Consumption = C,   Taxes = T,   Investment Demand = ID, Disposable Income = Y-T, Govt. Purchases of Goods and Services = G Aggregate Expenditure = AE, the MPC is constant, Foreign trade is zero. In case you care, autonomous consumption = $40.

a. How much of a change in taxes would be needed to raise equilibrium aggregate expenditure by $1,200?

b.  For the previous problem, how much of that rise in equilibrium income would be the result of induced consumption?

c.  Investment Demand falls by $50 and taxes are reduced by $100. What is the change in total equilibrium output?

Given the disruption of business by the Covid-19 virus, how might business models change going forward? How have business models adapted? Might some business models become more prevalent or obsolete in the future? Provide examples and justify your answer. (250 words).

Suppose the market is monopoly. The market demand function is Q subscript d equals 60 - 0.5 P, where p is the price. The firm has no fixed cost, and the marginal cost MC = 30. a. Write down the marginal revenue of this firm. b. Calculate the profit-maximizing monopolistic price and quantity. c. Calculate the profit of the firm. d. Calculate consumer surplus. After selling the products to the consumers in question (a)-(b), there are still other consumers in the market willing to buy this product at lower price. This firm is able to do price discrimination in the secondary market. e. Write down the demand function and marginal revenue in the secondary market. f. Calculate the price and quantity in the secondary market. g. Calculate the profit of the firm in the secondary market. h. Calculate consumer surplus in the secondary market. i. Show that the welfare loss is less when the firm is able to do price discrimination. You need to calculate the welfare loss before and after the price discrimination respectively. j. Calculate the price elasticity of demand in the first market and in the secondary market.

Pharmaceutical companies spend billions of dollars every year on the research and development of new drugs. Suppose a pharmaceutical company estimates that if they invest $1 billion on the development of a new drug, they can expect to earn $500 million in accounting profit as a result (their stream of future revenue would be $500 million higher than all of their explicit costs, including the R&D costs).   Just based on this information (that this company can expect to earn $500 million in accounting profit from this drug), does this necessarily indicate that this company should develop this drug? What does the decision of whether to invest in this new drug (or another) depend on? Be specific.

Suppose you own a sandwich shop with fixed costs of $1,000/month and marginal costs of $2.00/sandwich. If the price is $6/sandwich, 500 sandwiches are sold. If the price is $4.50/sandwich, 800 sandwiches are sold.

A)  Use these figures to calculate the price elasticity.

B) Calculate the profits and profit margins (profit/total cost) associated with the price at $6/sandwich and at $4.50/sandwich. Given these calculations, what price should you charge for sandwiches?

What component/components of GDP, if any, would each of the following transactions affect and how is it affected?

Chose One: consumption, investment, government spending, net exports or none

Choose One: increasing, decreasing, or none

1. Your family buys a new refrigerator.
2. Aunt Jane buys a new house.
3. Art sells his 1965 Mustang.
4. California re-paves Highway 101.
5. Toyota expands its factory in Princeton, Indiana.
6. Jim buys recreational marijuana from a dealer in Phoenix.

1. What determines the going market rate for any factor of production (wage, interest, rent, and profit)?
2. How might employment discrimination, labor unions, and immigration) change your answer above?
3. What is meant by monopsony and what effect does it have on the market for any factor of production?
4. What is meant by bilateral monopoly and what effect does it have on the market for any factor of production?

Taxes are generally distortionary. This means they affect the behaviour of consumers and/or producers. If the private market would achieve a Pareto efficient outcome without the tax, then when a distortionary tax is introduced, it moves society away from the Pareto efficient outcome. In other words, it makes society as a whole worse off. The efficiency loss is known as the "excess burden" or "deadweight loss" of the tax.

Give an example of a tax and explain how it distorts consumer and/or producer decisions. Explain why this impact on consumer and/or producer behaviour might be inefficient.

Note: Be specific! Do not give a general example like "the GST makes consumers buy fewer goods" - instead, try to think of a tax on a very specific item (or at least how a general tax like the GST might affect a very specific item.

1.Two countries, NZ and AUS, trade with each other. Some industries in each country exhibit internal economies of scale while other industries exhibit constant returns to scale. We should NOT expect to see
Select one:
a. intra-industry trade between NZ and AUS.
b. inter-industry trade between NZ and AUS.

2.Suppose that we have the following inverse supply and inverse demand functions for jandals in a small country called New Zealand:
p = 20 + 2QS and p = 50 – QD
where QS and QD are measured in 1000’s of pairs of jandals. The world price of jandals equals $36. New Zealand has a tariff equal to $6 per pair of jandals. Which of the following is TRUE?
Select one:
a. The price of jandals in New Zealand is $42 per pair. New Zealand will import 3,000 pairs of jandals.
b. The price of jandals in New Zealand is $40 per pair. New Zealand will neither export nor import.
c. The price of jandals in New Zealand is $36 per pair. New Zealand will import 6,000 pairs of jandals.
d. The price of jandals in New Zealand is $42 per pair. New Zealand will export 3,000 pairs of jandals.
c. perfect competition in the industries that are subject to internal economies of scale.
d. small number of firms in the industries that are subject to internal economies of scale.

1. Distinguish a change in the quantity demanded of any factor of production (labor, capital, land, entrepreneur) from a change in demand for and factor of production.
2. Distinguish a change in the quantity supplied of any factor of production (labor, capital, land, entrepreneur) from a change in supply of and factor of production.
3. Which one of them gives the best and clearest explanation of a change in demand as opposed to a change in quantity demanded?
4. Why is the demand for a factor of production called derived demand? Explain with a brief example.

Calculate and report and valid present worth measures using the listed interest for all the three options given below. What is the name of the best option economically?

