Suppose that, in the basic one-period model, there is no government spending and no taxes. Production by the representative firm produces pollution in proportion to the amount of output produced. Given any consumption bundle (a consumption-leisure pair), the consumer is worse off the more pollution there is.
(a) In a diagram, show the competitive equilibrium and the Pareto optimum. Show that the competitive equilibrium is not Pareto optimal, and explain why. Is more or less output produced in the competitive equilibrium than at the Pareto optimum? Explain.
(b) Now, suppose that the government imposes a proportional tax t on the output of the firm, and rebates the proceeds of the tax on a lump-sum fashion, as a transfer TR to the representative consumer. Show that the tax can be set in such a way that the competitive equilibrium is Pareto optimal. Explain your results.
In: Economics
Assume that a customer shops at a local grocery store spending an average of $150 a week, resulting in the retailer earning a $25 profit each week from this customer. Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life-span. Also assume a 4 percent annual interest rate and no initial cost to acquire the customer.
This customer yields $1300 per year in profits for this retailer. (Round to the nearest dollar.)
The customer lifetime is $_______. (Round to the nearest dollar.)
In: Finance
a) Classical Model
b) Keynesian Model
c) Supply-side Model
In: Economics
1.Which of the following would not be included in an economist's definition of investment spending?
| a |
the purchase of robots by Motor Magic Manufacturing |
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| b |
the construction of a new office building by the Mountain City Real Estate Company |
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| c |
the purchase of General Motors stock by Donald Trump |
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| d |
the purchase of a new pizza oven by H and R Pizza |
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| e |
an unexpected rise in inventories at Randle Manufacturing |
2. A decrease in the demand for peanut butter could be caused by a(n)
| a |
increase in the supply of peanut butter |
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| b |
increase in the price of peanut butter |
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| c |
doubling of the price of bread |
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| d |
drought in Georgia that destroyed 30 percent of the peanut crop |
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| e |
increase in consumer income |
3. Which of the following would indicate the beginnings of an expansion of the economy?
| a |
fewer new firms are started |
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| b |
stock market prices decline |
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| c |
consumer confidence improves |
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| d |
housing construction slows |
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| e |
orders for new equipment decrease |
4. To determine the CPI, you would need to know the
| a |
current market basket at current- and base-year prices |
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| b |
base-year market basket at current- and base-year prices |
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| c |
current market basket at current prices and base-year market basket at base-year prices |
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| d |
current market basket at base-year prices only |
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| e |
current market basket at current prices only |
In: Economics
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Question |
Answer |
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Whenever there is change in spending, there will be a change in real GDP. Explain why this is so.(2 Points) |
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Use the graph below to answer the following questions( 3Points) (a) What is the equilibrium GDP?
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What is the effect of net exports, either positive or negative, on equilibrium GDP?(2 Points) |
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The data in the first two columns below are for a private closed economy. Use this table to answer the following questions.(3 Points)
(a) What is the equilibrium GDP for the private closed economy? (b) Including the international trade figures for exports and imports, calculate net exports and determine the equilibrium GDP for a private open economy. (c) What will happen to equilibrium GDP if exports were $5 billion larger at each level of GDP? (d) What will happen to equilibrium GDP if exports remained at $10 billion, but imports dropped to $5 billion? (e) What is the size of the multiplier in this economy? |
In: Economics
14. Suppose the economy is in long-run equilibrium. If there is
an expansion of government spending at the same time that a
significant increase in immigration of skilled workers reduces
production costs, then in the short-run we would expect
A. real GDP will fall and the price level might rise, fall, or stay
the same.
B. real GDP will rise and the price level might rise, fall, or stay
the same.
C. the price level will fall, and real GDP might rise, fall, or
stay the same.
D. the price level will rise, and real GDP might rise, fall, or
stay the same.
E. Either A or C will occur.
15. According to the AD/AS model, which of the following statements
is (are) correct?
(x) Stagflation occurs if the economy experiences both an increase
in prices and a reduction in output.
(y) Stagflation occurs if the aggregate supply curve shifts to the
left because prices rise and output falls.
(z) An increase in the price level with a corresponding reduction
in real GDP could be created by natural disasters such as floods,
hurricanes and unusually dry weather
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only
In: Economics
12. Suppose the economy is in long-run equilibrium. If there is
an increase in consumer spending due to a tax rebate at the same
time that a natural disaster adversely affects the availability of
production inputs within the country, then in the short-run we
would expect
A. the price level will rise, and real GDP might rise, fall, or
stay the same.
B. the price level will fall, and real GDP might rise, fall, or
stay the same.
C. real GDP will fall and the price level might rise, fall, or stay
the same.
D. real GDP will rise and the price level might rise, fall, or stay
the same.
E. the price level might rise, fall or stay the same and real GDP
might rise, fall, or stay the same.
13. Suppose the economy is in long-run equilibrium. If there is a
significant consumption (sales) tax increase at the same time that
major new sources of oil are discovered in the country, then in the
short-run we would expect
A. real GDP will fall and the price level might rise, fall, or stay
the same.
B. real GDP will rise and the price level might rise, fall, or stay
the same.
C. the price level might rise, fall or stay the same and real GDP
might rise, fall, or stay the same.
D. the price level will rise, and real GDP might rise, fall, or
stay the same.
E. the price level will fall, and real GDP might rise, fall, or
stay the same.
14. Suppose the economy is in long-run equilibrium. If there is an
expansion of government spending at the same time that a
significant increase in immigration of skilled workers reduces
production costs, then in the short-run we would expect
A. real GDP will fall and the price level might rise, fall, or stay
the same.
B. real GDP will rise and the price level might rise, fall, or stay
the same.
C. the price level will fall, and real GDP might rise, fall, or
stay the same.
D. the price level will rise, and real GDP might rise, fall, or
stay the same.
E. Either A or C will occur.
In: Economics
1.
Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. Then the consumption function is given by
| a. |
C = 400 - 0.8Yd |
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| b. |
C = -400 + 0.2Yd |
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| c. |
C = 320 x Yd |
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| d. |
C = 400 + 0.8Yd |
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| e. |
C = 400 + 0.2Yd |
2.
Suppose that the MPC is equal to 0.8 and autonomous consumption
spending is 400. At what level of income is saving = 0?
| a. |
400 |
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| b. |
500 |
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| c. |
2000 |
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| d. |
320 |
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| e. |
1200 |
3.
The saving function
| a. |
. is an upward-sloping straight line with a vertical intercept of -C0 and a slope of (1 - b). |
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| b. |
shows that in some ranges of income saving may be negative. |
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| c. |
is given by the equation S = -C0 + (1 - b)Yd |
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| d. |
can be derived from the consumption function. |
|
| e. |
all of the above |
In: Economics
Assume that a customer shops at a local grocery store spending an average of $400 a week, resulting in a retailer profit of $40 each week from this customer. Assuming the shopper visits the store all 52 weeks of the year, calculate the customer lifetime value if this shopper remains loyal over a 10-year life span. Also assume a 3 percent annual interest rate and no initial cost to acquire the customer. The customer yields $ nothing per year in profits for this retailer. (Round to the nearest dollar.)
In: Finance
Assume that the economy is at full employment. Now suppose a decrease in investment spending. At the new equilibrium, (3)
Assume that the economy is at full employment. Now suppose there is an increase in consumption. At the new equilibrium,
In: Economics