Consumer A regards the two goods as perfect complements, always wanting 2 units of good 1 for every unit of good s, where as B regards 4 units of good s and 3 units of good 2 as perfect substitutes. Initially, A has 60 units of good 1 and 75 units of good 2, and B has 140 units of good 1 and 25 units of good 2. a) Draw an Edgeworth box (put good 1 on the horizontal axis) and show the initial position of the two consumers. Explain why the initial allocation is NOT an equilibrium allocation. b) Suppose that the price of good 1 is equal to the price of good 2. On the diagram you drew in a) show the optimal bundles of the two consumers. Are the good markets clear? If not, show clearly the size of surplus of shortage in each market. c) What must be the competitive equilibrium price ratio of this economy? Explain your answer. d) Assuming that all the gains from trade were captured by A, what would be the equilibrium allocation of the two goods between A and B.
In: Economics
I. You have studied the chapters on unemployment and business cycles. Please review those chapters before you answer this question
a) Find the time series data (quarterly or monthly) on the unemployment rate, inflation rate and real GDP growth in the U.S. from 1980 to 2005, and discuss whether the Okun’s Law is valid or not. Then, discuss whether the Phillips curve exists in the U.S. economy( you have to report your data source and or the website).
b) Which recession is most severe in terms of its depth and the duration of unemployment?
c) Why unemployment rises when the economic is recovering? what kinds of unemployment is it ?
II. Monetary policy will have different impact on the equilibrium rate of interest and GDP. Try to draw three different IS curves with different slopes and show
a) The different impact of the same easy money policy on interest rate and GDP in these different IS curves
b) Monetary policy is most effective under what conditions ( which IS curve). Why ?
c) What determine the slopes of IS curve. Review chapter 14 on sticky price and flexible price model to answer the percentage distribution of both types of firms ,i.e. s vs ( 1-s) under different IS curves( hint : refer to the equations on. P. 408 and p. 411 that
P=EP+{( 1-s)/a/s} ( ( Y-Y bar) p. 408 Y= Y bar + alpha ( P-EP). P. 411
| Year | Growth | Unemployment | Inflation | Business Cycle |
|---|---|---|---|---|
| 1929 | NA | 3.2% | 0.6% | Aug peak and Oct. market crash |
| 1930 | -8.5% | 8.7% | -6.4% | Contraction |
| 1931 | -6.4% | 15.9% | -9.3% | Contraction |
| 1932 | -12.9% | 23.6% | -10.3% | Contraction |
| 1933 | -1.2% | 24.9% | 0.8% | New Deal and March trough |
| 1934 | 10.8% | 21.7% | 1.5% | Expansion |
| 1935 | 8.9% | 20.1% | 3% | Expansion |
| 1936 | 12.9% | 16.9% | 1.4% | Expansion |
| 1937 | 5.1% | 14.3% | 2.9% | May peak |
| 1938 | -3.3% | 19% | -2.8% | June trough |
| 1939 | 8% | 17.2% | 0% | Expansion and Dust Bowl ended |
| 1940 | 8.8% | 14.6% | 0.7% | |
| 1941 | 17.7% | 9.9% | 9.9% | Expansion and WWII |
| 1942 | 18.9% | 4.7% | 9% | Expansion |
| 1943 | 17% | 1.9% | 3% | Expansion |
| 1944 | 8% | 1.2% | 2.3% | Bretton-Woods |
| 1945 | -1% | 1.9% | 2.2% | Feb. peak, recession, Oct. trough |
| 1946 | -11.6% | 3.9% | 18.1% | Expansion and Fed cuts |
| 1947 | -1.1% | 3.9% | 8.8% | Marshall Plan and Cold War |
| 1948 | 4.1% | 4% | 3% | Nov. peak |
