You matched with someone who seemed to be pretty on Tinder/Bumble, you asked them over to your place for a date. You meet, and they don’t turn out to be as attractive as their pictures made them look. You still proceeded with the date even though you usually do not go out with someone like that (personality wise). Which psychological bias explains your behavior, how is it different than what traditional economics would say?

Consider the uncovered interest-parity condition (UIP) using nominal interest rates.

a. What happens to the exchange rate if the foreign country lowers its nominal interest rates through expansionary monetary policy? How would that be reflected in the UIP curve graphically? Assume that the economy has a flexible exchange rate.

b. What needs to happen if a country has a fixed exchange rate system and the foreign country lowers 1 its nominal interest rate through expansionary policy? (Note that a fixed exchange rate system implies that the nominal exchange rate is held constant and if credible, should also equal the expected exchange rate!) How would this be reflected graphically? Discuss the UIP curve alone, without using the IS-MP graph.

Economics

A firm develops a new consumable good with no other firms currently in the market and has the following cost curves:

a) What could be the determinants of market power for a firm like this? Is there a typical determinant of market power that would not apply in this case?

b) What is the price and quantity the firm will trade at? What is the profit? (Draw the areas using the graph above as the starting point)

c) How would these results change if the firm behaved as if it had no market power? (Draw the areas using the graph above as the starting point)

d) Since the average total cost decreases (until the intersection with the MC curve) beyond the correct point in (b) why does the firm not produce additional units?

The firm receives feedback from its customers that they want a more affordable option. In response to this they release a new 6 pack version which is sold at a per unit price of between the prices in (b) and (c). It is assumed that anyone who can afford to purchase the smaller quantity of the good will also buy the 6 pack.

e) What degree of price discrimination is this likely to represent?

f) How do you predict total, producer and consumer surplus to change? Why? Using the diagram, show the new areas of surplus.

In 1990, the town of Ham Harbor had a more-or-less free market in taxi services. Any respectable firm could provide taxi service as long as the drivers and cabs satisfied certain safety standards. Let us suppose that the constant marginal cost per trip of a taxi ride is $5, and that the average taxi has a capacity of 20 trips per day. Let the demand function for taxi rides be given by D(P)1200 − 20P where demand is measured in rides per day, and price is measured in dollars. Assume that the industry is perfectly competitive. • What is the competitive equilibrium price per ride? What is the equilibrium number of rides per day? How many taxicabs will there be in equilibrium? • In 1995 costs had not changed, but the demand curve for taxicab rides had become D(P) = 1220 − 20P. If the taxi operated every day, what was the profit per taxicab license per year? • If the interest rate was 10% and costs, demand, and the number of licenses were expected to remain constant forever, what would be the market price of a taxicab license?

Suppose a hypothetical country known as the “Wonderland” has a civilian working-age population of 2.5 million people and of these about 4/5th of them are in the civilian labor force and ½ million people are unemployed. a) What is the labor force participation rate? b) What is the unemployment rate? c) If some desperate workers join the labor force lately, does the unemployment rate increase or decrease? Why?

Comment on the Spanish Christmas Lottery, including terms of risk, uncertainty, economic return, etc.

. A monopolist has a cost function given by c(y) = 0.5y 2 and faces a demand curve given by P(y) = 120 − y.

What is its profit-maximizing level of output? What price will the monopolist charge?

• If you put a lump sum tax of $100 on this monopolist, what would its output be?

• If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose?

• Suppose that you put a specific tax on the monopolist of $10 per unit output. What would its profit-maximizing level of output be?

Q1. What are the trends in the beverage industry (500-600 words)

The role of the European Union during coronavirus

Write a report that assesses whether the Eurozone countries have so far responded adequately to the economic challenges that have arisen during the coronavirus crisis.

The report should include the following sections:

• Section 1. (25%) The Eurogroup is debating EU-wide unemployment insurance scheme to mitigate the effects of the coronavirus crisis.
  • Define the different types of unemployment and discuss which one is the target of such a measure.
  • Analyze the possible effects of this measure using the concepts delivered in class.

• Section 2. (25%) The Eurogroup is discussing issuing Bons to cushion the economic downturn.
  • In the Eurozone, which institution oversees monetary policy, and which one controls fiscal policy?

The main goal of the European Central Bank is controlling the inflation. Why it is so important? To answer this question:

• define aggregate demand and aggregate supply in the long-run and short-run (use graphs), and
• explain the main effects of rising prices in the economy using the concepts delivered in class.

• Section 3 (25%) Fiscal and monetary policies
• • Provide information on fiscal and monetary policies that are being (or are planned to be) implemented as a response to the coronavirus crisis to prevent a fall of aggregate demand.
  • Provide two examples of fiscal policies in face of an economic crisis and discuss their positive and negative effects on aggregate demand. Use the concepts of “multiplier effect” and crowding-out effect” delivered in class. This section must include a written explanation.

• Section 4. (25%) Coronavirus crisis will certainly cause a fall of global trade.
  • Explain what the expected impact of the fall in international trade on the Eurozone economy might be. Use the AD/AS model and the concepts delivered in unit 8. This section must include a written explanation and charts.
• Bibliography

5. Microsoft Corporation decides how many packets of the new operating system (Windows Vista) it is going to sell on the market. The research (fixed) costs associated with the development of the new system amounts to F = $1000. The variable costs of the packet is negligible C(y) = 0. Microsoft’s inverse demand for the new operating system is given by P (y) = 100 − y. • Assume that Microsoft cannot discriminate among its customers. Find geometrically and analytically the level of sales that maximizes profit, the market price, and the maximal profit.

• Find the deadweight loss (DWL) geometrically and analytically.

• Find the elasticity of the demand at the optimal level of production. Is the monopolistic firm operating on elastic or inelastic part of the demand?

The Internet’s effects on (lower) transaction costs and increased competition have been widely recognized. Innovative service providers such as amazon, eBay or search engines such as Google and Bing have lowered search costs in many markets. And while Internet services have made entry into many markets easier, concerns have recently emerged about competition in these Internet service markets themselves.(Justus Haucap & Ulrich Heimeshoff,2014)

What are the economic characteristics of online markets? What implications if any do these characteristics have for the level of market power held by firms providing online search, auction platforms or social networks? Do competition policy rules need to be rewritten or extended for these markets?

"The ability of internet service providers to charge termination fees to content providers for delivering their content raises an important question for policy: does a positive termination fee lead to an equal reduction in prices to users?” Can economic analysis help answer this question? Explain

Construct and analyze a 2x2 one-shot game between two manufacturers (A and B) of competing for game consoles in which each manufacturer must choose between two different software technologies(x and y) which are not compatible with each other. What payoffs are necessary to generate two Nash equilibrium in which each manufacturer chooses the same technology? Would making your game a sequential-move encounter (in which A chooses its software platform before B)make it easier to predict the outcome of this game

Discuss the different ways that compatibility standards may emerge in markets. What implications, if any, do different paths to compatibility have for competition, innovation and economic efficiency?

How did Singapore fare in the Asian Financial Crisis in 1997 and the Global Financial Crisis in 2008 relative to its other ASEAN partners (you may pick any one of them for discussion)?