For each scenario, calculate the cross-price elasticity between the two goods and identify how the goods are related. Please use the midpoint method when applicable, and specify answers to one decimal place.

A 20%20% price increase for Product A causes a 10%10% decrease in its quantity demanded, but no change in the quantity demanded for Product B.

cross-price elasticity between A and B:

relationship between A and B:

no relationship

Product C increases in price from $5$5 a pound to $11$11 a pound. This causes the quantity demanded for Product D to increase from 1010 units to 1818 units.

cross-price elasticity between C and D:

relationship between C and D:

substitutes

When the price of Product E decreases 9%9%, this causes its quantity demanded to increase by 14%14% and the quantity demanded for Product F to increase 12%12%.

cross-price elasticity between E and F:

relationship between E and F:

complements

In 2010, a country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country’s current account deficit for 2010?

A. $70 billion

B. $159 billion

C. $142 billion

D. $65 billion

1.The finished goods beginning inventory = $100,000; The finished goods ending inventory = $50,000; The work in process inventory at the beginning of the year was $150,000 and at the end of the year $50,000; The raw materials inventory at the beginning of the year $80,000 and at the end of the year was $40,000.

Manufacturing costs and selling and administrative expenses were as follows: indirect materials = $10,000; factory utilities = $20,000; raw material purchases = $30,000 in June and $40,000 in May; direct labor cost related to wages of factory employees = $80,000; indirect labor = $20,000; factory supervision = $10,000; other factory costs = $10,000; selling expenses = $20,000; depreciation factory machinery = $40,000 and depreciation of office equipment = $50,000; sales commissions = $20,000; office supplies = $10,000; factory supplies = $20,000; marketing expenses = $60,000; and deprecation of office building = $50,000; the company closed its year end with sales revenue of $1,000,000.

Required: Prepare schedules for direct materials, direct labor, factory overhead, total manufacturing costs and cost of goods sold.

Calculation of Cost of Goods Sold: Periodic Inventory System Prepare the cost of goods sold section for Adams Gift Shop. The following amounts are known: Beginning merchandise inventory $27,050 Ending merchandise inventory 22,550 Purchases 77,125 Purchases returns and allowances 4,055 Purchases discounts 5,745 Freight-in 230 Adams Gift Shop Cost of Goods Sold Cost of goods sold: $ $ $ $ $ Cost of goods sold $

Assume that a country produces two goods, agriculture (which requires land and labor) and manufactured goods (which requires labor and capital), and is currently in autarky equilibrium. The country just finds that the international price ratio of agriculture relative to manufactured goods, i.e., P_A/P_M, in the world market is LOWER than the price ratio in its domestic market.

• Use production-possibilities frontier (PPF) and indifference curves to show how this country may gain from trade and identify the trade triangle, including export and import quantities.
• How will the nominal wage rate (w) be affected when there are not only a lower P_A but also a higher P_M? Illustrate your answer graphically.
• For workers that spend a greater share of their income on agriculture goods, are they more likely to gain or lose from trade?
• How will the real rental rates of capital and land be affected, respectively? Briefly explain why.

.     Explain the following:

      a)   Using a production possibilities schedule and assuming consumer goods and capital goods, explain how your positions on the curve can determine your location of the economic growth in the future. Use diagrams.

      b)   Why do we have increasing opportunity cost in real world and what does it mean in terms of the shape of the production possibilities curve? Carefully explain.

      c)   How does a production possibilities schedule show scarcity choice and opportunity cost? Using a diagram, carefully explain.

2.   Explain the following:

      a)   Using diagrams and supply and demand concept, carefully explain the impact of each of the following on equilibrium price and quantity of certain products.

            i)    Simultaneous decrease in price of raw material and decrease in income for a normal good (other things being equal).

            ii)  Simultaneous increase in business taxes and an increase in consumer income for a normal good (other things being equal).

      b)   Graphically explain price floor and price ceiling. Do these meddle with rationing function of prices? Carefully explain.

Part 2

Below is a production possibilities table for consumer goods (butter) and capital goods (guns).

Graph the data provided in the table using Excel. (Hints: Type your data into an Excel spreadsheet. With your mouse, highlight the data only. Go to insert. Click on scatter. Click on smooth lines chart. Select the line chart. Plot data drawing line.)

Based on the graph you created, determine if allocating advertising expenditures to boost sales or investing in a new plant and equipment would entail the greater opportunity cost. Explain and support your response.

Part 1 Below is a production possibilities table for consumer goods (butter) and capital goods (guns).

Graph the data provided in the table using Excel. (Hints: Type your data into an Excel spreadsheet. With your mouse, highlight the data only. Go to insert. Click on scatter. Click on smooth lines chart. Select the line chart. Plot data drawing line.)

Based on the graph you created, complete the following:

Identify the specific assumptions that underlie the production possibilities curve.

2. Typically, goods that are in high demand have a high market price. However, some goods that are in high demand during their peak season have lower prices as compared to their out-of-season price. Use your knowledge of supply & demand to explain the lower equilibrium price of cherries sold in the summer (their peak season), as compared to their price during the rest of the year (say, in the winter). Show it graphically and briefly explain. (3 pts.)

Hint: You should draw two demand and two supply curves in the same graph (for winter and summer). Start with the winter to show your initial demand and initial supply of cherries. Then, show the changes that occur in the summer months and prove that the price of cherries in the summer is lower than in the winter.