Key objective: exemplifying the limitations of the power of oligopoly due to short-term and long-term elasticities.

Setting: Imagine you are representing one of the members of the OPEC, and you are motivated by an increase of your revenue from the sale of crude oil. You have to compromise on current decision on possible output decrease as to stimulate the world price of gas. Please consider the historical relation of the reaction of the gas price at the pump to the world price of the crude oil per barrel. Please resort to the NYU STERN case on The Petroleum Market: 1970 – 2000 (via link provided below the assignment), but most of all to the research on the following issues in the summer of 2008 in the US and now, and the political debate on the energy crisis, environmental protection and renewable sources of energy.  

Instruction: As usually, please complete the assignment discussing the relevant economics concepts and applying economic tools with supporting data for problem solving in this real-life imitating simulation, and include also a memo summarizing the points of agreement to be reached and followed by OPEC unanimously, and with the compliance in the forthcoming months.

Outline: Include in the discussion the following issues with data, as the basis for your common decision to be made:

•      demand patterns for crude oil in the World

•      the price elasticity of demand for gas in the US

•      the factors influencing the price elasticity of demand for gas in the US, and possible changes in this respect (behavioral patterns)

•      the impact of price changes (on different price levels) on the revenue of crude oil exporters

•      the income elasticity of demand for gas

•      the price elasticity of supply of gas

•      the effect on the market outcome, on the market equilibrium, and on the efficiency of the market

•      the effect on the international trade, state policies, and on the economy.

In the city of Los Locos, marijuana producers have a marginal cost of $10 per ounce for growing expenses. Under the current law it is illegal to sell marijuana. The city police seize 20% of all marijuana grown and impose a fine of $20 per ounce. Los Locos is considering legalizing marijuana, and wants to impose a tax that would leave total consumption unchanged. The city should impose a tax of
100%? 50%? 150%? 25%? 75%?

In April approximately 22 million people filed for unemployment insurance.  In March the labor force was (BLS data) 162,913,000 with Employment = 155,772,000 and Unemployed = 7,140,000.  What would April’s unemployment rate be approximately?

If natural unemployment is around 4% and from Okun’s Law approximately for every 1% point change in unemployment, GDP falls 2%, how much has GDP dropped in % terms?

If real GDP in March (FRED) was $19,221.970 billion ($19.22 Trillion), what is the drop in dollar value of production?

If Forecasting Company announced that they predict the mpc has fallen to 0.5, How much Government spending will need to be injected to get back to Un(natural rate of unemployment where actual and potential output are back to long-run levels)?  

1. During the COVID-19 pandemic, there is the sense that essentials like toilet paper is desperately needed. Use demand and supply analysis to explain what should happen in the market.
2. Suppose stores don’t want the backlash of increasing the prices due to the higher demand. . What do we expect to happen?

[Discuss how changes in demand will affect prices. Then show how a shortage develops using the idea that prices are not changing with the equilibrium.   This is NOT a price ceiling (just a shortage)]

Graphs are required, a minimum of 2 graphs.

Choose a topic from the list below and use economic principles to answer the questions.. Do not embark on analysis focusing on social, political, or other disciplinary inquiries of the topic.

Papers need only be minimum of 2 pages (including your graphs). Try not to go over 4 pages please.

Prompt. In the last few weeks, the Federal Reserve has introduced a series of unconventional monetary policy tools—lending facilities, essentially, designed to ease credit strains that firms and municipalities will likely experience as the U.S. economy is buffeted by the novel coronavirus pandemic. The “Fed Brief” that accompanies this prompt outlines these new unconventional tools. Section 13(3) of the Federal Reserve Act grants the central bank the authority, with the approval of the Secretary of the Treasury, to implement these tools in emergency situations—what the Act identifies as “unusual and exigent” circumstances.
The governors of the Federal Reserve reason that these unconventional actions are in the best interest of the economy. Nevertheless, the governors are concerned that these actions, which have attracted the attention of journalists, politicians, and pundits alike, could ultimately politicize the Federal Reserve and, in doing so, compromise its ability to achieve its long-run monetary policy goals. Consider, for example, the recent Wall Street Journal article, by renowned financial journalist Greg Ip, that accompanies this prompt. Thus, the governors—Michelle Bowman, Lael Brainard, Richard Clarida, Jerome Powell, and Randal Quarles—ask you to assess how the central bank’s recent unconventional actions might affect its monetary policy outcomes in the long run. Specifically, the governors ask you to answer the following three questions.

1. In general, would the politicization of the central bank render monetary policy more or less time consistent? Please defend your reasoning.

