Tag: Economics – Others

14.
From Figure 2 we see that in the monetary intertemporal model due to the specific shock (e to j or j to e, it does not matter):
A. Money demand is acyclical.
B. Money is neutral.
C. Price level is countercyclical.
Money supply targeting guarantees price stability
Figure 215.
From Figure 2 we infer that in the monetary intertemporal model (from e to j points), monetary authorities that care about price stability should:
A. increase money supply after increases in future total factor productivity.
B. decrease money supply after increases in future total factor productivity.
C. increase money supply after increases in current total factor productivity.
D. decrease money supply after increases in current total factor productivity

[4] Suppose for the State of Missouri currently is $30 million allocated from the a $5 million categorical block grant is issued from the federal government to Missouri for transportation.
Total transportation spending in Missouri must increase to $35 million because categorical grants must be used for the specified purpose.[3]
Federal law requires states to have a balanced budget.[3]
Local governments can file for bankruptcy if they are unable to pay debt service when it is doe, but states cannot.[3]
Businesses are not taxed by local governments except in the rare case where the local government (like New York City) has a corporate income tax.[3]
Ad valorem severance tax collections are more volatile than per-unit severance tax collections.[3]
Severance taxes are intended to compensate residents in the state in which they are levied for the extraction of the state’s natural resources.[3]
A resident of Kansas City, MO, or St. Louis, MO, who earns income only from interest and dividends still must pay the Earnings Tax.[3]

2 Consider the abatement of a pollutant, where A denotes the units of abatement of the pollutant. Suppose that the marginal social benefit of abatement is MSB(A) = 1200 – 2A.
Also, Firm 1’s marginal abatement cost equation is MAC₁(A) = 4A, Firm 2’s marginal abatement cost equation is MAC₂(A) = 2A, and the marginal cost of enforcement and compliance equation is MCE(A) = 200 (i.e., 200 for every level of abatement A).
Illustrate areas by identifying and labeling the vertices of the areas.
On the graph below, illustrate MSB(A). Construct (derive algebraically) and illustrate the overall or total market (industry) marginal abatement cost equation, MAC(A). Construct and illustrate the marginal social cost of abatement equation, MSC(A). Calculate, illustrate, and explain the socially efficient abatement level, A*. Calculate and illustrate the total social benefit of abatement at A*, TSB(A).
Suppose the government imposes a uniform abatement standard policy:

Use the following to answer questions 47-49
Answer the next question(s) on the basis of the following marginal product data for resources a and b. The output of these independent resources sells in a perfectly competitive market at $1 per unit.
Marginal Product Data
Units of Resource
MP of a
MP of b
1
25
40
2
20
36
3
15
32
4
10
24
5
5
20
6
2
16
7
1
8
Assuming the prices of resources a and b are $5 and $8 respectively, answer the following questions.
Refer to the above data. Assuming the prices of resources a and b are $5 and $8 respectively, what is the least costly combination of resources for the firm to employ in producing 192 units of output?
A) 2 of a and 6 of b
B) 6 of a and 2 of b
C) 4 of a and 4 of b
D) 3 of a and 4 of b
Refer to the above data. Assuming the prices of resources a and b are $5 and $8 respectively, what is the profit-maximizing combination of resources?
A) 7 of a and 7 of b
B) 6 of a and 4 of b
C) 5 of a and 7 of b
D) 4 of a and 4 of b
Refer to the above data. When the firm hires the profit-maximizing combination of resources, its economic profit will be:
A) $170
B) $76
C) $145
D) $138

a.
Jackson manages his father’s fruit stand. He takes an accounting of all of the company’s assets, including equipment, tools, financial assets, and inventory. These items are examples of
b.
Abe owns a candy shop and at year-end calculates his revenue minus his explicit costs. The result is his
c.
Hailey decides to buy a pretzel from the cart outside her office. She pays $3.25 in cash for her lunch. The $3.25 is an example of
d.
Annabelle runs a tutoring company. In determining her costs and benefits from the venture, she includes her opportunity costs from choosing to open the tutoring business. She is evaluating the firm’s
e.
Sacha leaves his job as a nuclear engineer to become a train conductor. One day, while riding the rails, he considers the salary he could have earned had he remained an engineer. This is an example of
f.
Ginny works for an investment firm, and, after reviewing the investment decisions her firm made in the last year, she considers other ways the funding could have been used. She is considering the