Explain how barriers to entry created by high-tech firms differ from barriers to entry created by traditional manufacturing industries such as steel and automobiles.

Read the article

Using a PPF model, how would education (capital goods on the vertical axis and consumption goods on the horizontal axis) change the PPF? B) Aside from the article, how is the current economic recession affecting the frontier? Are we on the PPF?

ECONOMISTS have long argued that free trade makes everyone richer. But lately that view has come under attack, most notably from President Donald Trump. Economists are asking themselves some tough questions. Is free trade always a good thing? Do the losers from free trade need to be compensated? To explore the basics of free trade, The Economist spoke to John Van Reenen an economist at MIT. The conversation has been lightly edited for clarity. The Economist: At its most basic level, what is free trade? John Van Reenen: Free trade means allowing goods and services to move as freely as possible across different countries. As countries developed, they started making and swapping things among people within the borders of their own country. As transport improved, they could start buying and selling stuff abroad. For a long time, there were big barriers to international trade. At a time when governments struggled to raise tax from their own people, levying heavy import duties on things coming in from abroad was easier to implement. But economists eventually won the argument, which said that keeping those barriers as low as possible was sensible policy. With free trade, you come into more contact with foreign companies, new ideas, new people The Economist: Is free trade good for economic growth? John Van Reenen: As I see it, there are four big benefits. The first one can be traced all the way back to David Ricardo in the early 1800s. It allows countries to specialize in producing what they do best. For instance, the French are good at making wine, the British not so good. But the British are good at producing The Economist. Without trade, Britain would have to produce and consume its own its own wine. But with trade, Britain and France can focus on what they do best, with the French exchanging wine for more copies of The Economist. This is sometimes called “comparative advantage”. As time has gone by, trade is increasingly not just about exchanges in final goods—newspapers versus wine—but “intermediate” goods. Think of a car. Thousands and thousands of parts go into making a car. Increasingly what has happened is that one part is made in France, another in Germany, another in Japan, and so on. Then they can all be combined in a fourth country like Britain. Even for a complex thing like a car, nations can specialize in what they are good at. The second benefit of trade is that it makes markets bigger. If you are producing just for one country, your market is quite limited. But with trade, you can also start selling things to customers all over the world. That means that things like spending large amounts of money on research—self-driving vehicles or whatever—looks a lot more viable. The lump-sum costs of such investment are spread out, so we can get more innovation, which is the key to growing national income. Free trade increases the size of the pie. But it doesn’t mean that everyone is better off. Some get a smaller slice of the pie The third benefit relates to productivity differences between firms. Some firms are really productive, others are really poorly managed. What happens when you have trade, is that you have much stronger competition. Domestic firms are competing not just with other domestic firms but with firms all over the world. The less-efficient ones face more competition, so they shrink and they exit the market. Or they shape up. And the really innovative firms can expand. So it’s about creative destruction, really—shifting resources from less productive firms to more productive ones. The final benefit, which economists sometimes forget, relates to politics. With free trade, you come into more contact with foreign companies, new ideas, new people and so on. That’s mutually beneficial. And it is a political force for cooperation. Think of Europe. Since the second world war, those countries have had lower trade barriers, and that period has coincided with an unprecedented period of peace and cooperation. The Economist: What are the downsides of free trade? John Van Reenen: There are well-known downsides. The way I like to think about it is that free trade increases the size of the pie. The overall amount of material wellbeing expands. But just because the size of the pie expands, it doesn’t mean that everyone is better off. There are going to be some losers whose slice of the pie is so much smaller that they would have been better off with less trade. However, because the overall size of the pie has got bigger, the government can compensate the losers which can still make everyone better off. Let’s think about how this might happen. In the 1980s China began opening up to the rest of the world. China was a low-wage country, so it started selling a lot of low-end manufactured goods like clothes. Although that’s a great thing—people can buy cheaper clothes—workers in richer countries who were producing manufactured goods now faced much tougher competition. Workers in Bradford no longer just competed with those in Birmingham, but also those in Beijing. Those workers, especially less skilled ones in those industries, can be very seriously affected. It’s important to take a longer-term view. The education system needs to make people resilient to shocks I think economists underestimated the China shock. That may explain why policies to compensate the losers were insufficient—especially in America where the social safety net, such as for health care, is so threadbare. If there had been better policies, there would be much less of a political backlash against trade than we are seeing right now. The Economist: What can countries do to compensate those people who do lose out? John Van Reenen: There are lots of different options. The first thing I would emphasize is that you want to grease the wheels of mobility—to make it easier to move from one firm to another, or one industry to another, or one place to another. Putting up barriers to doing that is costly. For instance, planning regulations sometimes make housing in dynamic parts of the country very expensive, which makes it difficult for people in struggling areas to move there. You also want to help citizens get the skills to move. So-called “active labour market policies” are important here. Scandinavian countries like Denmark do these quite well. Rather than protecting jobs by increasing the costs of downsizing which ends up making employers reluctant to hire, these nations have generous unemployment-benefit systems combined with a lot of help for people who have become unemployed. Retraining is well resourced. Governments also enforce looking for work pretty strongly. It’s also important to take a longer-term view. Your education system needs to make people resilient to shocks. You want people to be well educated, and you want that education not to be too tightly linked to a particular skill. Having general skills—literacy, numeracy, social skills—is the right idea. So, when people are hit by tough times, they can reskill and move around more easily. But it is also important to be realistic. Some people, especially older people, are not going to be able to retrain if they were made unemployed by structural economic changes. For these people, there is nothing wrong with a reasonably generous welfare state and direct investment to support communities that are under stress from trade, technology or any other crisis. But remember: thanks to free trade, you can afford that, because the overall size of the pie is bigger.