Use the following information on the supply and demand for oil in the hypothetical country Olympus to answer the questions below. Assume that the demand and supply curves are linear.  

              Domestic           Domestic

Price ($)      Demand             Supply

60             460                 280

80             440                 320

100             420                 360

120             400                 400

140             380                 440

1. Assume that the world price of oil is $80 per barrel. Assume that Olympus is a small country and that Olympus imposes a $20 per barrel tariff on imported oil. Calculate the effect of the tariff on

a. The change in producer surplus

b. The change in consumer surplus

c. Government tariff revenue

d. Consumption distortion loss

Suppose desired consumption and desired investment are Cd = 300 + 0.75(Y − T) − 300r T = 100 + 0.2Y Id = 200 − 200r G is the level of government purchases and G=600 Money demand is Md P = 0.5Y − 500(r + πe ) where the expected rate of inflation, πe , is 0.05. The nominal supply of money M = 133,200. Suppose the full employment output is 2500 and the price level in the short run is 120.

5) Find the real interest rate and the value of the price in the long run equilibrium [Hint: The long-run equilibrium output level is the full employment output level]

Suppose General Electric paid its line workers $10 per hour in 2015 when the Consumer Price Index was 100. Suppose that deflation occurred and the aggregate price level fell to 88 in 2016.

Instructions: Round your answers to two decimal places.

    a. GE needed to pay its workers $ in 2016 in order to keep the real wage fixed at $10.

    b. GE needed to pay its workers $ in 2016 if it wanted to increase the real wage by 6 percent.

    c. If GE kept the wage fixed at $10 per hour in 2016, in real terms, its workers got a  % increase in wages.

The table identifies the total output produced for each given number of workers.

At a nominal wage of $75 per unit labor and a price of output equal to $1 per unit, how many workers are hired?    

Enter a whole number.

Enter increase, decrease, or same for the rest of the questions below.

If the wage and price remain constant, an increase in labor productivity will  the number of workers hired.

In the labor market as a whole, the increase in labor productivity can be expected to  the real wage and  the level of employment.

1. Suppose Country ABC’s Nominal GDP is $3,189 and the money supply is $100. What is the percentage change of the velocity of money if Nominal GDP falls to $2,823 and the money supply falls to $83?

2.

exports and imports change due to

QUESTION 4

1. Investment will change due to

The market for computer flash drives is competitive. The marginal cost of producing flash drives (supply) is given by marginal cost = 50 + 3*Q and marginal benefit = 300 – 2*Q.

a. What are the predicted equilibrium P and Q in the market for flash drives?

b. Suppose the price somehow gets stuck at $100. Is there a shortage or surplus? If yes, which is greater, quantity supplied or demanded, and by how much (i.e. how much is the shortage or surplus)? Definition: a shortage is an amount by which quantity demanded exceeds quantity supplied and a surplus is the amount quantity supplied exceeds quantity demanded.

c. Answer the same questions as in 3b for a price of $300.

The demand for slurpees in a competitive market is P=100-2Q and supply is P=Q. What is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? Suppose the slurpee market is monopolized by one firm. Assume the supply function now represents the monopolist’s marginal costs schedule. The demand schedule is unchanged. What is the monopolist’s marginal revenue mathematically? With a monopoly, what is the equilibrium price and quantity? What is the value of the area of consumer surplus? What is the value of the area of producer surplus? What are the gains to trade in the market? What is the value of the area of deadweight loss?

Suppose that a typical urban consumer purchases a consumption bundle (CPI Basket) which includes 50 units of books, 100 units of clothes, 200 units of apples, and 300 units of pizza. The following table shows the unit price of each item in various years.

Please answer the following questions;

1. Calculate the cost of CPI basket.
2. Choose a base year
3. Calculate Consumer Price Index (CPI)
4. Calculate inflation rate.

Q) Consider the following spread strategy: Short John Deere June $150 call, price = $13.50, long John Deere July $150 call at price = $18.625.

a. What type of spread strategy is this?

b. In June at expiration of the short call, Deere is currently trading at $152 and the July call is trading at $19.50. We close our spread position in two ways: settle on the June $150 call and take an offsetting position on the July $150 call.

c. Evaluate the payoff on the spread assuming 100 share contracts if the conditions in (b) hold.

Draw a general payoff profile of this type of spread.