1. (a) Draw the market for SUVs in equilibrium. Label your graph neatly and correctly.

(b) Now show what happens in the market when the price of gas falls dramatically and the technology used to manufacture SUVs improves, if the drop in gas has a much bigger impact on the market than the technology improvement.

( c) What will happen to the new equilibrium price and quantity of SUVs?

Why is knowing (or estimating) the product demand so crucial for a firm? In your response, include an example of a business that has suffered from poorly estimating the demand of its products. Evaluate how or why the business made such a mistake.

Two firms face the following demand curve: P = 50 – 5Q, where Q = Q₁ + Q₂.

The firms cost functions are C₁ (Q₁) = 20 + 10Q₁ for firm 1 and C₂ (Q₂)= 10 + 12Q₂ for firm 2.

1. Suppose both firms have entered the industry. What is the joint profit maximizing level of output?                                                                                                                    [5Marks]
2. What is each firms equilibrium output and profit if they behave non-cooperatively? Use the Cournot model.                                                                                                 [5Marks]

c. How much should Firm 1 be willing to pay to purchase Firm 2 if collusion is illegal but a takeover is not?     [5Marks]

What lessons could you draw from the experience of Shell in its Sakhalin Project as it specifically relates to managing government relationships? As an IOC (International Oil Company)? As an NOC (National Oil Company)?

1. Show whether each of the following production functions exhibit increasing, decreasing or constant returns to scale.

1. Q = 0.5KL                                                                                                             [2.5 Marks]
2. Q = 2K + 3L                                                                                                           [2.5 Marks]

2. A firm has the following production function

                                  Q = 2(XY) ^0.5

Where, X is maize and Y is rice. The cost of maize is K10 and the cost of rice Is K40. The firm has a budget of K80 to spend on the two goods.

1. Formulate the firms’ optimization problem.                                                             [5 Marks]
2. Compute the optimal input combination of good X and Y.                                    [5 Marks]
3. What level of output is associated with the optimal input combination?                  [3 Marks]

What is the impact of a K1 increase in the budget?                                               

The market for wheat is supplied by a large number of small price taking firms. a) Suppose there is only one large buyer (a Monopsony). How will the price, quantity, PS, and CS differ from the case of a perfectly competitive market? b) Suppose that the majority of wheat is used by firms that produce bread. How will the wheat market be affected if the local bread market is supplied by a Monopoly. c) How would the market for wheat be affected if the government placed a price ceiling in the market for bread.

1) Consider the following, all of which will affect the demand for pounds on foreign exchange markets or the supply of pounds on foreign exchange markets (either one or the other – never both)

State what the effect of each of them will be (will it increase it or reduce it?)

Say whether the transaction will be recorded on the Current Account or the Capital Account of the Balance of Payments.

a) There is an increase in demand in Britain for Renault motor cars
b) French consumers start to buy British beef again.
c) LEB (the London Electricity Board) is purchased by EDF (Electricité de France)
d) Large numbers of Russian students come to Britain to study.
e) EDF pays a large dividend to shareholders. Some shares in EDF are owned by a British pension fund.

2) Explain the effect on the business sector of the economy of a rise in the exchange rate for the country’s currency.

3) A substantial fall in the price of the pound in foreign currencies (e.g., the price of the pound in euros) could be expected to affect physical quantities of exports from the UK and imports into the UK as follows:

(a)    Increase both export and imports.
(b)   Increase exports, decrease imports.
(c)    Decrease both exports and exports
(d)   Decrease exports, increase imports.
(e)   Have no perceptible effect on either imports or exports.

Describe Cartier current Organization structure ?

Firm X operates in a perfectly competitive market. It is making a supernormal profit in the short-run. Explain clearly and logically what will happen to this firm in the long run. You will need to use a diagram.

Picture yourself as a corporate president who is about to decide on making a foreign direct investment. What questions should you ask yourself?

3. (a) Draw the market for SUVs in equilibrium. Label your graph neatly and correctly.

(b) Now show what happens in the market when the price of gas falls dramatically and the technology used to manufacture SUVs improves, if the drop in gas has a much bigger impact on the market than the technology improvement.

( c) What will happen to the new equilibrium price and quantity of SUVs?

4. Draw three different supply curves on a graph:

1. Make S1 highly elastic
2. Make S2 highly inelastic
3. Make S3 perfectly inelastic
4. Which supply curve is the supply curve for Vincent van Gogh’s masterpiece, “A Starry Night”?
5. Which supply curve is for an ice cream manufacturer?
6. Which supply Curve if for an airplane manufacturer?

1. Which type of firm would you rather work for? One who lays people off, or one that cuts everyone’s hours? Why? Think about the tradeoffs involved. Please use marginal analysis in your reasoning, and back up any claims you make with some documentation.

2. If a law was passed that required all firms to cut hours instead of lay people off, so that everybody was guaranteed a job and only hours worked fluctuated (instead of experiencing joblessness), what do you think the economic consequences would be? Specifically;

* Do you have any thoughts on how (and why) this might affect the duration and severity of recessions?

* What do you think the long-term implications on the health of the economy would be? Think about what effect this policy would have on workers’ effort level, and therefore productivity over time.

* Finally, would this sort of policy cause any other social problems or issues?

what share of M1 money is actual currency?

5. When priced at $425, 10,000 robot vacuums are demanded, and at $475, 8750 are demanded.

1. What is the price elasticity of demand for robot vacuums?
2. Assuming manufacturing costs are about the same per vacuum from 5,000 to 10,000 units sold, should the firm sell the product at the lower or the higher price to maximize revenues?

1. When Susan makes $45,000 a year, she is ready to purchase 200 hotdogs a year. When her income climbs to $60,000 a year, she would purchase 180 hotdogs a year.

1. Which elasticity would you use to measure the change in Susan’s consumption behavior?
2. Calculate the appropriate elasticity that you identified in part (a)?
3. Based on your answer in Part (b), what can you say about the type of good that hotdogs are for Susan?