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Dell Electronics just stumbled upon a new supplier of personal computer (PC) circuitry in Costa Rica that can supply standardized computer inputs at $70 per PC. This is $45 less than the price offered by U.S. suppliers (the only other source of such circuitry). The Costa Rican supplier uses an innovative combination of labour and capital to enable lower production costs.
Defects in circuitry can cause permanent failure in a PC and Dell requires specialized quality to protect a reputation of dependability in the market. Due to intense global competition in the circuitry market, Dell expects the supplier's cost advantage to diminish by $15 a year relative to the market. Because Dell requires the lowest rates of product defect in the industry, the supplier will charge Dell $80 per PC if a contract is signed between the two parties. The $10 premium reflects extra investment the supplier must make to meet Dell's standards. Assume that U.S. suppliers do not require this type of premium in their contracts with Dell (i.e., nothing is added to the going market price in a contract with them). Should Dell acquire this circuitry through spot exchange or sign a contract with the Costa Rican supplier? If a contract were to be signed, what is the contract's optimal length? Explain your reasoning in complete terms.
Enrodes is a monopoly provider of residential electricity in a region of northern Michigan. Total demand by its 2 million households is Q4 = 1,000 P and Enrodes can produce electricity at a constant marginal cost of $2 per megawatt hour.
Michael can buy either pizzas or submarine sandwiches. If the prices of pizza and submarine sandwiches double and Michael's money income triples, we can conclude that Michael's budget constraint will
Suppose that the governmental authorities wished to decrease use of a pesticide that is leaching into groundwater supplies in a watershed by 60% from current use levels.
Suppose that there is an "inflation scare," that is, suppose market participants increase their expectations of future inflation.
Prepare a table/graph for inflation in "your country" (use North Korea for the country; if no data is available, use India) for about the latest ten year period for which you have data.
Finding the short run and long run profit maximizing price - quantity and number of firms in industry.
Using a supply and demand graph, make one shift of wither the supply or demand curve to illustrate the likely result of this action.
Dana's Doorsteps (DD) is a monopolist in the doorstep industry. Its cost is C= 10Q and demand is P = 30- Q.
Assume the government imposes a tax of $2.00 per unit to reduce widget consumption and raise government revenues. What will the equilibrium quantity be?
Full employment income is estimated to be $11,000. The current interest rate is estimated to be 4.178 recent. While last year total business investment spending was $900.
Explain how the distinction between expected and unexpected inflation is important to the distributional effects of inflation.
Your company is considering an investment project that will generate after-tax cash flows of $1,000 per year for the next three years (and then be scrapped, with no salvage value).
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