suppose that you have been hired to analyze wages in simple market. The demand for labour and supply of labour can be represented by following equations:

Demand: L^D=100-4W

Supply: L^S=6W

a. calculate the new equilibrium wage(price) and quantity of labour employed in market.

b. A new employer enters the market causing labour demand to become

Demand: L^D=120-4W

Calculate the new equilibrium wage(price) and quantity of workers employed in this market.

c. Illustrate in one graph your answers to parts a and b.

4. Say that you have an income of $100, all of which you spend on 2 goods: x1 and x2. The price of x1 is $1, and the price of x2 is $2.

(a) The government imposes a quantity tax of on the consumption of x1. Write down an equation for your budget constraint.

(b) The government initially sets the quantity tax at = 0:5. What is the slope of the budget constraint in this case?

(c) Now say that the government increases the tax to = 0:75. How does this increase in the quantity tax change the slope of the budget line?

Problem 2. Assume the market is perfectly competitive. There are 100 firms currently operating in the market. The cost function for each firm is given by c(q) = 25 + 2q + q 2 , and the demand function is Q = 1024−2p.

• Derive the current market price and total output in equilibrium. (Hint: Q = 100q)

• Given the above answer, is the market in the long-run equilibrium right now? If not, what are the equilibrium levels of price and total output in the long run, and how many firms will operate in the market in the long run?

Western Electric has 33,000 shares of common stock outstanding at a price per share of $81 and a rate of return of 12.90 percent. The firm has 7,400 shares of 8.00 percent preferred stock outstanding at a price of $96.00 per share. The preferred stock has a par value of $100. The outstanding debt has a total face value of $410,000 and currently sells for 112 percent of face. The yield to maturity on the debt is 8.14 percent. What is the firm's weighted average cost of capital if the tax rate is 35 percent

Samsung is interested in the elasticity of demand in the smart phones market, so it hired an economist to estimate the demand for smart phones. She found that, in the short run, demand is Qd=100-0.5P, and in the long run, demand is Qd=120-0.6P. In both the long run and the short run, P=$50

a. What is the price elasticity of demand in the short run?

b. What is the price elasticity of demand in the long run?

c. Given your answers to a. and b., is this more likely to be a durable good or a non-durable good?

We interviewed 1,000 QC students. On average they pay about $300 per semester to buy books and school materials, and they vary by $100.

1. Jason spent $400. How many students paid more than Jason?

2. Mary paid $200. How many paid less than her?

3. how many students paid an amount between Mary and Jason?

4. What is the price students are willing to pay, for the highest 10% ?

5. What is the price students are willing to pay, for the lowest 25% ?

What is the price of the following US T-Bond? (Use any method you prefer, and enter your answer with two decimal places)

Face value : $100

Maturity: 6 years

Coupon rate 3% (paid annually)

Yield = 7.6%

Suppose you observe that the above bond is trading at $83.00. What is the yield? (Enter your answer as a percentage with the % sign, with two decimal places)

Calculate the price, duration, and modified duration of this bond when the yield is 9% (Enter all answers with two decimal places).

Suppose the demand for soybeans is ?(?) = 1100 − 20? and the supply for soybeans is ?(?) = 100 + 30?, where Q is billions of bushels of soybean per year and P is the price per bushel.

Now suppose that the government supports a price of $30 using a deficiency payment program. 1C: What quantity will producers supply to the market?

1E: What is the change in consumer surplus under this policy?

1F: What is the change in producer surplus under this policy?

1G: What is the change in welfare under this policy? Hint: you should find a negative number.

Snooky Inc believes its biggest risk is that fuel prices increase and require it to raise its prices. Accordingly it decides to hedge this risk by purchasing a forward of 10M barrels of fuel. Let’s assume the price of the contract is $100/barrel. If the price of fuel increases to $105 by the end of the contract, how much will Snooky pay per barrel for it’s fuel? Show all work.

How much total money would Snooky have saved or lost if it hadn’t entered into the forward contract? Show all work.

Last year company X issued a 10-year, 12% semi-annual coupon bond at its par value of $1000. Currently, the bond can be called in 4 years at a price of $ 1,060 and it sells for $ 1,100. What are the bond’s nominal YTM and nominal YTC ? Would the investor more likely be earning YTM or YTC ?

(b) Three bonds were issues at par value of $1000 and YTM of 8 %. Evaluate the price of below: • 10-year, 10% annual coupon • 10 year zero • $100 perpetuity