1. Write the equation for national saving for a small open economy. If national saving is held constant, what happens to domestic investment if NCO decreases? Why?
2. Suppose the nominal exchange rate is 100 yen per dollar. Further, suppose the price of a baseball glove in Canada is $50 and the price of a baseball glove in Japan is 7500 yen. What is the real exchange rate between Japan and Canada in terms of baseball gloves?
3. Is there a profit opportunity that could be exploited with arbitrage due to different price of gloves in Japan and Canada? Where would people buy and where would they sell gloves? (linked to ii above)
4. List three goods for which the law of one price is likely to hold. Justify your choices.
5. List three goods for which the law of one price is not likely to hold. Justify your choices.

An agent chooses between two goods, x and y, with prices px and py, respectively. She has an income I and her preferences are represented by the utility function U (x, y) = lnx + y.

A. Suppose that I = 100, px = 2 and py=1. How much of good x and y will the agent choose?

B. If the price of good x rises to px=4, with income and the price of good y remaining the same, what quantities does he/she buy and what is his/her resulting utility? Illustrate graphically

C. Find the income and substitution effect for good x due to this price change. Illustrate graphically.

D. Find the compensating variation for the price change and illustrate graphically.

E. What is the equivalent variation of the price increase?

Consider the following supply and demand equations for rice: Qd = 100 – 8P + 0.1Y Qs = 50 + 2.4P – 2W Where Qd is quantity demanded, P is price, Y is income in thousands of dollars, Qs is quantity supplied, and W is the wage rate for labor ($/hour). Assume the following: Y = 50 W = 25 1. Compute the equilibrium price and quantity for this problem. 2. Assume that the income has increased by 10 thousand dollars. What are the equilibrium price and quantity now? 3. Compare the equilibrium price and quantity for the two equilibriums. What is the intuition behind the observed change (e.g. why did the equilibrium quantity/price increase/decrease? Why does this make sense)? Without solving mathematically, what would be the impact of a wage increase on the market outcomes? Why?

1. Suppose that a consumer has utility given by U(X, Y ) = XY + 10Y and income of $100 to spend on goods X and Y.  
   1. The prices of X and Y are both $1 per unit. Use a Lagrangian to solve for the optimal basket of goods.  
   2. Suppose that the price of X increases to $5 per unit. Use a Lagrangian to solve for the new optimal basket of goods. Find the total effect of the price change on the consumption of each good.  
   3. Use a Lagrangian to find the substitution effect of the increase in the price of good X on the consumption of each good. What income would the consumer need to attain the original level of utility when the price of X increases to $5 per unit?
   4. Find the income effect of the increase in the price of good X on the consumption of each goo Are the goods normal or inferior?

2. Consider an economy that produces and consumes bread and automobiles. In the following table are data for two different years.

(a) Using 2000 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI.

(b) How much did prices rise between 2000 and 2010? Compare the answers given by the Laspeyres and Paasche price indexes. Explain the difference.

(c) Suppose you are a senator writing a bill to index Social Security and federal pensions. That is, your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDP deflator or the CPI? Why?

Suppose one market has a demand curve ?(?) = 100 − ??

（1）If this market has many firms supplying the identical products to the consumers, and the industry has a cost function ?(?) = 2? ^2. What are the market equilibrium price and quantity?

（2）What is the price elasticity of demand at the market equilibrium in (1)?

（3）If this market has only one firm supplying the products, with cost function ?(?) = 2?^2. What are the market equilibrium price and quantity now

（4）What is the price elasticity of demand at the market equilibrium in (3)? What can we conclude about the monopoly's profit-maximizing behavior regarding the price elasticity of demand?

（5）Illustrate consumer surplus, producer surplus and the total social welfare (total surplus) for the two cases. Based on your comparison, discuss the arguments for and/or against the monopoly.

15.

Maria Lorenzi owns an ice cream stand that she operates during the summer months in West Yellowstone, Montana. She is unsure how to price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $3.60 and 1,855 cones were sold. During the second week, she priced the cones at $4.10 and 1,450 cones were sold. The variable cost of a cone is $.40 and consists solely of the costs of the ice cream and the cone itself. The fixed expenses of the ice cream stand are $2,000 per week.

Required:

a. What profit did Maria earn during the first week when her price was $3.60?

b. At the start of the second week, Maria increased her selling price by what percentage? What percentage did unit sales decrease? (Round your percentage answers to 2 decimal place.)

c. What profit did Maria earn during the second week when her price was $4.10?

d. What was Maria's increase (decrease) in profits from the first week to the second week?

Maria Lorenzi owns an ice cream stand that she operates during the summer months in West Yellowstone, Montana. She is unsure how to price her ice cream cones and has experimented with two prices in successive weeks during the busy August season. The number of people who entered the store was roughly the same each week. During the first week, she priced the cones at $5.80 and 2,460 cones were sold. During the second week, she priced the cones at $6.30 and 2,000 cones were sold. The variable cost of a cone is $1.50 and consists solely of the costs of the ice cream and the cone itself. The fixed expenses of the ice cream stand are $2,055 per week.

Required:

1. What profit did Maria earn during the first week when her price was $5.80?

2. At the start of the second week, Maria increased her selling price by what percentage? What percentage did unit sales decrease? (Round your percentage answers to 2 decimal place.)

3. What profit did Maria earn during the second week when her price was $6.30?

4. What was Maria's increase (decrease) in profits from the first week to the second week?

1. BJ’s Wholesale Club Holdings went through IPO on 6/28/2018. Approximately 37.5 million shares were offered at a price of $17/share. A total of $36,656,250 was paid as underwriting fees. The price rose to roughly $21 on the first day of trading. What was BJ’s loss (at best) in this IPO? (0.5)

Given the following Java source code fragment double price[]; price = new double[16]; What's the name of the array? How many elements are in the array? What's the index of the first element in the array? What's the index of the last element in the array? What's the value of the element at index 3 after the last statement executes?