Tag: Economics – Others

You have exams in economics and chemistry coming up and 5 hours available for studying. The following table shows the trade-ofls you face in allocating the time you will spend in studying each subject.
Hours spent and midterm scores for each choice
Choice
Economics (Hours)
Chemistry (Hours)
Economics (Midterm Score)
Chemstry (Midterm Score)
A
5
0
95
71
B
4
1
93
79
C
3
2
90
85
D
2
3
86
90
E
1
4
81
92
F
0
5
74
94
Use the multipoint curve drawing fool to plot a production possibiltes fonter showing the trade-off between your economics grade and chemistry grade. Phot all choices A through F Procesty label this curve. Carefuly follow the instructions above, and only draw the requred objects. Alter ploting the final point of your multipoint curve, press the Esc key or use a long press on the last point fo end the line.
If you are at point C, what is the opportunity cost of increasing your chemstry score by studyng one additional hour for the chemistry exam? fewer points on your economics exam.

a. The Federal Reserve requires commercial banks to have reserves becausereserves are needed for banks to earn money.reserves provide the Fed a means of controlling the money supply.reserves are a claim that commercial banks have against the Federal Reserve Banks.this is the way the Fed monitors bank solvency.
b. Reserves are an asset to commercial banks but a liability to the Federal Reserve Banks becausthese funds are cash belonging to the Federal Reserve Banks, but they are a claim that th against commercial banks.they must be equal to determine net worth.commercial banks and the Federal Reserve Banks do not use the same accounting systerthese funds are cash belonging to commercial banks, but they are a claim that commercia Reserve Banks.
c. Excess reserves are equal toactual reserves required reserves.total reserves – total deposits.actual reserves – required reserves.required reserves – actual reserves.
d. Excess reserves

Answer whether the statements are True or False statements.(10 points) Provide 1-2 sentences explaining your choice.
i. Perfect price discrimination is the ability to charge different buyers theirentire willingness to pay for goods with identical production costs.
Answer:
True. Perfect (first-degree) price discrimination involves charging each buyer their exact willingness to pay, capturing all consumer surplus; identical production costs do not prevent this pricing practice.
ii. Price discrimination is a method of manufacturing to cut costs
Answer:
False. Price discrimination is a pricing strategy used to extract more consumer surplus, not a manufacturing method aimed at reducing production costs.
iii. Negotiating for a better price on a used car is an example of a third degreeprice discrimination.
Answer:
False. Individual negotiation is personalized bargaining (closer to individualized or first-degree pricing), whereas third-degree price discrimination segments markets by identifiable groups with different elasticities.
iv. Perfect price discriminating monopolist produces the same quantity as aperfectly competitive firm with the same costs.
Answer:
True. A perfect price-discriminating (first-degree) monopolist sells units up to the point where price equals marginal cost for each unit, resulting in the socially efficient output equal to the competitive quantity.
v. Advertising and marketing are the same thing.
Answer:
False. Marketing is a broad set of activities including product development, pricing, distribution, and promotion, while advertising is just one component of promotion within marketing.
vi. Increase in transportation cost will increase the retail price and lower thefarm price.
Answer:
True. Higher transportation costs raise the marketing margin and typically increase retail prices while reducing the net price received by producers (farm price) after transport deductions.
vii. Marketing margin is revenue minus expenditures.
Answer:
False. Marketing margin usually refers to the difference between the consumer (retail) price and the producer (farm) price, not a simple accounting of revenue minus expenditures.
viii. Transportation cost is a derived demand shifter.
Answer:
False. Derived demand refers to demand for an input driven by demand for final goods; transportation cost itself is a cost factor and more properly affects margins rather than being classified as a derived demand shifter.
ix. Derived demand is the demand that derived from income, tastes, etc. ofsellers.
Answer:
False. Derived demand is demand for an input that arises from demand for the final product by consumers, not demand driven by sellers’ income or tastes.
3x. Marketing agreements and orders are initiated by industry to help providestable markets
Answer:
True. Marketing agreements and orders (especially in agriculture) are industry-initiated mechanisms intended to stabilize markets, coordinate supply, and support prices.

Devermine which economic principle is illustrated by each scenario.
a. The owner of a snow cone trailer realizes that the denand for snow conss is low during the winter and closes shop until the temporature warms back up near summertime
b. The local river has so much pollution that three-eyed fish are forming. Regulations are therefore enacted to limit the amount of chemicals dumped into the river.
c. At a high-eed restaurant, the restaurant owner has one chef at a meat station, one chef at a wegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, enabling the kitchen to serve more customers in an evening.
d. During the summer, a bumpor crop of oranges in Florida causes a surplus in the supply of oranges nationwide.

