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AssumeyouarethemanagerofaperfectlycompetitivefirmwhoseshortruncostisTC

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AssumeyouarethemanagerofaperfectlycompetitivefirmwhoseshortruncostisTC;=100+160Q+3Q2.Ifthemarketpriceis$196,whatshouldyoudo?(Points:1);aproduce5unitsandcontinueoperating;bproduce6unitsandcontinueoperating;cproducezerounits(i.e.,shutdown);dCannotbedeterminedfromtheaboveinformation.;2.Assumeaprofitmaximizingfirm'sshortruncostisTC=700+60Q.Ifitsdemand;curveisP=30015Q,whatshoulditdointheshortrun?(Points:1);ashutdown;bcontinueoperatingintheshortruneventhoughitislosingmoney;ccontinueoperatingbecauseitisearninganeconomicprofit;dCannotbedeterminedfromtheaboveinformation.;3.Thefollowingarepossibleexamplesofpricediscrimination,except(Points:1);apricesinexportmarketsarelowerthanforidenticalproductsinthedomestic;market.;bseniorcitizenspaylowerfaresonpublictransportationthanyoungerpeopleatthe;sametime.;caproductsellsatahigherpriceatlocationAthanatlocationB,because;transportationcostsarehigherfromthefactorytoA.;dsubscriptionpricesforaprofessionaljournalarehigherwhenboughtbyalibrary;thanwhenboughtbyanindividual.;4.Inorderthatpricediscriminationcanexist,(Points:1);amarketsmustbecapableofbeingseparated.;bmarketsmustbeinterdependent.;cdifferentdemandpriceelasticitiesmustexistindifferentmarkets.;ddemandpriceelasticitiesmustbeidenticalinallmarkets.;eBothAandC.;5.Dominantpriceleadershipexistswhen(Points:1);aonefirmdrivestheothersoutofthemarket.;bthedominantfirmdecideshowmucheachofitscompetitorscansell.;cthedominantfirmestablishesthepriceatthequantitywhereitsMR=MC,and;permitsallotherfirmstosellalltheywanttosellatthatprice.;dthedominantfirmchargesthelowestpriceintheindustry.;6.Iffirmsareearningeconomicprofitinamonopolisticallycompetitivemarket,whichof;thefollowingismostlikelytohappeninthelongrun?(Points:1);aSomefirmswillleavethemarket.Firmswilljointogethertokeepothersfrom;entering.;bFirmswilljointogethertokeepothersfromentering.;cNewfirmswillenterthemarket,therebyeliminatingtheeconomicprofit.;dFirmswillcontinuetoearneconomicprofit.;7.Intheshortrunafirmshouldshutdownifitcannot(Points:1);amakenormalprofits.;bmakeeconomicprofits.;ccoveritsvariablecosts.;dcoveritsfixedcosts.;8.WhichofthefollowingwillhappenwhentheFederalReservebuysbondsfromthe;publicintheopenmarketandcashinthehandsofthepublicdoesnotchange?(Points;1);atherequiredreserveratiowillincrease;bthemoneysupplywilldecrease;cthedepositsofcommercialbankswilldecline;dcommercialbankreserveswillincrease;9.Supposethattheeconomystartsatequilibriumandthempc=0.8.Whatwouldbethe;effectofa$500increaseintaxesoncealltheroundsofthemultiplierprocessare;complete?