A classical economy is described by the following equations: ?? = 150 + 0.8(? − ?) − 200?
?? = 150 − 80?
? = 0.6? − 150?

? = 1,500
?^e = 0.06
Government spending and taxes are equal where T = G = 100. The nominal money supply M = 4,550.

(a) What are the equilibrium values of the real interest rate, the price level, consumption, and investment?

(b) Suppose an economic shock increases desired investment by 30, so it is now ??

= 180 − 80?. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

(c) During a recession, would classical economists suggest that the changes in monetary policy be used to improve economic conditions? Briefly explain.

Kahuku Corporation has 100 million shares outstanding trading at $20 per share. The company announces its intention to raise $150 million by selling new shares.

a. What do market signaling studies suggest will happen to Kahuku’s stock price on the announcement date? Why?

b. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing Kahuku shareholders will experience on the announcement date?

c. What percentage of the value of Kahuku’s existing equity prior to the announcement is this expected gain or loss?

d. At what price should Kahuku expect its existing shares to sell immediately after the announcement?

An economy produces and consumes only two products: college education and economic textbooks. The following table gives the appropriate data for two different years.

            Using the above table, compute the following and show your calculations

Nominal GDP for 2005 and 2008.

Real GDP for 2008 using 2005 as the base year.

The GDP Deflator for 2008.

The CPI index for 2005 and 2008 using 2005 as the base year.

The inflation rate from 2005 to 2008 based on the CPI.

Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $305,800, and the sales mix is 60% bats and 40% gloves. The unit selling price and the unit variable cost for each product are as follows:

a. Compute the break-even sales (units) for the overall enterprise product, E.
units

b. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point?

Consider a perfectly competitive industry with a large number of identical firms. Each firm’s long-run average total cost curve reaches a minimum at $4, where output is 100 units. The current market price of the good is $4. a. Is this industry in long-run equilibrium? Why or why not?

b. Suppose that the industry is a constant-cost industry. The government announces that this product is harmful to consumer health, so aggregate consumer demand falls (but not to zero!). How does this affect the long run equilibrium outcome, in terms of the market price of the good, the quantity of the good that is bought and sold in the market, and the number of firms in the industry? Explain, using graphs of the industry and a representative firm.

The market for a certain goos, (y) is perfectly competitive. Currently, three types of firms produce the good. The firms have the following cost functions:

Type 1 firms: C₁(y₁)=2y₁²+242

Type 2 firms: C₂(y₂)=3y₂²+192

Type 3 firms: C₃(y₃)=4y₃²+100

The market demand for the good is y=1200-3p. In the short run. there are 24 type 1 firms, 24 type 2 firms, and 16 type 3 firms.

a) What is the equilibrium price of the good?

b) What will the price be in the long run equilibrium? Which firm types and how many firms of each type will be active in the long run?

You operate a luxury hotel in Baltimore that famous celebrities rent for extended periods. The daily price is per room is $1,950. Operating costs average $60,000 per day, regardless of the number of rooms rented. Construct a spreadsheet model to determine the profit if 60 rooms are rented. The manager has observed that the number of rooms rented during any given day varies between 50 and 80 (the total number of rooms available).

a.Use data tables to evaluate the profit for this range of unit rentals.

b.Suppose the manager is considering lowering or increasing the daily price by $100. How will profit be affected? (Hint: use a two-way data table).

1. Suppose that a consumer has a choice between two goods, X and Y.  If the price of X is $2 per unit and the price of Y is $5 per unit, how much of X and Y will the utility maximizing consumer purchase, assuming an income of $19?  Use the information on total utility given below.  Use a methodology that could be used in answering a more complex problem and show how you used this methodology.  Trial and error or summing the different combinations of TU to find the highest are not acceptable approaches.

Enter answers only as numbers, and round decimals to 2 decimal places.

Suppose that there is natural monopoly that faces a demand curve Q=100-P with total cost function C(Q)=400+15Q.

The profit maximizing quantity for the natural monopolist, in the presence of a marginal cost pricing rule is ________ units.

The profit maximizing price that will set by the monopolist that will be set in the presence of a marginal cost pricing rule is $_________.

The average total cost per unit at the profit maximizing level of output in the presence of a marginal cost pricing rule is $__________.

The profit for the natural monopolist under the marginal cost pricing rule, given they set the profit maximizing price and level of output, is $________.

An incomplete subsidiary ledger of materials inventory for May is as follows:

a. Complete the materials issuances and balances for the materials subsidiary ledger under FIFO.

b. Determine the materials inventory balance at the end of May.
$

c. Journalize the summary entry to transfer materials to work in process.