Monopolies exist because of burriers to entry, obstacles that prevent odter firms from entering an industry and competing for market share. For each case, indicate which barrier to entry applies.
2. Coca Cola’s vast market share in the soft drink marke:
Legal barrier
Brand loyalty
Network externalities
Control of a rescurceb
b. China’s coernol of the market for rare earths (a group of mincrals ased to produce clectronics):
Exreomics of scale
Control of a resource
Notwork externalities
Brand loyally
Lepal barrier
C. Phizer’s control of the productioe of Viagra:
Costrol of a resource
Leepal burrier
Neturek eaternalities
Brand loyalty
Economies of scale
4. The local utility company that can provide electricity bo the cotire market af a lower menge cont than other peoducers:
Cubinal of a mocure
Exposies of wale
Notwork esternalition
Brend loyally
Legalteriere
e. Iscriboris position in worial evedia
Legal barier
Neterest externalities
Ikenomics of wale
Cosirol of a monese

1. Farmer Brown earned an economic loss (i.e. NEGATIVE economic profits) last year on her egg farm.
a) Draw a two-diagram perfect competition model representing what happened in the egg market and in Farmer Brown’s egg firm last year (label all curves and axes). Be sure to indicate the following in your model: the profit-maximizing level of output for Farmer Brown and the total economic losses earned by Farmer Brown. Fully but succinctly explain your diagrams.
b) Using the two-diagram model from part a), show what will happen in the egg market and in Farmer Brown’s firm this year (based on what happened last year). Explain what you show in the diagrams.
c) Describe how we will know when we’ve reached the long run equilibrium point for a perfectly competitive firm, and WHY this will be the equilibrium point (i.e. why there’s no incentive to move from this point in the long run). Show this long run equilibrium point in your two-diagram model.

2. Individual Problems 18-2
A reserve price is a minimum price set by the auctioneer. If no bidder is willing to pay the reserve price, the item is unsold at a profit of $0 for the auctioneer. If only one bidder values the item at or above the reserve price, that bidder pays the reserve price. An auctioneer faces two bidders, each with a value of either $36 or $96, with both values equally probable. Without a reserve price, the second highest bid will be the price paid by the winning bidder. The following table lists the four possible combinations of bidder values. Each combination is equally likely to occur. On the following table, indicate the price paid by the winning bidder with and without the stated reserve price.
Bidder 1 Value ($) Without a reserve price, the expected price is . With a reserve price of $96, the expected price is . Thus, the expected price is larger the reserve price.

If the Fed lowers the discount rate to 3.5%, what will happen in the federal funds market?
Question 25 options:
a. The savings curve will shift right; The borrowing curve will shift right. The FFR will increase.
b. The savings curve will shift right; The borrowing curve will shift left. The FFR will increase.
c. The savings curve will shift left; The borrowing curve will shift right. The FFR will increase.
d. The savings curve will shift left; The borrowing curve will shift left. The FFR will increase.
e. The savings curve will shift right; The borrowing curve will shift right. The FFR will decrease.
f. The savings curve will shift right; The borrowing curve will shift left. The FFR will decrease.
g. The savings curve will shift left; The borrowing curve will shift right. The FFR will decrease.
h. The savings curve will shift left; The borrowing curve will shift left. The FFR will decrease.
i. Nothing will happen in the Federal Funds Market.

Bllateral monopolySuppose the one bar in a small town wants to hire a lounge singer to increase the bar’s popularity. Because it is the only business demanding this type of labor, it has monopsony power. There is only one good singer in town, so that singer has monopoly power, as well.The following graph depicts the supply and demand for labor in this market, as well as the marginal expense ( ME_(L) ) curve faced by the bar and the marginal revenue (MR) curve faced by the singer.
Complete the following table by choosing the number of hours the bar would demand and the wage it would pay to maximize its profits as amonopsonist. Then choose the number of hours the singer would provide and the wage they would charge as a monopolist.
Preferred Outcome:
Monopsonist (Bar)
Monopollst (Singer)
True or False: In such markets, the prevaliling wage and quantity of labor supplied will always be the average of the hours and wages desired by thetwo partles.TrueFalse

Interest rates have been at 77% for the past four years. The economy goes into a recession causing the Fed chairperson to announce an expansionary monetary policy with an interest rate target of 2.5%. You forecast interest rates for next year to be 77%. This is an example of applying the theory of
fundamental expectations
forecast expectations
rational expectations
adaptive expectations
Part 2
Suppose a change in the way a variable moves such that it is much larger than before. If adaptive expectations accurately represent how people form expectations, then the difference between the variable and its expected value is
zero, on average
less than zero
greater than zero
Part 3
There are many faults associated with adaptive expectations except that
predictions of future values affect expectations.
past data do not help predict future values of variables.
individuals utilize more information that just past data.
people adjust to new information.