1. Suppose a shoe manufacturer has a constant MC of $15. The manufacturer currently charges $40 for
a pair of shoes, and at that price, the estimated price elasticity of demand is -5.0.
i. Is the firm charging the optimal price for the product? Show your steps.
ii. Should the price be changed? If so, what should it be? Explain that intuitively. 2. A train company estimates that the price elasticity of demand for weekday travelers is -3.0. For
weekend travelers, it is -4.5. If the train company discriminates (assuming costs are the same), what
will be the ratio of weekday to weekend prices? What does it mean? 3. The demand for a monopolist’s product is Q=700-5P. The monopolist also recognized that its
marginal revenue is MR=140-0.2Q and the marginal cost is $40. The firm is very happy there are no
fixed costs.
i. What is the optimal price and quantity? What the monopolist’s revenue?
ii. Now the firm wants to engage in a price discrimination scheme. It sells 150 units for $100 and 150
units for $60. What is the profit in this scenario? Which strategy is more profitable? 4. Person A’s hourly wage in 1985 was $3.35. Person B’s hourly wage in 2016 was $7.25. The CPI in
1985 and 2016 was 107 and 240, respectively. What is the 1985 wage in 2016 dollars? In real terms,
which wage is better off? 5. Which one of the following persons would NOT be considered unemployed? (Circle the right
answer)
a. An auto worker vacationing in Florida during the layoff period, before the production of new
models begins next month. He does not know for sure whether he will be called back to work when this
happens, and looked for a new job last week.
b. A college student actively searching for a summer job.
c. A construction worker who has given up looking for work after 18 months without a job.
d. A retiree actively looking for part-time work to supplement Social Security income. 6. Describe whether all the following are counted as investment in calculating GDP.
* The purchase of a new automobile for private, non-business use
* The purchase of a new house * The purchase pf corporate bonds 7. What would not be included in the GDP of the US? (Explain)
a) the bag of wheat used by the bakery to make the bread I bought this morning
b) the bag of apples bought in the supermarket
c) the wine of yesterday, produced in California
d) the haircut I got this morning at the barber shop 8. Suppose the GDP of US is $1000. Holding all else constant, what would be the new total GDP?
* Nike (US firm) sold merchandise to Italy worth 7% of US GDP
* The new administration built new bridges and railroads worth $100
* Americans purchased the new models of smartphones worth 20% of GDP
* Economists calculated that 15% of these phones were made by foreigners
* New houses were bought for $200 9. Explain how the aggregate expenditure function shifts in response to changes in each of the
following variables:
a. The real interest rate decreases.
b. Consumer confidence increases.
c. Higher taxes are imposed on business profits.
d. Foreign economies are booming.
e. The rise of online lending firms which provide cheaper and easier access to credit. 10. Use the aggregate expenditure model to explain the following statements.
a. The Federal Reserve is expected to cut interest rates to boost the economy.
b. Silicon Valley discovered new metal that increase the efficiency of electrical devices. The news are
reflected in the financial markets, increasing the Dow by 5%.
c. The new administration plans to cut personal taxes.
d. The Chinese Yuan appreciates relative to the US Dollar. 11. Explain which of the following are counted as part of the money supply (M1):
a. Checking account deposits
b. stocks
c. savings account deposits
d. Government bonds 12. Briefly describe what are the three tools the Fed uses to change the money supply and interest
rates in the economy? Which of these three is the most important and why? 13. Using the money supply/money demand model, show (graphically) and explain how the Fed
increases the interest rate. 14. Briefly explain whether the following statements are true or false:
a. The SAS curve slopes upward because households spend more as their income increases.
b. The long-run AS curve can never shift.
c. Either a decrease in the nominal money supply by the Fed, all else constant, or an increase in the price
level, all else constant, will shift the AD curve to the left. 15. Using the SRAS/LRAS/AD model, explain what will happen under the following scenarios:
a. An increase in personal taxes
b. A decrease in expected profits and business confidence
c. A decrease in the level of foreign GDP or real income
d. An increase in the nominal money supply by the Fed 16. Describe how the following statements relate to the AD-AS model:
a. The Fed has bought more than $2 trillion of Treasury and mortgage bonds to stimulate the economy.
b. The Fed expected a weaker dollar to help increase exports.

 

SuperTutor

(15)

Status NEW Posted 17 May 2017 04:05 AM My Price 20.00

-----------

Attachments

file 1494996635-Solutions file.docx preview (56 words )

S-----------olu-----------tio-----------ns -----------fil-----------e -----------Hel-----------lo -----------Sir-----------/Ma-----------dam----------- T-----------han-----------k y-----------ou -----------for----------- yo-----------ur -----------int-----------ere-----------st -----------and----------- bu-----------yin-----------g m-----------y p-----------ost-----------ed -----------sol-----------uti-----------on.----------- Pl-----------eas-----------e p-----------ing----------- me----------- on----------- ch-----------at -----------I a-----------m o-----------nli-----------ne -----------or -----------inb-----------ox -----------me -----------a m-----------ess-----------age----------- I -----------wil-----------l b-----------e q-----------uic-----------kly----------- on-----------lin-----------e a-----------nd -----------giv-----------e y-----------ou -----------exa-----------ct -----------fil-----------e a-----------nd -----------the----------- sa-----------me -----------fil-----------e i-----------s a-----------lso----------- se-----------nt -----------to -----------you-----------r e-----------mai-----------l t-----------hat----------- is----------- re-----------gis-----------ter-----------ed -----------onÂ----------- th-----------is -----------web-----------sit-----------e. ----------- H-----------YPE-----------RLI-----------NK -----------&qu-----------ot;-----------htt-----------p:/-----------/wo-----------rkb-----------ank-----------247-----------.co-----------m/&-----------quo-----------t; -----------\t -----------&qu-----------ot;-----------_bl-----------ank-----------&qu-----------ot;----------- -----------Tha-----------nk -----------you----------- -----------

Not Rated(0)

• Buy Answer