Tag: Economics – Others

Answer w2. Who messures the listion force, end how is at defined?
a. The 45 Bureau of Labor Statistics (RLS) measures the labor force ins Bople over 15 years of age who are employed and those who are actively seeving work. The U.S. Rurea u of Employment (USBE) measures the labor force as people Ower 16 years of age who are employed and those who are actively seebing work.
b. The unemployment rate is defined as
The number of adults drided by the labor force.
the ratio of the number of adults who are working divided by the adult population.
the proportion of the adult population looking for work.
the number of unemployed persons divided by the labor force.
c. If there is an increase in the unemployment rate, the size of the labor force
will not change.
could increase or decrease.
must decrease.
must increase.
d. A positive unemployment rate—more than zero percent—is fully compatible wit employment because at full employment,
unemployment includes frictional unemployment, which is always po because people are transitioning to new jobs
there is usually some unemployment due to the business cycle.
unemployment includes seasonal unemployment, which is usually p. because people are transitioning to new jobs.
◻ the economy is producing at capacity.

HiDD2, Section B, you should answer both questions ( 50% of your grade)Question B-1 ( 6 points, 1//2+1//2+1+1+1+1+1 )
Assume the economy of country X is in short-run equilibrium at a level of output thatexceeds the full-employment level of output.
Draw a correctly labeled graph of the aggregate demand, short-run aggregate supply,and long-run aggregate supply curves, and show each of the following:
The current equilibrium real output and price level, labeled Y_(1) and PL_(1),respectively
The full-employment output, labeled Y_(F)
Assume the government of country X lowers income tax rates. On your graph in part (a),show the short-run effect of the tax cut on equilibrium real output, labeling the newshort-run equilibrium real output Y_(2).
Based on the change in real output on your graph in part (b), explain what will happento:
The natural rate of unemployment
Nominal interest rates
What open-market operation could the central bank take to bring back the economy toa long-run equilibrium? Explain what is/are the effect(s) of the open market operation.
Assume that the central bank has taken the action as you described in part (d). Use ashort-run Phillips curve to show the effects of this policy on unemployment and inflation

N > 1 people are standing at a corner of a street. Suddenly, a car knocks a person down and runs away. Someone needs to call an ambulance to save the victim’s life. Each person wishes that the person be saved. They earn happiness worth 1 unit from the person being saved. However, they all wish that someone else call an ambulance. Calling an ambulance costs 1 2 units. Each person decides simultaneously and privately whether to call an ambulance.
(a) What are the strategies available to the players, i.e., the N bystanders who saw the accident?
(b) What are the pure strategy Nash equilibria of this game?
(c) Let us look at a mixed strategy equilibrium of this game wherein each player calls an ambulance with probability p. What is the players’ expected payoff from calling an ambulance given that the others are following this strategy?
(d) What is the players’ expected payoff from not calling an ambulance given that others are following this strategy?
(e) Equating the two, compute the value of p as a function of N.
(f) Is p increasing or decreasing in N? Plot this in Excel or any other graph plotter available online to see if you cannot do this mathematically.
(g) As N becomes very large, what is the probability that nobody calls an ambulance?

Case Study 15: Price and Output Determination under Perfect CompetitionGreenFields Agriculture Ltd., a Zambian firm, produces organic maize in a market characterized by perfect competition. Numerous small-scale farmers offer identical maize products, and no single farmer can influence the market price. The current market price for organic maize is ZMW 2.50 per kilogram. GreenFields’ cost structure indicates that the marginal cost (MC) of producing maize equals the market price at an output level of 10,000 kilograms. The firm’s average total cost (ATC) at this output level is ZMW 2.00 per kilogram. GreenFields is contemplating whether to expand production, maintain current levels, or exit the market.
REQUIRED:
Explain why GreenFields Agriculture Ltd. is considered a price taker in this market structure.
Determine the profit or loss GreenFields would incur at the current output level.
Should GreenFields increase production beyond 10,000 kilograms? Justify your answer using marginal analysis.
Discuss the long-run equilibrium condition for firms in a perfectly competitive market and its implications for GreenFields.
If the market price falls below the average variable cost, what should GreenFields’ short-run decision be? Explain.

3. Consider two countries: The United States and the United Kingdom. In 2014, growth in both economies, as measured by their GDP growth were similar at 2.3% for the US and 3.0% for the UK. Assume that these growth rates are expected to remain the same for several years to come. Suppose that the current US money growth rate of 6% annually, while the UK chooses to match its GDP growth rate and grow the money supply by 3% annually. Consider the US as the Home country and the UK as the Foreign country. Use the quantity theory to answer the following questions ( L constant) (20 pts.)
What is the expected inflation rate in the US and in the UK?
What is the expected rate of appreciation or depreciation of the British Pound versus the US Dollar on an annual basis?
If the UK desired the British Pound to depreciate versus the US Dollar by 2% annually in order to fuel export growth, what policy decision would it undertake? Name one potential downside of this decision for the UK’s citizens.
Draw the time series diagrams to illustrate the effects of a reduction in the growth rate of money supply in the US from 6% to 3%. Assume that the UK leaves its money growth rate constant. Show the effects on the US interest rate, prices, the real money supply and E$/f.

