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week 8 final exam study guide




Question;TCO A) Suppose you are hired to manage a small;manufacturing facility that produces Widgets.;(a.) You know from data collected on the Widget;Market that market demand has recently decreased and market supply has recently;increased. As manager of the facility, what decisions should you make regarding;production levels and pricing for your Widget facility?Remember that supply and demand are about the;market supply and market demand, which is bigger than your own company. You are being given data on supply and demand;for the whole market, and are being asked what effect that has on you as a;small part of that market. (b.) Now, suppose that following the supply and;demand changes in (a), a substitute good goes down in price, and your costs of;production decrease. What new decisions;will you make regarding production levels and pricing for your Widget;facility? (TCO B);Here is some data on the demand for marshmallows:Price Quantity$10 1100$ 8 1300$ 6 1700$ 4 2300$ 2 3100(a.) Is demand elastic or inelastic in the $6-$8;price range? How do you know?(b.) If the table represents the demand faced by a;monopoly firm, then what is that firm?s marginal revenue as it increases output;from 1700 units to 2300 units? Show all work.TCO C) You;have been hired to manage a small manufacturing facility which has cost and;production data given in the table below.;Total TotalWorkers;Labor Cost Output Revenue 1 $500 100 $700 2 1000 280 1150 3 1500 440 1440 4 2000 540 1570 5 2500 600 1670 6 3000 630 1710 7 3500 640 1730(a.) What is the marginal product of the second;worker? (b.) What is the marginal revenue product of the;fourth worker? (c.) What is the marginal cost of the first;worker? (d.) Based on your knowledge of marginal analysis;how many workers should you hire? Explain you answer. TCO C);Answer the next questions on the basis of the following cost data for a;firm in pure competition: OUTPUT ------ TFC ---------- TVC 0 $100.00 0.00;1 100.00 70.00 2 100.00 120.00 3 100.00 150.00 4 100.00 220.00 5 100.00 300.00 6 100.00 390.00(a.) Refer to the above data. If the product price is $75, 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.) Refer to the above data. If the product price is $100, 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. (TCO D) A;software producer has fixed costs of $18,000 per month and her Total Variable;Costs (TVC) as a function of output Q are given below: Q TVC Price1,000;$15,000 $25;2,000 20,000 24 3,000 30,000 23 4,000 50,000 22 5,000 80,000 20 (a.) 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.) What should be the production level if fixed;costs rose to $48,000 per month? Explain.(TCO F) (a.) 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.);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.);Refer to the data in the above Scenario.;What is the unemployment rate in the United States for the given;year? (TCO G and;H) (a.) What are the arguments for and against the;use of fiscal policy to fight inflation, lower unemployment, and raise GDP;(Keynesian and Monetarist)? (b.) 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.) 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. (TCO;G) (a.) Third National Bank is fully loaned up with;reserves of $20,000 and demand deposits equal to $100,000. The reserve ratio is;20%. Households deposit $5,000 in currency into the bank. How much excess;reserves does the bank now have, and 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.) What is the discount rate in the banking;system, and explain how the Fed manipulates this rate in order to achieve;macroeconomic objectives. TCO E and I);Let the exchange rate be defined as the number of dollars per British;pound. Assume there is a decrease in;U.S. interest rates relative to that of Britain.(a.) Would this event cause the demand for the;dollar to increase or decrease relative to the demand for the pound? Why? (b.) Has the dollar appreciated or depreciated in;value relative to the pound? (c.) 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 Great Britain? Illustrate by showing the price of a U.S.;cell phone in Britain, before and after the change in the exchange rate. (d.) If you had a business exporting goods to;Britain, and U.S. interest rates fell as they have in this example, would you;plan to expand production or cut back?;Why?;="msonormalcxspfirst">


Paper#55649 | Written in 18-Jul-2015

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