Answer the following questions based on the Video: We the Economy: “Amazing Animated Film on the Debt and the Deficit and “The Fiscal Ship” computer game.

1) List your main three goals in “The Fiscal Ship”.

2) For each of your goals, list two policies you used to achieve these goals. Explain how your goals and policies affected the government budget and the debt.  

Remember that your choices have real life ramifications. Please do not enact policies and create a country that you are not willing to live in just to balance the budget. We all have to live here.

Suppose that the demand for bananas is given by: Qd(p) = 1,500,000 – 50000p where Qd(p) is quantity demanded in kilograms of bananas and p is the price. Further suppose that there are many identical sellers in the domestic market who can each choose to plant bananas. If a seller chooses to produce bananas, she will incur a planting cost of $2.00 per kilogram at the beginning of the year and must pay an additional $0.50 per kilogram to harvest the bananas at the end of the year at the optimal farm scale of 12,500 kg of bananas. You may assume that the planting cost includes the opportunity costs associated with the allocated land. Thus, at the 2 beginning of the year (when both planting and harvesting costs are part of total opportunity cost), the total amount of bananas planted is given by: Qs(p) = { 0 if p < 2.50 [0, ∞] if p = 2.50 ∞ if p > 2.50 } Note that supply can be drawn as a straight horizontal line at a price of $2.50 Draw the supply and demand system and clearly mark the equilibrium outcome. Shade in the area that is the consumer surplus

Two firms compete by choosing price. Their demand functions are

Q_1=20-P_1+P_2 and Q_2=20+P_1-P_2

where P_1 and P_2 are the prices charged by each firm, respectively, and Q_1 and Q_2 are the resulting demands. Note that the demand for each good depends only on the difference in prices; if the two firms collude and set the same price, they could make that price as high as they wanted, and earn infinite profits. Marginal costs are zero.

a. Suppose the two firms set their prices at the same time. Find the resulting Nash equilibrium. What price will each firm charge, how much will it sell, and what will its profit be? (Hint: Maximize the profit of each firm with respect to its price.)

b. Suppose Firm 1 sets its price first and then Firm 2 sets its price. What price will each firm charge, how much will it sell, and what will its profit be?

c. Suppose you are one of these firms and that there are three ways you could play the game: (i) Both firms set price at the same time; (ii) You set price first; or (iii) Your competitor sets price first. If you could choose among these options, which would you prefer? Explain why.

Suppose that country A and country B both produce wine and cheese. Country A has 800 units of available labor, while country B has 600 units. Prior to trade, country A consumes 40 pounds of cheese and 8 bottles of wine, and country B consumes 30 pounds of cheese and 10 bottles of wine.

Country A Country B  

Labor per pound cheese 10 10

Labor per bottle wine 50 30

a. Which country has a comparative advantage in the production of each good? Explain.

b. Determine the production possibilities curve for each country, both graphically and algebraically. (Label the pretrade production point PT and the post-trade point P.)

c. Given that 36 pounds of cheese and 9 bottles of wine are traded, label the post-trade consumption point C.

d. Prove that both countries have gained from trade. e. What is the slope of the price line at which trade occurs?

Given last month’s March employment report (released Friday April 3), what is your expectation for GDP in the 2nd quarter of 2020 and inflation

Two used car dealerships compete side by side on a main road. The first, Harry’s Cars, always sells high-quality cars that it carefully inspects and, if necessary, services. On average, it costs Harry’s $8000 to buy and service each car that it sells. The second dealership, Lew’s Motors, always sells lower-quality cars. On average, it costs Lew’s only $5000 for each car that it sells. If consumers knew the quality of the used cars they were buying, they would pay $10,000 on average for Harry’s cars and only $7000 on average for Lew’s cars.

Without more information, consumers do not know the quality of each dealership’s cars. In this case, they would figure that they have a 50-50 chance of ending up with a high-quality car and are thus willing to pay $8500 for a car. Harry has an idea: He will offer a bumper-to-bumper warranty for all cars that he sells. He knows that a warranty lasting Y years will cost $500Y on average, and he also knows that if Lew tries to offer the same warranty, it will cost Lew $1000Y on average.

a. Suppose Harry offers a one-year warranty on all of the cars he sells. i. What is Lew’s profit if he does not offer a one-year warranty? If he does offer a one-year warranty? ii. What is Harry’s profit if Lew does not offer a one-year warranty? If he does offer a one-year warranty? iii. Will Lew’s match Harry’s one-year warranty? iv. Is it a good idea for Harry to offer a one-year warranty?

b. What if Harry offers a two-year warranty? Will this offer generate a credible signal of quality? What about a three-year warranty?

c. If you were advising Harry, how long a warranty would you urge him to offer? Explain why.

