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The own price elasticity of demand for a pack of cigarettes is estimated to be -.4. Current price and consumption are $4.00 and 2 million units per year. Assuming a linear demand relationship determine the demand equation for cigarettes. Show all your calculations.
The production function for a firm is given by
Q = L+K+LK where Q denotes output; Land K labour and capital inputs. Wage rate and rental rate are given by w and r respectively.
(a) Show whether or not the above production function exhibits diminishing marginal productivity of labour.
(b) Determine the nature of the Return to Scale as exhibited by the above production function
(c) Using the Lagrangean Multiplier method, calculate the least cost combinations of labour and capital and the resulting long run total cost function for the above production function. Explain the economic significance of the Lagrangean Multiplier and calculate its value.
(d) Using Excel- Solver verify your answer to (d) above.
Why might it be difficult for the Fed to formally adopt inflation targeting? Would inflation targeting be a good policy for the Fed in the present economic environment
In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?
Describe the present economic crisis situation in Europe. Why has it been so difficult for the Europeans to find a solution to this problem? Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..
Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.
Question based on Derive and compare demand curve, Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?
Problem based on Utility Function - Problem, Answer and explain the following using a diagram which is completely labeled.
Question based on Laffer Curve : Tax Rate and Tax Revenue, Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?
Problem - Income Elasticity of Demand, Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5
Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."
Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.
Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?
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