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ECON final exam 2014




Question;2.(TCO B) The supply and demand schedules for;tickets to basketball games in town of Oakwood are given in the table below.;Price;Quantity Demanded;Quantity Supplied;$6;5,000;2,000;7;4,000;2,000;8;3,000;2,000;9;2,000;2,000;10;1,000;2,000;The stadium owners need to find the optimum price;for the games.;a.;What are the coefficients of elasticity of supply;and demand if the price is raised from $6 to $8? (8 points);b.;Characterize the demand and supply for tickets;based on the calculated elasticies. (4 points);c.What is the optimum price;that the stadium owners can set for the tickets? (4 points);d.;Why is the selected price for the tickets better;than other prices given in the table above? (4 points);4.(TCO C) Answer the next questions (Parts A and B);on the basis of the following cost data for a firm operating in pure;competition;OUTPUT ------ TFC ---------- TVC;0;$500.00 0.00;1;500.00 70.00;2;500.00 130.00;3;500.00 170.00;4;500.00 200.00;5;500.00 300.00;6;500.00 510.00;(a.) (15 points) Refer to the above data. If the;product price is $185 at its optimal output, will the firm realize an economic;profit, break even, or incur an economic loss? How much will the profit or loss;be? Show all calculations.;(b.) (15 points) Refer to the above data. If the product price is $200;at its optimal output, will the firm realize an economic profit, break even, or;incur an economic loss? How much will the profit or loss be? Show all;calculations. (Points: 30);5.(TCO D) A software producer;has fixed costs of $30,000 per month and her Total Variable Costs (TVC) as a;function of output Q are given below;Q;TVC;Price;3,000;$;5,000 $5;13,000 25,000;4;23,000 50,000 3;33,000 80,000 2;43,000;120,000 1;(a.) (15 points) If software can only be produced;in the quantities above, what should be the production level if the producer;operates in a monopolistic competitive market where the price of software at;each possible quantity is also listed above? Why? (Show all work.);(b.) (15 points) What should be the production;level if fixed costs rose to $50,000 per month? Explain.;6.(TCO F);(a.) (20 points) Suppose nominal GDP in 1999;was $100 billion and in 2001 it was $260 billion. The general price index;in 1999 was 100, and in 2001 it was 180. Between 1999 and 2001, the real GDP;rose by what percent?;(b.) Use the following scenario to answer;questions (b1) and (b2).;In a given year in the United States, the total;number of residents is 230 million, the number of residents under the age of 16;is 38 million, the number of institutionalized adults is 15 million, the number;of adults who are not looking for work is 27 million, and the number of;unemployed is 12 million.;(b1.) (5 points) Refer to the data in;the above scenario. What is the size of the labor force in the United States;for the given year?;(b2.) (5 points) Refer to the data in the above;scenario. What is the unemployment rate in the United States for the given;year? (Points: 30);7.(TCO G and H);(a.) (15 points) What are the arguments for and;against the use of fiscal policy to fight inflation, lower unemployment, and;raise GDP (Keynesian and Monetarist)?;(b.) (10 points) Any change in the economy?s;total expenditures would be expected to translate into a change in GDP that was;larger than the initial change in spending. This phenomenon is known as;the multiplier effect.Explain how the multiplier effect;works.;(c.) (15 points) You are told that 80 cents out of every extra dollar;pumped into the economy goes toward consumption (as opposed to saving).;Estimate the GDP impact of a positive change in government spending that equals;$10 billion. (Points: 40);8.(TCO G);(a.) Reserve requirement for banks is set at 5%.;Your firm deposits its profits of $28,000 into the Third National Bank.;(10 points) How much excess reserve does your;deposit generate for the bank?;(10 points) What is the maximum amount of new;money that can be created in the banking system as a result of this deposit?;Show all work.;(b.) (10 points) What is the Federal Funds Rate;in the banking system?;(10 points) Explain how the Fed manipulates this rate in order to;achieve macroeconomic objectives. (Points: 40);9.(TCOs E and I) Let the exchange rate be;defined as the number of dollars per Japanese yen. Assume that there is a;relatively lower rate of inflation in the U.S. relative to that of Japan.;(a.) (10 points) Would this event cause the;demand for the dollar to increase or decrease relative to the demand for the;yen? Why?;(b.) (10 points) Has the dollar appreciated or;depreciated in value relative to the yen?;(c.) (10 points) Does this change in the value of;the dollar make imports cheaper or more expensive for Americans? Are American;exports cheaper or more expensive for importers of U.S. goods in Japan?;Illustrate by showing the price of a U.S. e-reader in Japan, before and after;the change in the exchange rate.;(d.) (10 points) If you had a business exporting goods to Japan, and;U.S. inflation fell as discussed above in this example, would you plan to;expand production or cut back? Why? (Points: 40)


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