| 1949 | -0.6% | 6.6% | -2.1% | Oct. trough and NATO |
| 1950 | 8.7% | 4.3% | 5.9% | Expansion and Korean War |
| 1951 | 8% | 3.1% | 6% | Expansion |
| 1952 | 4.1% | 2.7% | 0.8% | Expansion |
| 1953 | 4.7% | 4.5% | 0.7% | War ended and July peak |
| 1954 | -0.6% | 5% | -0.7% | May trough, Dow at 1929 level |
| 1955 | 7.1% | 4.2% | 0.4% | Expansion |
| 1956 | 2.1% | 4.2% | 3% | Expansion |
| 1957 | 2.1% | 5.2% | 2.9% | Aug peak |
| 1958 | -0.7% | 6.2% | 1.8% | April trough |
| 1959 | 6.9% | 5.3% | 1.7% | Fed raised rates |
| 1960 | 2.6% | 6.6% | 1.4% | April peak and Fed cut |
| 1961 | 2.6% | 6% | 0.7% | JFK spending and Feb. trough |
| 1962 | 6.1% | 5.5% | 1.3% | Cuban Missile Crisis |
| 1963 | 4.4% | 5.5% | 1.6% | LBJ spending, Fed raised rate |
| 1964 | 5.8% | 5% | 1% | Fed raised rate |
| 1965 | 6.5% | 4% | 1.9% | Vietnam War, Fed raised rate |
| 1966 | 6.6% | 3.8% | 3.5% | Expansion, Fed raised rate |
| 1967 | 2.7% | 3.8% | 3% | Expansion |
| 1968 | 4.9% | 3.4% | 4.7% | Fed raised rate |
| 1969 | 3.1% | 3.5% | 6.2% | Nixon, Fed raised rate, Dec. peak |
| 1970 | 0.2% | 6.1% | 5.6% | Nov. trough, Fed cut rate |
| 1971 | 3.3% | 6% | 3.3% | Expansion and Wage-price controls |
| 1972 | 5.3% | 5.2% | 3.4% | Expansion |
| 1973 | 5.6% | 4.9% | 8.7% | Vietnam War and gold standard ended, Nov. peak. |
| 1974 | -0.5% | 7.2% | 12.3% | Stagflation, Watergate, Fed raised rate |
| 1975 | -0.2% | 8.2% | 6.9% | March trough, Fed cut rate |
| 1976 | 5.4% | 7.8% | 4.9% | Expansion, Fed cut rate |
| 1977 | 4.6% | 6.4% | 6.7% | Carter |
| 1978 | 5.5% | 6% | 9% | Fed raised rate |
| 1979 | 3.2% | 6% | 13.3% | Fed raised then lowered rate |
| 1980 | -0.3% | 7.2% | 12.5% | Jan. peak, Fed raised rate, July trough |
| 1981 | 2.5% | 8.5% | 8.9% | Reagan, Expansion peaked in July |
| 1982 | -1.8% | 10.8% | 3.8% | Nov. trough, Fed cut rate |
| 1983 | 4.6% | 8.3% | 3.8% | Reagan spent on defense |
| 1984 | 7.2% | 7.3% | 3.9% | Expansion |
| 1985 | 4.2% | 7% | 3.8% | Expansion |
| 1986 | 3.5% | 6.6% | 1.1% | Reagan cut taxes |
| 1987 | 3.5% | 5.7% | 4.4% | Black Monday |
| 1988 | 4.2% | 5.3% | 4.4% | Expansion, Fed raised rate |
| 1989 | 3.7% | 5.4% | 4.6% | S&L Crisis |
| 1990 | 1.9% | 6.3% | 6.1% | July peak |
| 1991 | -0.1% | 7.3% | 3.1% | March trough |
| 1992 | 3.5% | 7.4% | 2.9% | Expansion, Fed cut rate |
| 1993 | 2.8% | 6.5% | 2.7% | Expansion |
| 1994 | 4% | 5.5% | 2.7% | Expansion |
| 1995 | 2.7% | 5.6% | 2.5% | Fed raised rate |
| 1996 | 3.8% | 5.4% | 3.3% | Fed cut rate |
| 1997 | 4.4% | 4.7% | 1.7% | Fed raised rate |
| 1998 | 4.5% | 4.4% | 1.6% | LTCM crisis |
| 1999 | 4.8% | 4% | 2.7% | Expansion |
| 2000 | 4.1% | 3.9% | 3.4% | Expansion |
| 2001 | 1% | 5.7% | 1.6% | March peak, 9/11, and Nov. trough |
| 2002 | 1.7% | 6% | 2.4% | Expansion |
| 2003 | 2.9% | 5.7% | 1.9% | JGTRRA |
| 2004 | 3.8% | 5.4% | 3.3% | Expansion |
| 2005 | 3.5% | 4.9% | 3.4% | Expansion |
| 2006 | 2.7% | 4.4% | 2.5% | Expansion |
In: Economics
In: Economics
1. List the principal determinants of capital investment
2. Explain what is meant by the "marginal efficiency of capital." What is its role in determining the present value of an investment
3. Why is investment commonly a discrete, non-continuous function with respect to interest rates? Distinguish among the main ways by which firms finance investment.
