company prices the console at $350 each and the headset at $40 each, how much revenue will the firm receive?

b) If the company prices the console at $200 each and the headset at $60 each, how much revenue will the firm receive?

c) Suppose the company bundles the console and the headset together for a package price of $260 each. What would be the total revenue in this case?

d) Is there a bundle price at which both consumers will purchase the package that yields the highest revenue of any possibility on this page? If so, what will it be? If not, why not?   

Is the absence of a COVID vaccine an example of market failure? Explain    

Chepa’s utility function is given by U (x, y) = ln x + 4 ln y. Assume that Chepa has endowments (10, 10) and that Py = 10 throughout the problem. (h) This part of the question is to investigate Chepa’s welfare under different prices. We will do it step by step.

(i) By substituting out the M with the expression of Chepa’s endowment income (see part (g)), obtain Chepa’s gross demands as functions of Px.

(ii) Plug your answer to (i) into Chepa’s utility function (that is, replacing the general x and y in her utility function by the optimal x and y given Px) to obtain an expression of the maximal utility achieved by Chepa as a function of Px.

(iii) Find the value of Px that gives Chepa the lowest utility. (Hint: Take the answer to (ii), differentiate it with respect to Px, set the derivative to zero and solve for Px in that equation. It is a good practice to check the second order condition to make sure you are getting a minimum — but if you feel uninterested or that this is too hard, you can trust that I am giving you a “nicely behaved” minimisation problem and skip checking the SOC.)

(iv) Explain the economic meaning of your result in (iii).

Define labour force participation rate and explain why it is always less than 100%?     

1. Wardco mining would like to expand operations in a west Texas region affecting a single small town. Expansion would put toxic chemicals into the groundwater that, if untreated, would make the water undrinkable. This is the only effect and, even then, the chemicals breakdown in about a decade.

a. If it cost Wardco $40 million to extract the minerals but would cost $10million to treat the water and the value of mined products to customers is $60million, should Wardco be required to pay the cost of treating the water?

b. If it cost Wardco $40 million to extract the minerals but would cost $10million to treat the water and the value of mined products to customers is $48million, should Wardco be required to pay the cost of treating the water? Would Wardco do so?

c. Suppose it cost Wardco $40 million to extract the minerals and the value of mined products to customers is $48million. It would cost $10million to treat the water but only $5million to buy all the affected residents’ property. Should Wardco be required to treat the water in this case?

How did President Reagan's foreign policy views toward the USSR and Cold War evolve from 1981-1989?

Back from his dream, Matt begins some strategic planning for starting another store in a small town that has no computer store and is not inclined to use mail order buying methods.

1. He believes the annual demand in the town will be P = 1800 – 10Q. First, calculate Matt's marginal revenue curve, and then graph both the demand and MR curves.

2. He estimates his marginal cost per computer to be constant at $600. Sketch on the graph the marginal cost curve. From this data, calculate how much he should sell to maximize profit and what price Matt should charge.

3. If capital costs are fixed at $12,000 for the year what is Matt’s total cost function and his average cost per computer at the optimal output?

4. From the average cost at profit maximum output, show the profit rectangle on your graph above.

5. If Matt were able to perfectly price discriminate, what would be his output and profit?

The following two equations are the demand equations for airplane trips for a business person and a vacationer, respectively. The airlines’ marginal cost is $20 per passenger.

? =620−100? ,and

? =180−40? ""

1. What price should the airlines charge each person if the firm’s objective is to maximize profit?

2. Does this pricing make sense? To answer this, calculate the price elasticity of demand for each customer type. Whose demand is more elastic? Explain your response.