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Question 1:
a. Draw a figure depicting market equilibrium in the ice-cream market. Label the figure properly. Briefly explain the figure.
b. Draw a new figure depicting the following situation: The weather is suddenly unseasonably hot and at the same time the wage of ice-cream salespeople increases. Explain your figure, and report on your new equilibrium price and quantity.
Question 2:
Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term.
a) A slowdown in China's economic growth due to the sub-prime crisis in the US.
b) Union wage settlements push the wage rate up.
c) An increase in consumer confidence.
If the perfectly competitive firm produces the output at which its marginal cost equals market price, it receives no profit (or a very tiny one).
Discuss the pricing policy of price discrimination. Provide the economic reasoning for movie theaters, airlines, and many other businesses to charge customers different prices based on time of the day, age, and purchase dates. Why?
Which player is likely to have higher bargaining power: a large, established company shopping around for a new parts supplier.
suppose the recipient of a kidney transplant has stated that she would prefer 5 years of perfect health to the 10 years
1. in a market system well-defined property rights are important because theyreduce unnecessary investment. limit
Draw a graph illustrating this excise tax. On your graph label the areas that correspond to consumer tax incidence (CTI), Who bears a greater economic burden when this excise tax is imposed? Explain your answer
is stability in the general level of prices through time important? why or why not? should price stability be the goal
Suppose there are 100 workers in the labor market who differ in their innate productivity. Worker I has a value of marginal product equal to $1 per hour.
Menu analysis is typically associated with commercial foodservice operators who charge individual selling prices for their menu items.
Explain how the moves towards smaller deficits and eventually to budget surpluses and fiscal consolidation could effect: (i) Government debt levels (ii) Interest rates
Discuss how the development of the Internet has changed the market structure in which companies operate. Remember that, for purposes of this class, we are assuming most firms can be categorized as being in perfect competition, monopolistic competitio..
Assume that bank deposits (D) are $3,200 billion, the required reserve ratio is 10%, and currency in circulation is $400 billion. What can the Fed do (in terms of open market operations) to lower the money supply by $100 billion? Explain. (Note assum..
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