Consider the retail market for bananas in Australia in 2020. The market is in equilibrium with 20,000 tonnes being bought and sold per year at a price of $4 per kg.

a. Explain why $5 per kg for bananas is not an equilibrium price. Given the current demand and supply, if the price was temporarily $5 per kg, explain how the market would return to equilibrium.

b. Explain why the production/consumption of 20,000 tonnes of bananas is the socially efficient level of production (assuming there are no externalities).

c. Suppose that in 2021 price of diesel increases, increasing the transportation costs for banana farmers in getting their bananas to market. Explain why there would be any movement in the demand or supply curve and any change in the equilibrium price and quantity for bananas after the increase in the price of diesel.

Question 1

Consider the retail market for bananas in Australia in 2020. The market is in equilibrium with 20,000 tonnes being bought and sold per year at a price of $4 per kg.

Question 21 (5 points)

a. Label the diagram appropriately, by writing the labels i. to vii.

Question 22 (6 points)

b. Explain why $5 per kg for bananas is not an equilibrium price. Given the current demand and supply, if the price was temporarily $5 per kg, explain how the market would return to equilibrium.

Question 23 (4 points)

c. Explain why the production/consumption of 20,000 tonnes of bananas is the socially efficient level of production (assuming there are no externalities).

Question 24 (6 points)

d. Suppose that in 2021 price of diesel increases, increasing the transportation costs for banana farmers in getting their bananas to market. Explain why there would be any movement in the demand or supply curve and any change in the equilibrium price and quantity for bananas after the increase in the price of diesel.

Question 25 (4 points)

e. Suppose that in 2022 the price of bananas increases and the amount of bananas bought and sold increases. What must have happened to the demand or supply of bananas for this to have occurred?

Draw graphs using appropriate units and label them. Graphs without labels WILL NOT BE given any points even if the answer is correct. Explain clearly wherever asked.

1. Exercise on quantity equation and AD curve

1. Assume money supply is fixed at M=1000 and the velocity of money V=2.0, complete the table 1

2. Draw the AD curve that results from the table results and label as AD₁

c. What does the AD curve denote?

   d. Suppose the money supply increases to 1500 while velocity remains equal to 2.0, complete the table 2 below (use the price level from the previous table 1)

   e. Plot the AD curve with the data from Table 2 and label the curve as AD₂ (when M=1500 and V=2.0)

f. Suppose if the money supply remained at its original level of 1000 but the velocity increases to 3.0, how does it affect the AD curve?

   g. Suppose if the money supply fell to 500 while velocity remained equal to 2.0, complete the following table 3

   h. Plot the AD curve with data from Table 3 and label the curve as AD₃ (when M=500 and V=2.0)

   I. Plot the AD curve with data from Table 3 and label the curve as AD₃ (when M=500 and V=2.0)

Ollivander and Arturo Cephalopos are two producers of wands in the wizarding world. They both sell excellent wands which are extremely similar in quality and could be considered almost perfect substitutes. They engage in Bertrand competition, which means they compete by setting price. Ollivander’s marginal cost of producing one wand is 7 Galleons, while for Cephalopos the marginal cost is 10 Galleons. NOTE: 1 Galleon = 17 Sickles or 493 Knuts. Treat sickle as a cent.

1. What is the Bertrand equilibrium price in this market?

A) 10 Galleons

B)15 Galleons

C)7 Galleons

D) 9 Galleons and 16 Sickles

“Italian pasta increasingly made of wheat from Canada and U.S” (Durishin, M. & Robinson, A. Vancouver Sun Newspaper, Tuesday, December 3, 2019, p. B4).

Suppose that Rajdeep loves lasagna. The following table presents a measurement of Rajdeep’s Total Utility, TU of Lasagna for each successive serving.

1. Given the Total Utility in the Utility Schedule presented above, determine the Marginal Utility, MU that Rajdeep attains with EACH successive serving of lasagna eaten.
   
2. Why is it that the Marginal Utility, MU begins to FALL even as the Total Utility rises?
   

What makes the consumer “Budget Line” seem like another version of the Production Possibility Frontier, PPF? And what

Briefly discuss the Lincoln Mills Case.

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

The U.S. economy is over a decade removed from the Great Recession. For several years after the Great Recession officially ended, the U.S. grew at an historically slow rate. Analyze the causes of the slow increases in U.S. GDP. Include in your paper: An analysis of the monetary policy approach the Federal Reserve took to the recovery An analysis of the fiscal policy approach the Federal Government took to the recovery An analysis of how the attempts to influence GDP in the short-run negatively affect GDP in the long-run An explanation of why the unemployment rate dropped rapidly in the United States despite low rates of increases in GDP An identification, as appropriate, of the economic principles (from Module 1) that factor into your analysis?

Nervous Norman holds 70% of his assets in cash, earning 0%, and 30% of his assets in an insured savings account, earning 2%. The expected return on his portfolio:

a) is 0%.
b) is 0.6%

c) is 2%.
d) is 1%.
e) cannot be determined without knowing what the dollar value of his assets is.

Your company purchased an airplane for $470,000 and will depreciate it using a 7-year MACRS with a 6-year life. Salvage value in year 6 is expected to be $160,000. The airplane is expected to increase company revenues by $179,000 per year. However, O&M costs are expected to be $20,000 per year. Your company is in the 21% tax bracket and the company's MARR is 15%. What is the Net Present Worth of this investment?

Assume the market for coal is initially in equilibrium. For each of the case below, identify the effect on the supply curve on the coal. What is the new equilibrium price and quantity in the market for coal for each case? Explain the process of how to get to the new equilibrium.

a. The development of a new, lower cost mining technique.

b. An increase in wages paid to coal miners.

c. The imposition of a $2 per ton tax on coal.

d. A government ban on all imports of coal.

e. A new government regulation requiring air purifiers in all work areas.

Question 8

Consider your sets of indifference curves for (i) Coke and chips, and (ii) Coke and Pepsi.

8.1 Explain why these sets of indifference curves are likely to look different.

8.2 Illustrate with a diagram.

8.3 What does this difference imply about the magnitude of the substitution effects in response to changes in the price of Coke?