30. Which of the following statements are TRUE?
a) When a factor or relationship is ordinal it cannot be measured, only ranked.
b) The meaning of utility in economic jargon is all about the usefulness of something
c) Utility in economic jargon is the satisfaction or happiness one derives from consuming a good.
d) Indifference curves represent different levels of happiness which can be ranked as representing more or less happiness (or utility) but not by how much.
e) Indifference curves must be monotonic and non-intersecting
f) Each indifference curve represents a specific level of utility or happiness.
g) A cardinal factor or relationship is one that can be measured.
h) The preferences mapped by Indifference curves are not always Transitive.
i) The three slopes of the Happiness Mountain are (change in U)/(change in quantity of good X): Marginal Utility of good X , (change in U)/(change in quantity of good Y): Marginal Utility of good Y, and (change in Y)/(change in X): slope in the X-Y plane.
j) The Happiness Mountain models the Production Process.

A case study in the chapter describes a phone conversation between the presidents of American Airlines and Braniff Airways. Let’s use game theory to analyze the interaction between the two companies. Suppose that each company can charge either a high price for tickets or a low price. If one company charges \( \$ 300 \), it earns low profits if the other company also charges \( \$ 300 \), and high profits if the other company charges \( \$ 600 \). On the other hand, if the company charges \( \$ 600 \), it earns very low profits if the other company charges \( \$ 300 \) and medium profits if the other company also charges \$600.
Complete the following decision box for this game. American’s profits are on the left in each situation, Braniff’s on the right.
Braniff: High Price
Braniff: Low Price
American: High Price
medium, medium
very low, high
American: Low Price
high, very low
low, low
The Nash equilibrium outcome in this game is for American to set a low price and for Braniff to set a low price.
True or False: Consumers would lose if the two airlines collude to earn higher profits than those given by the Nash equilibrium.
True
False

Suppose that Alex, an economist from a research facility in Washington, and Becky, another economist from an investigative reporting group, are both guests on a popular science podcast. The host of the podcast is facilitating their debate over budget deficits. The following dialogue represents a portion of the transcript of their discussion:
Becky:
Most people recognize that the budget deficit has been rising considerably over the last century. We need to find the best course of action to remedy this situation.
Alex:
I believe that a cut in income tax rates would boost economic growth and raise tax revenue enough to reduce budget deficits.
Becky:
I actually feel that raising the top income tax rate would reduce the budget deficit more effectively.
The disagreement between these economists is most likely due to differences in underlying assumptions. Despite their differences, with which proposition are two economists chosen at random most likely to agree?
Lawyers make up an excessive percentage of elected officials.
Minimum wage laws do more to harm low-skilled workers than help them.

Following a report of higher prices (inflation) in country A (the domestic currency, CA), the balance of payments re-equilibration occurs in which order?
The DC depreciates from the financial account
The foreign interest in DI decreases
Foreign agents increase their interest in domestic investment (DI)
The relative price (RP) of domestic investment (DI) increases (i.e. it takes more FC to buy the DC to invest in the same amount of DI)
The DC depreciates from the current account
Foreign agents decrease their demand of the domestic currency (DC) in the FX market that was used to invest in DI
The relative price (RP) of domestic investment (DI) dereases (i.e. it takes less FC to buy the DC to invest in DI)
Foreign agents increase their demand for the domestic currency (DC) in the FX market to invest in domestic investment (DI)
The DC appreciates from the financial account

Question 3
If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:
Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve.
the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.
the real incomes of Japanese rice consumers would rise, but the real incomes of japanese rice producers would fat.
the price of rice in Japan will fall.
Question 4
Tariffs result in a decrease in consumer surplus because:
the price and the quannty consumed of the protected good increases.
the price and the quantity consumed of the prosected good decreases.
the price of the protected good increases and quanctity consumed decreases.