G.H. Buns — Fact Pattern
G.H. Buns is a shoenaber that has been worling as a sole peoprietor for the punt 2 , park. Buns does not have any partivers in the buniness. He selling hls shoes online and takes special orders for clients.
A very heaveiet man by the name of Drisile lames buys a pair of loufers from G H shoe; there were a fee gaps made in its comitruction. As Driale was walling down the itreet, the shoe became unrweled and caused Driarle fall imto a ditch causing injury. Drizale pald a good surt of money for the shoes and was siperely diwappointed in its construction. Driazle sued negligence in the creation of the thow and asked the court to glve him oompensatory damages for his infurien, wifferine and daruges from his work (Special damuges).
A jury granted Drigale an award of $40009 in compersatory dreages plas attomens fiees. Buns only fivented $1000.
Considerations such as tax lability, Irrited liability shiclids, and ease of formation are relevant.
What kinds of buniness forms do you think that Buns should have formed in his nomarie?
If G.H. Buns had a poriner in the buninesh, what kind of advantages would the hat bees able lo have over a sole proprietornhip?
Please arower the following questions and replr to twe ocher postrics. Thank pou und see rou in the devousion postel.

John wants to buy a certain type of used car. Paula owns this type of used car. Paula claims that her car is in excellent condition. She knows the real condition of her used car. Her car is not in good condition.John does not know automobile mechanics and thus does not know whether Paula’s car is in excellent condition.John is willing to buy a used car in good condition at $21,000 and a used car in less than good condition at $11,000.Paula makes an offer to John for $17,000. Since her car is in less-than-good condition, she would be willing to sell it to John or anybody else for $10,000.Assume the probability of buying a good car in the used car market is 50%, and, therefore, the probability of buying a bad car is 50%.
Is this situation an adverse selection problem or a moral hazard problem or both? Explain your answer. (15 points)
Will John accept Paula’s offer ( $17,000 )? Explain your answer. ( 25 points)
What is the maximum price at which John would buy Paula’s car? Explain your answer. ( 20 points)
Identify two ways to reduce the information asymmetry between John and Paula regarding the real condition of the car. Explain your answer. (15 points)

You produce widgets for sale in a perfectly competitive market at a market price of $10 per widget. Your widgets are manufactured in two plants, one in Massachusetts and the other in Connecticut. Due to changes in the labor market in Connecticut, you are forced to raise wages there, so that marginal costs in that plant increase. In response to this, should you shift production and produce more in your Massachusetts plant?
Part 2
Due to the higher marginal cost of production at the Connecticut plant, you should
Part 3
not change production at either plant.
not shift production to the Massachusetts plant, but you should reduce production in the Connecticut plant until that plant’s marginal cost of production equals price.
not shift production to the Massachusetts plant, but you should increase production in the Connecticut plant until that plant’s marginal cost of production equals marginal revenue.
increase production at the Massachusetts plant until the marginal revenue of the total amount produced is equal to the marginal cost of production there.
shift production to the Massachusetts plant until the marginal cost of production at the two plants is equal.

Figure 1 represents the case of a (an)
a. negative externality.
d. positive externality.
b. pure public good.
e. pure private good.
c. common property resource.
f. open access resource.
Given the MSC, MPC, MPB = MSB, and MEC curves in Figure 1, is zero pollution (i.e., Q = 0) socially efficient?
a. No, zero pollution is NOT socially efficient because MPB(0) > MPC(0).
b. No, zero pollution is NOT socially efficient because MSB(0) > MSC(0).
e. Yes, zero pollution is socially efficient because MEC(0) = MSC(0).
f. Yes, zero pollution is socially efficient because MPB(0) > MPC(0).
In Figure 1, the quantity Q1 is
a. socially inefficient because MSB(Q1) = 59 < 85 = MPC(Q1). b. socially inefficient because MPB(Q1) = 59 < 85 = MPC(Q1). c. socially inefficient because MSB(Q1) = 59 < 144 = MSC(Q1). d. cost effective because MEC(Q1) = 59 = MPB(Q1). e. socially inefficient because MSC(Q1) = 144 > 85 = MPC(Q1).
In Figure 1, the competitive market equilibrium quantity, Qc, is Qc = 372 units and the socially efficient quantity, Qε, is Qε = 1102 units.

7. The long-run supply curve in different cost industries
The following graph shows the market for orange juice. Initially, the market is in a long-run equilibrium. Suppose that a change in tastes resulted in a leftward shift in demand.
On the following graph, shift the demand or supply curve to reflect this change in tastes. Then use the grey point (star symbol) to indicate the new short-run equilibrium.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
In the short run, firms will _____.
In the long run, the supply curve will _____: remain unchanged / shift leftward / shift rightward
On the previous graph, show the shift in the supply curve and then use the purple point (diamond symbol) to indicate the resulting new long-run equilibrium.
Comparing the two long-run equilibria on the graph, you can see that the orange juice market is an example of a low-cost industry / a high-cost industry / an increasing-cost industry / a decreasing-cost industry.
On the previous graph, use the green line (diamond symbols) to plot the long-run market supply curve for orange juice.