2. Central banks endeavor to maintain time-consistent monetary policies, because time-inconsistent monetary policies tend to deliver unwanted inflation outcomes in the long run; why do time-inconsistent monetary policies underperform in this way?

3. Finally, provide an example of how the Federal Reserve and, perhaps, Congress could preserve (or, if necessary, restore) the credibility of the central bank’s commitment to maintain low and stable inflation. Again, please defend your reasoning.

As a member of the Eurozone, Greece was/is unable to conduct it’s own monetary policy. Instead, Eurozone monetary policy is set by the European Central Bank in Frankfurt. Suppose that Greece is facing a recession and wants to boost output.
1. What type of government policy would you suggest to boost output? Provide an IS-LM graph with a clear explanation of what you are suggesting.
2. How would the government fund such a policy?
3. What are some of the longer term implications of Greece using this approach to stabilizing output?

A breakeven analysis for net present worth is performed with a MARR of 15% and a useful life of 20 years with the following data:
Initial Cost: $750,000
Annual Cost (O&M): $60,000/ year with an annual increase of $5,000 each year
Annual Revenue: $80,000/ year with an annual increase of $1,000 each year
Salvage Value: $475,000
Determine the following:
a. If the project is viable (i.e. if the profit is larger than the cost using net present worth).
b. The gradient annual revenue increase to make the project viable.
c. The salvage value to make the project viable.

Compare and contrast the use of government spending changes versus tax changes as a means of influencing the course of the economy. Is one or the other preferable in specific situations? Imagine for a moment that you have two roommates, who each have opposing viewpoints on nearly everything, including politics and economics. Taylor is adamant that the best way to manage the economy is through tax changes, while Morgan insists that it’s better to adjust the economy through government spending. What would a Neoclassical economist say? What would a Keynesian economist say? Which roommate do you agree with, and why? Find a news article to help support your opinion. Summarize the article and include the link to in your response.  Remember to cite your sources.

Many global companies have evolved to or are evolving to, a ‘stateless corporation’.  The US and most OECD countries have legal authority to tax a domiciled corporation on its worldwide revenue.  However, as of 2019, most countries tax these corporations based on territorial tax (revenue within that country's borders).  However, the US continues to tax these corporations based on global revenues.  Is this a good choice for the US?  Why or why not?.

In what ways is the EU a unique RTA? What are some of the problems confronting the EU today?

This project develops skills in searching online Web-enabled databases with information about products and services in faraway locations.

Your company is located in Greensboro, North Carolina, USA, and manufactures office furniture of various types. You are considering opening facility to manufacture and sell your products on Australia. You would like to contact organizations that offer many services necessary for you to open your Australian office and manufacturing facility, including lawyers, accountants, import-export experts, and telecommunication equipment and support firm.

Access the following online databases to locate companies that you would like to meet with during the upcoming trip:

·       Australian Business Register (abr.gov.au)

·       Nationwide Business Directory of Australia (www.nationwide.com.au)

You can search using search engines as well.

Do the following

List TWO companies from each of the category that you would contact on your trip to determine whether they can help you with these and any other functions you think vital to establishing your office.

Format of Details

·       Name of company

·       Address

·       Telephone No

·       Website (if available)

16. In pure competition, price is determined where the market

A. Demand and supply curves intersect

B. Total cost is less than total revenue.

C. Average total cost equals total variable cost.

D. Demand intersects the individual firm's marginal cost curve.

20.  Long-run competitive equilibrium

A. Is realized only in constant-cost industries.

B. Is not economically efficient

C. Will never change once it is realized

D. Results in zero economic profit.

21. Marginal product is

A. The change in total revenue attributable to the employment of one more worker.

B. The change in total output attributable to the employment of one more worker.

C. Total product divided by the number of workers employed.

D. The change in total cost attributable to the employment of one more worker

24. Oligopoly is more difficult to analyze than other market models because

A. of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models

B. The marginal cost and marginal revenue curves of an oligopolist play no part in the determination of equilibrium price and quantity.

C. unlike the firms of other market models, it cannot be assumed that oligopolists are profit maximizers.

D. the number of firms is so large that market behavior cannot be accurately predicted.

30. The demand curve confronted by the individual, purely competitive firm is

A. Perfectly inelastic

B. Relatively elastic, that is, the elasticity coefficient is greater than unity

C. Relatively inelastic, that is, the elasticity coefficient is less than unity.

D. Perfectly elastic.

35. The short run is characterized by

A. Zero fixed costs.

B. Plenty of time for firms to either enter or leave the industry.

C. Fixed plant capacity.

D. Increasing but not diminishing returns.