You have been appointed Global Manager of a firm that has two plants, one in the United;States and one in Mexico. Assume, you cannot change the size of the plants or the amount of;capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20. Given current;employment, the marginal product of the last worker in Mexico is 100, and the marginal product;of the last worker in the U.S. is 500.;a. Is the firm maximizing output relative to its labor cost? Show how you know.;b. If it is not, what should the firm do?;(Points: 5);2.;1. You've been hired as a managing consultant by an unprofitable firm to determine whether it;should shut down its operation. The firm currently uses 70 workers to produce 300 units of;output per day. The daily wage (per worker) is $100, and the price of the firm's output is $30.;The cost of other variable inputs is $500 per day. Although you don't know the firm's fixed cost;you know that it is high enough that the firm's total costs exceed its total revenue. You know that;the marginal cost of the last unit is $30. Should the firm continue to operate at a loss? Carefully;explain your answer. (show all your calculations).;(Points: 5);3. The Federal Reserve System regulates the money supply primarily by: (Points: 2);controlling the production of coins at the United States mint.;altering the reserve requirements of commercial banks and thereby the ability of banks to;make loans.;altering the reserves of commercial banks, largely through sales and purchases of government;bonds.;restricting the issuance of Federal Reserve Notes because paper money is the largest portion;of the money supply.;4. Dominant price leadership exists when (Points: 2);one firm drives the others out of the market.;the dominant firm decides how much each of its competitors can sell.;the dominant firm establishes the price at the quantity where its MR = MC, and permits all;other firms to sell all they want to sell at that price.;the dominant firm charges the lowest price in the industry.;5. Assume you are the manager of a firm that employs 10 workers and pays each $15 per hour.;Further assume that the MP of the 10th worker is 5 units of output and that the price of the output;is $4. According to economic theory, in the short run, what should you do? (Points: 2);the firm should hire additional workers.;the firm should reduce the number of workers employed.;the firm should continue to employ 10 workers.;More information is required to answer this question.;6. Suppose the Value of French Franc in terms of the dollar is 40 on October 12 and 45 on;October 17. By how much has the Franc appreciated or depreciated against the dollar? (Points;2);The Franc has depreciated by 12.5%.;The Franc has remained constant relative to the dollar;The Franc has appreciated by 45%;The Franc has depreciated by 45%;The dollar has depreciated by 12.5%;7. Which of the following industries is most likely to represent the Monopolistic Competition;market structure? (Points: 2);pharmaceuticals;tobacco products;hair salons;farm equipment;8. If the economy were encountering a severe recession, proper monetary and fiscal policies;would call for: (Points: 2);selling government securities, raising the reserve ratio, lowering the discount rate, and a;budgetary surplus.;buying government securities, reducing the reserve ratio, reducing the discount rate, and a;budgetary deficit.;buying government securities, raising the reserve ratio, raising the discount rate, and a;budgetary surplus.;buying government securities, reducing the reserve ratio, raising the discount rate, and a;budgetary deficit.;9. If government purchases and taxes are both increased by the same lump sum, we can expect;the following in the medium run: (Points: 2);a change in transfer payments;a change in taxes;a change in money demand;a change in business and consumer confidence;output, prices, and interest rates will all increase;10. When the slope of the total revenue curve is equal to the slope of the total cost curve (Points;2);monopoly profit is maximized.;marginal revenue equals marginal cost.;the marginal cost curve intersects the total average cost curve.;the total cost curve is at its minimum.;Both A and B;11. The CPI, a price index used to measure inflation, is imperfect since (Points: 2);it only measures those goods that are included in the market basket;it does not take into account quality improvements;many payments are already indexed for inflation;it does not include services;only A) and B);12. Assume that the price level is flexible both upward and downward and that the Fed's policy is;to keep the price level from either rising or falling. If aggregate supply increases in the economy;the Fed: (Points: 2);will have to increase interest rates to keep the price level from falling.;will have to reduce the money supply to keep the price level from rising.;will have to increase the money supply to keep the price level from falling.;can keep the price level stable without altering the money supply or interest rate.;13. Suppose the value of the French Franc in terms of the dollar is;50 on October 12, and 44 on October 17. By how much has the Franc appreciated or;depreciated against the dollar? (Points: 2);The value of the Franc rises against dollar by 12;The Franc has actually depreciated by 12%.;The Franc has remained constant relative to the dollar;The dollar has actually appreciated by 12%.;14. If firms are earning economic profit in a monopolistically competitive market, which of the;following is most likely to happen in the long run? (Points: 2);Some firms will leave the market.Firms will join together to keep others from entering.;Firms will join together to keep others from entering.;New firms will enter the market, thereby eliminating the economic profit.;Firms will continue to earn economic profit.;15. Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q. If its demand curve is P;= 300 - 15Q, what should it do in the short run? (Points: 2);shut down;continue operating in the short run even though it is losing money;continue operating because it is earning an economic profit;Cannot be determined from the above information.;16. The fact that a perfectly competitive firm has a perfectly elastic demand curve means;(Points: 2);there is no limit to the firm's profits.;there is no limit to the firm's revenues.;that it can sell all it wants at any price.;None of the above;17. The aggregate demand curve is downward sloping because (Points: 2);a lower price level leads to a larger quantity of money in real terms, causing the interest;rate to fall, lowering the value of the dollar, and raising net exports.;there is excess supply of goods and services in the expenditure sector;the expenditure sector is in equilibrium but the money sector is not;there is excess demand in the money sector;there is excess supply of money in the money sector;a higher price level leads to a smaller quantity of money in real terms, causing the interest;rate to rise, raising the value of the dollar, and raising net exports;18. Along a given aggregate supply curve an increase in the price level leads to an increase in;aggregate output because (Points: 2);money demand becomes less sensitive to changes in the interest rate;firms increase production in response to higher profits.;investment becomes more sensitive to changes in the interest rate;the income tax rate decreases;the expenditure multiplier increases;19. An expansionary U.S. fiscal policy that drives up U.S. interest rates is most likely to;(Points: 2);decrease the foreign demand for dollars and appreciate the international value of the dollar.;decrease the foreign demand for dollars and depreciate the international value of the dollar.;increase the foreign demand for dollars and appreciate the international value of the dollar.;increase the foreign demand for dollars and depreciate the international value of the dollar.;20. In order that price discrimination can exist, (Points: 2);markets must be capable of being separated.;markets must be interdependent.;different demand price elasticities must exist in different markets.;demand price elasticities must be identical in all markets.;Both A and C.;21. Assume that the prices of cars manufactured in the U.S. increases due to an increase in;quality. Which of the following should happen if the same number of cars is produced? (Points;2);real GDP should increase but nominal GDP should stay the same;nominal GDP should increase;the GDP-deflator should decrease;real GDP and the GDP-deflator should decrease;all of the above;22. In a normal AD-AS diagram with an upward-sloping AS-curve, if a tax decrease is combined;with money expansion (Points: 2);output will remain relatively unaffected but interest rates will definitely increase;output will remain relatively unaffected but interest rates will definitely fall;output will remain relatively unaffected but interest rates will definitely not increase;aggregate demand, the price level, and output will all increase;domestic markets and foreign markets will change;23. Other things equal, a depreciation of the U.S. dollar would: (Points: 2);increase the price of imported resources and decrease aggregate supply.;decrease net exports and aggregate demand.;increase consumption, investment, net export, and government spending.;decrease aggregate supply and decrease aggregate demand.;24. Using demand and supply analysis to assist you, what are the effects on the exchange rate;between the British pound and the Japanese yen from: a decrease in Japanese interest rates;(Points: 2);The yen depreciates, and the pound appreciates;The yen appreciates, and the pound depreciates;The yen depreciates, and the pound depreciates;The yen appreciates, and the pound appreciates;25. An increase in the marginal propensity to will decrease the size of the expenditure;multiplier () and therefore the AD-curve will shift to the and become steeper. If people;save more and spend less, firms will experience an increase in unintended inventories. Firms will;respond by decreasing production and national income will 3 (Points: 2);save, left, decrease.;consume, right, increase.;save, left, increase.;consume, left, decrease;save, right, decrease;26. Which of the following identities is FALSE? (Points: 2);Y = C + I + G + NX;YD = Y - TA + TR;BS = TA - TR - G;I - S = (G - TA + TR) + NX;S + TA - TR = I + G + NX;27. In a certain year the aggregate amount demanded at the existing price level consists of $100;billion of consumption, $40 billion of investment, $10 billion of net exports, and $20 billion of;government purchases. Full-employment GDP is $120 billion. To obtain price level stability;under these conditions the government should: (Points: 2);increase tax rates and reduce government spending.;discourage personal saving by reducing the interest rate on government bonds.;increase government expenditures.;encourage private investment by reducing corporate income taxes.
Paper#29831 | Written in 18-Jul-2015Price : $22