8. Assume the market for gasoline in California can be described by ordinary supply and demand curves. If a $1.00 per gallon tax is placed on gasoline companies, which of the following will likely occur ( note: according to ordinary D & S)?

A. Consumers will pay the full amount of the tax, as the companies simply shift the tax.

B. The tax will be split between consumers and firms.

C. The quantity purchased may not change at all.

D. All the above.     

9. Assume the marijuana market in California can be described by ordinary demand and supply curves. Currently consumption is legal, but production is limited to relatively small quantities by licensed growers. What would happen to the (P, Q) of marijuana if the licenses were dropped and large scale production was allowed?

A. The Q would increase but P is indeterminate because both D and S increase.

B. The P would decline and the Q would increase as the S increases.

C. The P would increase and Q would increase as D would increase.

D. All the above.

10. What is a dead weight loss?

A. A dead weight loss is a loss in consumer surplus whenever a price goes up.

B. A deadweight loss is a loss of producer surplus whenever a price goes down.

C. A deadweight loss is a loss in economic surplus whenever a market is pushed away from its (D and S) equilibrium.

D. All the above.

What makes a monopolistically competitive market different from a purely competitive market or a monopolist?

De Beers, a diamond mining and distribution firm, is one of the most successful monopolies in history. The firm used numerous tactics to successfully control supply and demand. Read the article 'Here's why diamonds are so expensive' (Links to an external site.), and watch the video 'Why engagement rings are a scam' (Links to an external site.) [warning: contains strong language], and respond to the following prompts in a post with a minimum of 250 words. Feel free to bring in additional references to these reply posts. Using economic principles and models, explain how De Beers are able to set high prices for their diamonds? In recent times, rival firms in Canada, Australia, and Russia have found huge deposits of precious stones. What would happen to prices and supply of diamonds if De Beers allowed their competitors to enter the diamond market. Use economic principles and models to explain your answers. In 2004, De Beers was charged by the US Department of Justice for violating antitrust laws. What is the purpose of antitrust laws? What other kind of government policies exist in dealing with monopolies? Now that you have learned about De Beers and the diamond market, would you spend or expect your partner to spend two months of your/your partner's salary on an engagement ring? Explain your answer.

Problem III. Suppose that, in a market of a certain good, there are firms that are engaged in a Cournot competition. The inverse demand function is given by P(Q) = 120 − 6Q, where Q is the total supply of the good. All firms have the same cost function C(qi) = 30qi + 50.

Q7. What is the Cournot equilibrium price of the good when there are N firms in the market?

(a) (30N + 200)/(N + 1) 2

(b) (50N + 120)/(N + 1)

(c) (120N + 50)/N

(d) (30N + 120)/(N + 1)

(e) (120N + 30)/(N + 1)

Q8. What is the profit of each firm at the Cournot equilibrium when there are N firms in the market?

(a) 30[45/(N + 1)2 − 1]

(b) 50[27/(N + 1)2 − 1]

(c) 50[9/(N + 1)2 − 1]

(d) 30[50/(N + 1)2 − 1]

(e) 50[45/(N + 1)2 − 1]

Q9. When there is free entry in this market, what is the number of firms that will compete in this market?

(a) 7

(b) 5

(c) 6

(d) 4

(e) 8

1) Given the following equations:

   QD = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5000 + 100P

where Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.

  a.   If A = $10,000 and I = $25,000, what is the demand curve?

b.   Given the demand curve in part a., what is equilibrium price and quantity?

c.   If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?

2) Industry supply and demand are given by QD = 1000 - 2P and QS = 3P.

a.   What is the equilibrium price and quantity?

b.   At a price of $100, will there be a shortage or a surplus, and how large will it be?

c.   At a price of $300, will there be a shortage or a surplus, and how large will it be?

1. Suppose that Lexi preferences are given by the utility function u(x1; x2) = x₁²x₂, where x₁ denotes bottles of juice, and x₂ denotes the number of meat plates. A meat dish costs $15 on average, and bottle of juice is $3. You are told that at these prices Lexi can afford 10 meat plates and 40 bottles of juice per month.

i) Derive Lexi optimal consumption bundle.
ii) Which of the following two options would Lexi prefer? Show work.

Option (1): Additional $30 that Lexi can spend only on meat.

Option (2): $3 off of each meat plate ordered.

Determine the net present worth (NPW) of the cash flows given in table below for an investment opportunity being presented to a company. MARR =10%. Year 0 1-10 11-15 16-25 26-30 Cash Flow -$100K 10K 20K -5K 30K

Suppose the optimization problem is to minimize the cost of production c = 3 x + 4 y subject to the constraint 2xy =337.5. Here the cost-minimizing amount of x is ?? , and y is ?? .

The Lagrange multiplier is ?? .

The second principal minor of Bordered Hessian is ?? .

The bordered Hessian matrix is??

What are some of the actions taken by Ken Lay as the CEO of Enron and what were the ethical issues?

Consider the consumption theories

a) Explain the Keynes’ consumption puzzle?

b) How does Modigliani’s consumption theory resolve the puzzle?

c) How does Friedman’s consumption theory resolve the puzzle?

At its simplest level, Keynesian macroeconomics suggests there may be a role for government policy when it comes to the success of the macroeconomy. With this in mind, President Donald Trump passed the “Tax Cuts and Jobs Act of 2017” (TCJA) which went essentially into effect on January 1, 2018. A large part of the long run impact of this policy change depends on the multiplier which in turn depends on the marginal propensity to consume (MPC). As it turns out, you have the most recent and up to date estimates of the MPC and so Donald Trump has sent an aide to interview you about this and your thoughts on the policy change as well.

1. Youre an econometric expert when it comes to the MPC but we have only spent a small time talking about the "TCJA". Explain what it is and what the key provisions are (despite popular belief, Wikipedia seems like a fine source for this).

Markets work well for some goods, but poorly for others. According to the textbook, for which of the following goods or services would markets be expected to work poorly?
A. clean air
B. clean water
C. clean amusement parks
D. Markets would work poorly for all three of the goods or services listed above.
E. Markets would work poorly for both clean air and clean water, but they would work well for clean amusement parks.

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. As a result,
(x) externality could be eliminated if all of the sheep owners received a subsidy payment from government.
(y) the town could auction off a limited number of sheep-grazing permits to correct this problem.
(z) the town could assign land property rights to individual owners to correct this problem.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only
15. Which of the following statements is (are) correct?
(x) If general knowledge is not excludable then it is quite likely that profit maximizing firms in private markets would choose to not supply general knowledge to society.
(y) As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because benefits are hard to measure
(z) If technological knowledge is excludable and general knowledge is not excludable, then it is likely that technological knowledge is a “club good” (natural monopoly good) and general knowledge is a public good
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only