(Points:1);aAnincreaseof$500intaxescausesequilibriumoutputtodecreaseby1000.;bAnincreaseof$500intaxescausesequilibriumoutputtodecreaseby2000.;cAnincreaseof$500intaxescausesequilibriumoutputtoincreaseby2000.;dAnincreaseof$500intaxescausesequilibriumoutputtodecreaseby400.;eAnincreaseof$500intaxescausesequilibriumoutputtoincreaseby400.;10.Iftheeconomywereencounteringasevererecession,propermonetaryandfiscal;policieswouldcallfor:(Points:1);asellinggovernmentsecurities,raisingthereserveratio,loweringthediscountrate;andabudgetarysurplus.;bbuyinggovernmentsecurities,reducingthereserveratio,reducingthediscount;rate,andabudgetarydeficit.;cbuyinggovernmentsecurities,raisingthereserveratio,raisingthediscountrate;andabudgetarysurplus.;dbuyinggovernmentsecurities,reducingthereserveratio,raisingthediscountrate;andabudgetarydeficit.;11.AssumethatthepricelevelisflexiblebothupwardanddownwardandthattheFed's;policyistokeepthepricelevelfromeitherrisingorfalling.Ifaggregatesupplyincreases;intheeconomy,theFed:(Points:1);awillhavetoincreaseinterestratestokeepthepricelevelfromfalling.;bwillhavetoreducethemoneysupplytokeepthepricelevelfromrising.;cwillhavetoincreasethemoneysupplytokeepthepricelevelfromfalling.;dcankeepthepricelevelstablewithoutalteringthemoneysupplyorinterestrate.;12.AnexpansionaryU.S.fiscalpolicythatdrivesupU.S.interestratesismostlikelyto;(Points:1);adecreasetheforeigndemandfordollarsandappreciatetheinternationalvalueof;thedollar.;bdecreasetheforeigndemandfordollarsanddepreciatetheinternationalvalueof;thedollar.;cincreasetheforeigndemandfordollarsandappreciatetheinternationalvalueof;thedollar.;dincreasetheforeigndemandfordollarsanddepreciatetheinternationalvalueof;thedollar.;13.SupposetheValueofFrenchFrancintermsofthedollaris40onOctober12and45;onOctober17.ByhowmuchhastheFrancappreciatedordepreciatedagainstthe;dollar?(Points:1);aTheFranchasdepreciatedby12.5%.;bTheFranchasremainedconstantrelativetothedollar;cTheFranchasappreciatedby45%;dTheFranchasdepreciatedby45%;eThedollarhasdepreciatedby12.5%;14.Ineconomicanalysis,anyamountofprofitearnedabovezeroisconsidered"above;normal"because(Points:1);anormallyfirmsaresupposedtoearnzeroprofit.;bthiswouldindicatethatthefirm'srevenueexceededbothitsaccountingand;opportunitycost.;cthiswouldindicatethatthefirmwasatleastearningaprofitequaltoits;opportunitycost.;dthiswouldindicatethatthefirm'srevenueexceededitsaccountingcost.;15.AssumethatGDP=4,800,consumption=3,400,privatedomesticsavings=400;governmentpurchases=1,200,andnetexports=120.Whichofthefollowingistrue?;(Points:1);adisposableincomeis3,800;bprivatedomesticinvestmentis320;cthebudgetdeficitis200;dalloftheabove;eonlyA)andC);16.Ifthegovernmentincreasestaxes,whichofthefollowingisLEASTlikelytooccur?;(Points:1);aadecreaseinprivatedomesticsaving;badecreaseinconsumption;canincreaseinprivatedomesticinvestment;dadecreaseinnetexports;eadecreaseinnationalincome;17.Incalculatingthisyear'sGDP,nationalincomeaccountants(Points:1);aexcludethepricepaidforausedcomputerbyacollegestudent;bincludeanyincreaseinstockvalues;cincludeanestimateforincomefromillegalactivities;dexcludethevalueofanyrepairsmadeonexistingproperty;eexcludepollutioncontrolequipmentasnonproductive;18.Assumeyoudepleteyoursavingstobuyanewsofaandsomegovernmentbonds;andthentakeavacationinaforeigncountry.Whichofthefollowingistrue?(Points:1);aconsumptionwillincrease;bnetexportswillincrease;cgovernmentpurchaseswillincrease;dinvestmentwillincrease;ealloftheabove;19.Assumegovernmentpurchases=1,500,thebudgetdeficit=120,privatedomestic;saving=1,220,consumption=4,800,thetradedeficit=90,andtransferpayments=0.;Whichofthefollowingistrue?