Tag: Economics – Others

1- Give an example case of imperfect information in an economic setting. Explain clearly the reason and consequence of imperfect information in addition to the reason why this situation is counted as imperfect information.
2- What is market failure? Explain in a few sentences.
3- What can be done to decrease or eliminate the effects of imperfect information in economic markets/situations? Give two specific examples.
4- Suppose Firm ABC is selling health insurance for 5 year periods. The insurance covers the costs of medical treatment which happens with probability 0.05 , half of the costs of medical examination which happens with probability 0.15 and 25% of costs of surgery which happens with probability 0.01 in one year. Medical examination costs 10000 dollars, medical treatment costs 20000 dollars and surgery costs 100000 dollars on average.
a. Calculate the expected payment of the company for the next five years.
b. What is the actuarily fair premium per person if Firm ABC has 400 customers?
5- Suppose Firm XYZ is selling car insurance for 1 year. The insurance covers the costs of accident which happens with probability 0.01 and 50% of costs of periodic service examination which happens 4 times in a year on average. An accident costs 30000 dollars and periodic service examination costs 2000 dollars on average.
a. Calculate the expected payment of the company for a year.
b. What is the actuarily fair premium per person if Firm ABC has 500 customers?

A company has identified five independent projects for possible implementation in the upcoming financial year.
The table below shows the initial investment, the life and the present worth for each of the projects:
Project
Initial Investment (Rands)
Project Life (in Years)
PW of Project @ 12% (in Rands)
A
-R150,000
6
R 85,400
B
-R250,000
8
R 123,250
C
-R100,000
6
R 30,000
D
-R250,000
4
R 100
E
-R400,000
12
R 153,500
Given the number of projects, what is the maximum number of mutually exclusive project bundles that can be formed and how many of these bundles will fit within a budget limitation of R250,000? Select the correct answer from the options below:
Question 7Answer
5 mutually exclusive bundles are possible, all will fit in the budget
5 mutually exclusive bundles are possible, but only 4 bundles will fit in the budget
16 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
32 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
64 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
16 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
32 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
64 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
8 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
None of the above

How would each of the following affect the firm’s marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves?
1. A decrease in material costs.
decrease MC, no change AVC, decrease, ATC
decrease MC, decrease AVC, decrease, ATC
increase MC, increase AVC, increase, ATC
no change MC, no change AVC, decreases ATC
no change MC, no change AVC, increases ATC
increase MC, no change AVC, increase, ATC
2. An increase in wages.
decrease MC, no change AVC, decrease, ATC
decrease MC, decrease AVC, decrease, ATC
increase MC, increase AVC, increase, ATC
no change MC, no change AVC, decreases ATC
no change MC, no change AVC, increases ATC
increase MC, no change AVC, increase, ATC
3. The rent that the firm pays on the building that it leases decreases.
decrease MC, no change AVC, decrease, ATC
decrease MC, decrease AVC, decrease, ATC
increase MC, increase AVC, increase, ATC
no change MC, no change AVC, decreases ATC
no change MC, no change AVC, increases ATC
increase MC, no change AVC, increase, ATC
4. The government imposes a fixed amount of tax.
decrease MC, no change AVC, decrease, ATC
decrease MC, decrease AVC, decrease, ATC
increase MC, increase AVC, increase, ATC
no change MC, no change AVC, decreases ATC
no change MC, no change AVC, increases ATC
increase MC, no change AVC, increase, ATC

QUESTION 25
What is found in Arthur Laffer’s model of the macro economy?
A. The trade-off between the MPC and the MPS.
B. The trade-off between inflation and unemployment.
C. The spending multiplier.
D. The tradeoff between leisure and all other economic goods.
E. None of the above is in his model.
QUESTION 26
Suppose goif ball workers in lapan earn 112 per houl, while goif bal workers in the Thilpgines earn 36 per hour on anerage. Aasume these workers in japan are 3 smes more productive then workers in the Philippines. What happers given free trade and rero Eamsaction coss?
RWorkers in the Phig ppines wages ofecrease to 54 per hour.
8. Workers in japan will have their wages fall to 19 per hour.
C. Workers in Japan will have their wages to $4 per houf.
D. Nouhing will change.
C. Workers in the Prilppines wages decrease to $3 per hour.
QUISTION 27
What is not true?
A. Repressed inflation arises when the government accelerates the growth of the money supply and simuluateully impoles maximum price controls.
B. Cetens Paribus, lower money velocity will lead to deflation.
C. Monetary policy can permanently lower the real interest rate.
0. An increased Consumer Price index (CPD) indicates inflation.
E. The dfference between frictional unemployment and cyclical unemployment is that frictional unemployment exsts even in a general equilibrium whereas cyclical unemployment exists only in a recession.

