Suppose that the owner and CEO of a firm that operates in a PERFECTLY COMPETITIVE market environment comes to see you for help. She has a few questions to ask you as the company Economist. This question is:

(i)     “At lunch the other day, I overheard an economist at the next table describe our perfectly competitive firm as being a ‘Price Taker’ in the market. Can you carefully and completely explain what it means to be a Price Taker AND why my firm is described that way, please?”

Roma and Parma are both capable of producing wine and cheese. With its resources Roma can produce either 150 thousand pounds of cheese or 25 thousand bottles of wine. Parma with its resources can produce 80 thousand pounds of cheese or 10 thousand bottles of wine.

Roma’s opportunity cost of producing one bottle of wine is equal to _ pounds of cheese.

Parma’s opportunity cost of producing one bottle of wine is equal to _ pounds of cheese.

Enter numbers rounded to two decimal places as necessary.

Answer the following questions true or false.

Parma has an absolute advantage in producing wine. _ (T/F)

Parma has a comparative advantage in producing wine _ . (T/F)

I have two questions:

1) What are some of the possible causes of recessions that Wesley Clair Mitchell discusses, and which ones seem most plausible to you?

2) What are the similarities and differences between the simple quantity theory of money and the equation of exchange?

I'll appreciate your answers, Thanks in advance.

11. A family has to decide how much of their monthly income they will spend on good A and how much they will spend on good B. Assume that the price of good A is $20, the price of good B is $4, and the monthly income of the family is $600. On a piece of paper, plot the budget constraint faced by this family putting the quantity of good A on the horizontal axis and the quantity of good B on the vertical axis. Now answer this question: What is the value of the vertical intercept?

12. Given the information in question 11, what is the value of the horizontal intercept of the budget constraint?

13. Given the information in question 11, what is the value of the slope of the budget constraint?

14. A family has to decide how much of their monthly income they will spend on milk and how much they will spend on bread. Suppose this household has a fixed income of $1,000 per month, the price of milk is $2 per litre and the price of bread is $1 per kg. First, on a piece of paper, plot the monthly budget constraint faced by this family with "litres of milk" on the horizontal axis and "kg of bread" on the vertical axis. Now, assume that the government introduces a cash subsidy program that gives this family $500 in cash per month. Which of the following best describes what happens to the budget constraint of the family?

a. The budget constraint rotates outward around the horizontal intercept

b. The budget constraint rotates outward around the vertical intercept

c. The budget constraint rotates inward around the horizontal intercept

d. The budget constraint shifts outward and its slope remains unchanged

e. The budget constraint rotates inward around the vertical intercept

f. The budget constraint shifts inward and its slope remains unchanged

15. Given the information in question 14, what is the value of the vertical intercept of the budget constraint after the introduction of the subsidy?

16. Given the information in question 14, what is the value of the horizontal intercept of the budget constraint after the introduction of the subsidy?

17. Consider again the initial scenario described in question 14: A family has to decide how much of their monthly income they will spend on milk and how much they will spend on bread. This family has a fixed income of $1,000 per month, the price of milk is $2 per litre and the price of bread is $1per kg. However, now consider a different subsidy scheme. In particular, suppose that the government decides to reimburse the family for half of their milk expenses, i.e. the government decides to give $1 to the family (to be spent on whatever they want) for every litre of milk purchased. Which of the following best describes what happens to the budget constraint of the family with the introduction of this subsidy scheme?

a. The budget constraint rotates outward around the horizontal intercept

b. The budget constraint rotates inward around the horizontal intercept

c. The budget constraint rotates outward around the vertical intercept

d. The budget constraint rotates inward around the vertical intercept

e. The budget constraint shifts outward and its slope remains unchanged

f. The budget constraint shifts inward and its slope remains unchanged

18. Given the information in question 17, what is the value of the vertical intercept of the budget constraint after the introduction of the reimbursement scheme?

19. Given the information in question 17, what is the value of the horizontal intercept of the budget constraint after the introduction of the reimbursement scheme?

20. Given the information in question 17, what is the new opportunity cost of milk (in terms of bread) after the introduction of the reimbursement scheme? (NOTE: enter a positive number).

You are informed that there is empirical evidence that developed countries have much higher rates of COVID-19 infection than developing countries. A researcher informs you that this is a very strong and significant evidence on the negative causal relationship between economic development and infection rates. a- Do you agree that this reflects a negative relation between economic development and infection rates? Explain. (hint: negative is referring to the direction of the relation or the slope if you were to graph it). [2.5 marks]

b- Do you agree that this evidence is significant? Explain [2.5 marks]

c- Do you agree that this is a causal relation? Support your answer by providing a reason

Explain

a) how unions can work to widen wage gaps for workers and to reduce overall employment in an economy.

b) how unions reduce efficiency and produce deadweight loss in an economy

How did Iran become a nuclear power- how did they get this technology - fission technology and missile technology?

Suppose the government is concerned with its large trade deficit. Politician A proposes to encourage consumers to buy more domestically produced goods by running "Buy American" marketing campaigns. Politician B proposes to reduce government spending in order to tackle government debt.

A.) How does Politician A's plan affect the trade deficit and why?

B.) How does Politician B's plan affect the trade deficit and why?

C.) Which of these two policy choices, if any, will be effective in reducing the trade deficit in the long run?

Why are banks holding so many excess reserves and why is the money multiplier less than one? (500 - 650 word explanation please!)

As of March 2020, the average unemployment rate in Europe (6.6%) is higher than in the U.S. (3.5%).

A. Explain one difference between the European and U.S. economies that is consistent with more structural unemployment in Europe.

B. Explain one difference between the European and U.S. economies that is consistent with more frictional unemployment in Europe.

Briefly explain the economic philosophy behind the New Deal and give an example.

1. Consider the Solow growth model with population growth and growth in the efficiency of labor. Suppose that 2 countries A and B have the same production function given by Yt = Ktα(LtEt)1−α, the same rate of growth of E (g), the same depreciation rate of physical capital (δ) and the same saving rate s. The initial level of E, E0, is lower in country A than in country B.

   1. (a) Compare the steady-state levels of output per effective worker of these two coun- tries.

   2. (b) Assume now that at time 0 both countries are above the steady state and that k0A = k0B (i.e., the level of capital per effective worker at time 0 is the same in both countries) and continue to assume that the initial level of E is higher in country B than in country A. Draw log of output per capita for these two countries as a function of time (have time on the x-axis) starting in period 0 and show how they both converge to their respective balanced growth paths.

   3. (c) Do these countries converge to each other in output per capita? Defend your answer.