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)?

5)

a) Most policies that target inequality either target it at the low end of the income distribution by trying to increase wages of low-income workers, or at the high end of the income distribution by limiting wages of high-income workers. List a few potential policies of each type.

b) In order to better understand how sensitive inequality measures are to the choice of measure, provide a Lorenz curve of an economy with a 90-10 wage gap that is essentially zero but for which the Gini coefficient is close to 1.

Consider a firm which produces according to the following production function by using labor and capital:

f(l,k) = k^{1/4 / 1/2}

(a) Solve the cost minimization problem of this firm for the given wage rate, w and the rental rate of capital,v.

(b) Derive the cost function of the firm.

(c) Solve the profit maximization of the firm for a given price p, and derive the supply function.

(d) Derive the profit function of the firm.

(e) Suppose demand for this good is given by the following relation: p = 272−2q

Now, solve for the market equilibrium price level (where demand equals supply) if w = 1 and v = 2. (f) Decide whether the production function exhibits constant, increasing or decreasing returns to scale.

State whether the following represent an injection into the circular flow of income or a withdrawal from it. You have to assume that “other things remain unchanged” (ceteris paribus)

a)         a cut in taxes
b)         BAe Systems (a defence contractor) receives a large order from abroad
c)         central government spending on higher education is cut
d)         retirement pensions are increased

2. Think of a business with which you are somewhat familiar. For that business:

A. What are the fixed costs?

B. What are the variable costs?

C. What are the explicit costs?

D. What are the implicit costs?

The following numbers will be estimates (I'm not asking you to do any research; Begin by entering possible numbers for the fixed costs and variable costs for each level of output. Then calculate total cost, marginal cost and average cost. I just want you to have practice calculating the various costs.)

Complete this table

E. Do your average total costs show economies of scale or diseconomies scale? Why?

1) What effect will the following have on the demand for UK-produced goods and services ceteris paribus?

a) the Chancellor of the Exchequer, George Osborne increases taxes
b) there is an increase in interest rates
c) there is an increase in interest rates in Germany
d) additional spending on the National Health Service to reduce waiting lists
e) reduced spending on Child Benefit
f) Samsung builds a new factory in Scotland

This assessment is designed to apply the knowledge and skills developed by students in evaluating the role of systems thinking in global and local sustainability challenges. You have been assigned a case study on the LMS, and must answer the following questions in relation to the case:

Using the Iceberg model, explain if and how systems thinking might be useful in addressing the wickedness of the problem. (500 words).

The city of Selma (like most other cities) contracts with a single garbage collection firm, Alamo Waste Inc., which has been given an exclusive franchise to pick up trash in the city. However, Mr. Foo L. Noone has proposed an alternative scheme. He suggests that the city government should divide the city into several, much smaller areas. Then it should allow numerous small companies that would like to get into the business of collecting trash to competitively bid for garbage collection in these areas. The government would then allow the lowest bidder to service the area.   

      Suppose that the city government has estimated the price residents are willing to pay for various numbers of garbage collections per month and the total costs per resident as shown in the following table.

1. Complete the above table.

2. How much are the fixed costs per month of garbage collection per resident in any given        area?

C.   Given that the current garbage collection firm has a monopoly what is the current number of collections per resident and the price charged residents for each collection? What is the economic profit received from each resident by the monopoly firm. Show your work.

D. If competitive bidding were allowed and a competitive market for garbage collection services developed, what would be the number of collections per month and the price charged per resident per collection? What is the economic profit received from each resident by the competitive firms?

E.   Draw an appropriate graph of your solutions to parts B and C and insert your numbers onto the graph. Based on the above analysis should the city government implement Mr. Noone's proposal? Briefly explain your answer.

7. Research Questions Choose one of the questions below and write a short essay. No longer than 500 words.

1. Why has income inequality increased over time in emerging economies (China, Russia, etc.) What are some of the explanations for this increase?

2. Has intergenerational mobility increased or decreased over time within advanced economies?