4. Explain the accelerator principle.
In: Economics
One of the key ways a firm may be a monopoly is through patent protection. Perhaps many of you heard of the infamous case of Martin Shkreli's price hike of a drug called Daraprim from $12.50 to $750 almost overnight (Links to an external site.). Specifically answer this prompt: Should there be a price ceiling placed on patented products? Why or why not? If so, how exactly would you set the price ceiling? Consider the incentives that such a policy may have in the short and long term.
Include a detailed and accurate application of one or more of the concepts: patent, legal barriers to entry, economic profit in the short run and long run.
In: Economics
The I. Kruger Paint and Wallpaper Store is a large retail distributor of the Supertrex brand of vinyl wallcoverings. Kruger will enhance its citywide image in Miami if it can sell more rolls of Supertrex next year than other local stores. It is able to estimate the demand function as follows:
Number of rolls of Supertrex sold = 20 X Dollars spent on advertising + 6.8 X Dollars spent on in-store displays + 12 X Dollars invested in on-hand wallpaper inventory - (minus) 65,000 X Percentage markup taken above wholesale cost of a roll.
The store budgets a total of $17,000 for advertising, in-store displays, and on-hand inventory of Supertrex for next year. It decides it must spend at least $3,000 on advertising; in addition, at least 5% of the amount invested in on-hand inventory should be devoted to displays. Markups on Supertrex seen at other local stores range from 20% to 45%. Kruger decides that its markup had best be in this range as well.
a). Formulate as an LP problem.
b). Solve the problem
c) What is the difficulty with the answer?
d) What constraint would you add?
In: Economics
In: Economics
In: Economics
Explore and choose foreign countries and markets. Recommend the introduction of product or service overseas. Explain what entry strategy you would choose and explain your rationale based on the characteristics (i.e. political, economic, legal, and cultural) of the country and risks (e.g., intellectual property)
In: Economics
How did North Korea (essentially a third world country) become a nuclear power- how did they get this technology - fission technology and missile technology?
In: Economics
Adam has wealth of $40,000 as long as his business does not burn down. However, there is a 30% probability that his business will burn down, causing a loss of $30,000 and leaving him with $10,000 of wealth. Adam's utility function is given by U = W0.5 where W is wealth. Suppose Adam purchases insurance to cover the potential $30,000 loss. If the insurance premium is actuarially fair, Adam's utility with insurance is:
In: Economics
14.
Consider a monopoly facing the following demand, marginal revenue,
total cost, and marginal cost curves:
Demand curve: P = 12 – 0.002 Q
Marginal revenue curve: MR = 12 – 0.004 Q
Marginal cost curve: MC = 3 + 0.001 Q
a. Calculate the profit maximizing output of this monopoly. Briefly explain your answer.
b. What is the socially efficient output level? Briefly explain your answer.
c. Suppose the government wants to adopt a price ceiling to induce this monopoly to produce at the socially efficient output level. Briefly explain what the level of this price ceiling should be and what will be the economic profit of this monopoly under this price ceiling.
In: Economics
Graph the nominal exchange rate of Italy in relation to the United States dollar.
Graph time on the horizontal axis and nominal exchange rates on the vertical access. You will want to compare this to Real Exchange rates, so see if you can plot them on the same graph - sometimes the scale is okay, sometimes not so much. Write a few sentences explaining what the graphs are telling you. A ten-year time frame is preferred.
In: Economics
|
4. Cost-benefit analysis A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. For the students of the college, the visual appearance of the campus is and . Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $4,420. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 260 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $13. The benefit of the beautification initiative, as suggested by the survey, is. Because the estimated benefit is than the cost, the college administrators undertake the beautification initiative. The calculation of the benefit of the beautification initiative relied on the ability of the administrators to capture the true willingness to pay of each student accurately. Which of the following scenarios would cause the survey used by the college administrators to yield misleading data on willingness to pay? Check all that apply. Students are surveyed at random, using conventional survey and data-gathering methods. Students believe they will eventually be charged their willingness to pay. |
In: Economics
Considering deregulation and how it affects agriculture or the California economy.
For example, economic regulation has limited the number of nurses and doctors based on the strict licensing regulations.
How would deregulation affect the quality of trained medical professional?
How has social regulation (through the requirement of health benefits for all employees) reduce the number of employees that have full time work?
In: Economics