(Points:1);aprivatedomesticinvestmentis$1,190;bnationalincomeis$7,400;cdisposableincomeis$6,020;dalloftheabove;eonlyA)andC);20.TheCPI,apriceindexusedtomeasureinflation,isimperfectsince(Points:1);aitonlymeasuresthosegoodsthatareincludedinthemarketbasket;bitdoesnottakeintoaccountqualityimprovements;cmanypaymentsarealreadyindexedforinflation;ditdoesnotincludeservices;eonlyA)andB);21.Assumeexports=300,imports=400,taxrevenues=1,100,governmentpurchases;=1,400,privatedomesticsaving=900.Thenthelevelofprivatedomesticinvestmentis;(Points:1);a600;b700;c900;d1,100;e1,300;22.AssumethatGDP=4,800,consumption=3,400,privatedomesticsavings=400;governmentpurchases=1,200,andnetexports=120.Whichofthefollowingistrue?;(Points:1);adisposableincomeis3,800;bprivatedomesticinvestmentis320;cthebudgetdeficitis200;dalloftheabove;eonlyA)andC);23.Anincreaseinaggregatedemandcanbecausedby(Points:1);aanincreaseingovernmentexpenditures;banincreaseinnominalmoneysupply;cadecreaseintaxes;danincreaseinbusinessandconsumerconfidence;ealloftheabove;24.WhichofthefollowingwillNOTcauseashiftoftheIScurve?(Points:1);aachangeintransferpayments;bachangeintaxes;cachangeinmoneydemand;dachangeinbusinessandconsumerconfidence;eachangeinautonomoussaving;25.Anincreaseinthemarginalpropensitytowilldecreasethesizeofthe;expendituremultiplier()andthereforetheIScurvewillshifttotheandbecome;steeper.Ifpeoplesavemoreandspendless,firmswillexperienceanincreasein;unintendedinventories.Firmswillrespondbydecreasingproductionandnational;incomewill3(Points:1);asave,left,decrease.;bconsume,right,increase.;csave,left,increase.;dconsume,left,decrease;esave,right,decrease;26.1.You'vebeenhiredasamanagingconsultantbyanunprofitablefirmtodetermine;whetheritshouldshutdownitsoperation.Thefirmcurrentlyuses70workerstoproduce;300unitsofoutputperday.Thedailywage(perworker)is$100,andthepriceofthe;firm'soutputis$30.Thecostofothervariableinputsis$500perday.Althoughyoudon't;knowthefirm'sfixedcost,youknowthatitishighenoughthatthefirm'stotalcosts;exceeditstotalrevenue.Youknowthatthemarginalcostofthelastunitis$30.Should;thefirmcontinuetooperateataloss?Carefullyexplainyouranswer.(Points:5);------------------------------------------------------------------------------------------------------------;2.YouhavebeenappointedGlobalManagerofafirmthathastwoplants,oneinthe;UnitedStatesandoneinMexico.Assume,youcannotchangethesizeoftheplantsor;theamountofcapitalequipment.ThewageinMexicois$5.ThewageintheU.S.is$20.;Givencurrentemployment,themarginalproductofthelastworkerinMexicois100,and;themarginalproductofthelastworkerintheU.S.is500.;a.Isthefirmmaximizingoutputrelativetoitslaborcost?Showhowyouknow.;b.Ifitisnot,whatshouldthefirmdo?;3.Assumelastyear'srealGDPwas$7,000billion,thisyear'snominalGDPis$8,820;billion,andtheGDPdeflatorforthisyearis120.WhatwasthegrowthrateofrealGDP?;4.Assumethegovernmentcutsitspurchasesby$120billion.Asaresult,thebudget;deficitisreducedby$40billion,privatedomesticsavingdecreasesby$10billion;disposablepersonalincomedecreasesby$80billionandthetradedeficitisreducedby;$15billion.Byhowmuchhasnationalincome(Y)changed?;5.Supposethattheeconomystartsatequilibriumandthempc=0.8.Whatwouldbethe;effectofa300increaseintaxesoncealltheroundsofthemultiplierprocessare;complete?;6.Foreachofthefollowingchanges,showtheeffectonthedemandcurve,andstate;whatwillhappentomarketequilibriumpriceandquantityintheshortrun.;a.Consumersexpectthatthepriceofthegoodwillbehigherinthefuture.;b.Thepriceofasubstitutegoodrises.;c.Consumerincomesfall,andthegoodisnormal.;d.Consumerincomesfall,andthegoodisinferior.;e.Amedicalreportispublishedshowingthatthisproductishazardoustoyourhealth.;f.Thepriceoftheproductrises.;7.Foreachofthefollowingchanges,showtheeffectonthesupplycurve,andstate;whatwillhappentomarketequilibriumpriceandquantityintheshortrun.;a.Thegovernmentrequirespollutioncontrolfiltersthatraiseproductioncosts.;b.Wagesofworkersinthisindustryfall.;c.Thereisanimprovementintechnology.;d.Thepriceoftheproductfalls.;e.Producersexpectthatthepriceoftheproductwillfallinthefuture.;1.Youhaveopenedyourownwordprocessingservice.Youboughtapersonal;computer,andpaid$5,000forit.However,duetothecostchangesinthecomputer;industry,thecurrentpriceofanequivalentmachineis$2,500.Youcouldsellanyused;machinefor$1,000.Ifyouwerenotwordprocessing,youcouldearn$20,000peryear;atanalternativejob.Assumethattheinterestrateis10%.Youcanalsohireanassistant;whocandoeverythingthatyoucandofor$20,000peryear(youwouldstillcontinueto;dowordprocessing).;Onepersonusingonecomputercanproduce11,000typedpagesperyear,andthe;priceperpageforyourserviceis$2.;Youareconsideringthreeoptions:(1)expandyourbusinessbyhiringanassistant.(2);leaveyourbusinessthewayitis(3)shutdown.Basedonthecostsandrevenues;above,whichshouldyoudo?Explainandshowanyrelevantcalculations.;2.IntheSundaynewspaper,thereareusuallycouponsthatyoucanclipandtaketothe;storetosavemoneyonproducts.Anyonecanbuyanewspaper,andthevalueofthe;couponseasilyexceedsthepriceofthenewspaperformostconsumers.Isthisan;exampleofpricediscrimination?Explain.;3.FirmsthatmakegamesystemslikePlaystationandNintendotypicallychargeaprice;closetoaveragecostonthegamesystemitself,anddonotchangethatpriceeven;whenthesystemsarescarceordemandincreases.Whymightthisbeaprofit;maximizingstrategy?;4.McDonald'schargesahigherpriceforaBigMacinNewYorkCitythanitdoesina;smalltowninIowa.Isthisanexampleofthirddegreepricediscrimination?Explain.;5.Afirmhastwoplants,oneintheUnitedStatesandoneinMexico,anditcannot;changethesizeoftheplantsortheamountofcapitalequipment.ThewageinMexicois;$5.ThewageintheU.S.is$20.Givencurrentemployment,themarginalproductofthe;lastworkerinMexicois100,andthemarginalproductofthelastworkerintheU.S.is;500.;a.Isthefirmmaximizingoutputrelativetoitslaborcost?Showhowyouknow.;b.Ifitisnot,whatshouldthefirmdo?;6.Ineconomicanalysis,anyamountofprofitearnedabovezeroisconsidered"above;normal"because;anormallyfirmsaresupposedtoearnzeroprofit.;bthiswouldindicatethatthefirm'srevenueexceededbothitsaccountingand;opportunitycost.;cthiswouldindicatethatthefirmwasatleastearningaprofitequaltoits;opportunitycost.;dthiswouldindicatethatthefirm'srevenueexceededitsaccountingcost.;7.Whyisjudgingtrendsineconomicindicatorsimportanttomanagers?

 

Paper#22670 | Written in 18-Jul-2015

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