22Mrs. Renfro’s, Inc., sells 25 different relishes in 45 states. Mrs. Renfro’s chipotle corn salsa is so popular that the company cannot make enough to keep its resellers stocked. Its price of $4.50 for a jar seems just right to consumers who savor its hot and spicy taste. The popularity of hot and spicy food is an example of a that Mrs. Renfro’s has taken advantage of to make its product a success.
Multiple Choice
barter factor
demand factor
supply factor
consumer index
macroeconomic environmental factor
23You can go to your nearest Hallmark card store and buy a birthday greeting card for a friend and pay $4.50. Or you can buy a Hallmark card from its new $0.99 line of greeting cards, made with lesser-quality materials but just as sentimental, sold at Barnes & Noble bookstores. This is an example of
Multiple Choice
eBook
mass customization
organizational synergy
one product and multiple market segments
price discrimination
a Tiffany/Walmart strategy

Consider the competitive market for rhenium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. If there were 10 firms in this market, the short-run equilibrium price of rhenium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhenium market.Because you know that competitive firms earn – economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhenium industry in long-run equilibrium.True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.TrueFalse

a.
A downsloping aggregate demand curve can be explained by the interest-rate effect, the real-balances effect, and the foreign purchases effect.
b.
The explanation for a downsloping aggregate demand curve differs from the explanation for a single product because:
A downsloping aggregate demand curve assumes constant money income, so substitution toward a now relatively cheaper product for those whose prices have risen does not occur.
A downsloping aggregate demand curve reflects changes in the overall price level rather than relative prices among individual goods, so the usual single‑product substitution effect is not the primary explanation.
A downsloping single‑product demand curve assumes other prices and income are held constant, so consumers substitute toward a relatively cheaper product when its price falls.
The single‑product demand curve relies on relative price changes among goods, whereas the aggregate demand curve reflects economy‑wide price level changes and their effects on aggregate spending.
c.
The multiplier:
causes an initial change in spending to generate an equal change in saving.
equalizes the change in spending and the change in aggregate demand.
causes an initial change in spending to generate an even larger change in the aggregate demand.
reduces the impact of spending changes on the aggregate demand curve.
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An individual worked for an airline that went out of business because the airline was unable to meet new federal safety standards. While the individual is unemployed, she will be classified as:frictionally unemployed.naturally unemployed.cyclically unemployed.structurally unemployed.
frictionally unemployed.
naturally unemployed.
cyclically unemployed.
structurally unemployed.

The UQ Economics Society is running a sausage sizzle at UQ. They sell sausages for $2 each and cans of soft drink for $1.50 each.
Select the item from the list provided to make the following statements true.
Selling two sausages and a drink together for $5 is an example of __________.
The market will be more __________ if the UQ Economics Society sells two sausages and a drink for $5, with producer surplus decreasing and consumer surplus increasing.
The Economics Society’s __________ would likely be reduced if the UQ Law Society decided to compete in the sausage sizzle market with reduced prices.
Choices:
First degree price discrimination
Second degree price discrimination
Third degree price discrimination
Peak load pricing
Pricing power
Arbitrage
Inefficient
Collusion
Dominant
Dominated
Prisoner’s dilemma
Efficient

6. (10 points) Beatrice’s Birthday Cakes operates in a monopolistically competitive market. The following table presents cost and revenue data for birthday cakes at Beatrice’s.
Finish filling out the table.
What is the profit-maximizing output for Beatrice’s Birthday Cakes?
When maximizing profit, what price does Beatrice charge for a cake?
At the profit-maximizing quantity, what is Beatrice’s total profit?
How many competitors does Beatrice likely have?
Costs
Revenues
Quantity Produced (Units)
Total Cost ($)
Marginal Cost ($)
Quantity Demanded (Units)
Price ($/ unit)
Total Revenue ($)
Marginal Revenue ($)
0
25
–
0
60
–
1
28
1
54
2
32
2
48
3
37
3
46
4
43
4
36
5
50
5
30
6
58
6
24
7
67
7
18
8
77
8
12