As 90% of the US population is under some form of shut- or lock-down, the economic consequences have been devastating: 10 million unemployment claims in two weeks, expectation of a Q2 GDP decrease of over 25%, etc. The same is true in other countries with very few exceptions. While big business will probably recover, the impact on small businesses is both uncertain and possibly permanent – a study in the UK estimates that a six month shutdown would result in one third of small businesses closing permanently...

Using a real life example of a business you know well, how is it affected by the crisis and how it plans to survive in the future. You should try to incorporate any pertinent financial topics (such as: fundraising, the Fed, monetary and/or fiscal policy, bank lending, etc.) and include graphs, tables, charts to aid in your explanation.

true or false (with explanation)

a. according to the Fisher effect, when the inflation rate rises, the nominal interest rate rises by the same amount so that the real interest rate remains the same.

b. Inflation make them poorer because it raises the cost of what they buy.

c. the principle of monetary neutrality asserts that changes in the quantity of money influence nominal variables but not real variables in short run.

d. If an economy always has inflation of 10 percent per Year there is an inflation cost that will not suffer.

e. Hyperinflations occur when the goverment runs a large budget deficit, which the central bank finances with a substantial monetary contraction.

what is the definition of elasticity of demand?

formula?

each of the following cases, indicate which could you think has a relatively more price elastic demand and identify the reason (more substitutes bigger share of the budget or more times to adjust)

:motorcycles or Harley Davidsons

:peanut butter or housing

:your electric bill this month or over the entire year

If TAXI fares rise what will happen to the total revenue received by taxi operators assuming that the elasticity of demand for TAXI fares is elastic?

The demand curve for turnip can be represented by the following equation: ? = 2000 − 400? There are only two producers and the marginal cost to produce a turnip is $2 (There is no fixed cost). If the capacity of each firm is 600 output, calculate the price range of turnip under the Bertrand-Edgeworth Model.

GAME THEORY

E-commerce platform is used for facilitating the transaction between buyers and retailers. There are many platforms available in the market, such as Amazon.

i. Draw the payoff matrix of the selection of e-flatform between buyers and retailers.

ii. Explain whether there is a dominant strategy for buyers and retailers.

Write 450 words analysis about Mike Traxinger and his role and career at Agtegra. Also, Briefly Explain what Agtegra do.

What was one of the major reasons why the United States was slower to recover from the 2008–2009 recession than Canada?

3. When a central bank sets a target for the interest rate, what does it commit itself to?

4. According to supply-side theories, what happens if the government cuts the tax rate?

5. Which statement is consistent with the Keynesian theory?

6. Which statement do opponents of active stabilization policy believe?

7. During recessions, how do automatic stabilizers change government deficit and taxes?

8. If the short-run Phillips curve were stable, what would be unusual?

9. According to Friedman and Phelps, no matter what a central bank does to the money supply, what will happen in the long run?

A firmm purchases a life insurance contract from a sick person, then collects the payout when he dies. These types of contracts are called viatical settlements. It is the sale of a policy owner's existing life insurance policy to a third party owner for more than its cash surrender value but less than the net death benefit (Wikipedia). These markets are also referred to as reverse insurance markets. Firms have an incentive to enter into such settlements if they expect the person whose life insurance policy is being purchased to die relatively soon. If the person dies, the firm gets to collect the death benefit.

Q. Did this market suffer adverse selection?

Pinkor is a retail chain selling children´s clothes on the market stalls and small shop that it owns. It buys most of its products from wholesalers. Mr. Rakesh, the owner, says: “I think we should start to sell by mail order on the internet and close some of our shops to save money”.

a. Define “distribution channel”

b. Identify two disadvantages to Pinkor of buying supplies from wholesalers

c. Outline two benefits to Rakesh of selling through several small shops rather than by mail order and online

d. Explain two factors which affect Pinkor´s choice of distribution channel

e. Do you think Rakesh is right to want to change the channel of distribution the business uses? Justify your answer.