When market participants are allowed through their interactions to find the price, there will be equilibrium where the quantity supplied by buyers equals the quantity supplied by sellers. If this is the case, why might the government intervene in certain markets where externalities exist? Please give reasoning for both a positive and a negative externality. Why might the government intervene in the case where the good is a public good?
In: Economics
In: Economics
A monopolist produces gizmos at constant marginal cost of 4 and no fixed cost. It recognizes that it has two types of customers. The demand curve of each type of customer is given by: Type-1 customer: ( ) p1 q1 = 18 − 2q1 Type-2 customer: ( ) p2 q2 =15 − q2 where qi (i = 1, 2) are the quantity demanded of type i consumer per period. While the monopolist knows the demand curves, it cannot identify the type of a given consumer. It is assumed that it has 10 customers in total per period, and five of them are of Type 1. a) The monopolist wishes to sell both types of consumers. Assuming it charges the same two-part tariff schedule to both types of consumers; derive the optimal two-part tariff schedule. What would be the resulting profit? b) Suppose that the monopolist engages in second-degree price discrimination. Derive the two-part tariff schedules that are incentive compatible for both types, and the resulting profit in this case
In: Economics
1. The Coronavirus Pandemic is an unprecedented event that has affected our lives in an extraordinary way. We can see its effects on our economy as well. Due to the pandemic, majority of the stock prices are plummeting. Savers who are holding these stocks are observing major declines in the value of their portfolios. Can savers have better outcomes in their stock market portfolios by changing the stocks they own? What would Efficient Market Hypothesis say about this? Start with explaining clearly what Efficient Market Hypothesis is.
In: Economics
In: Economics
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