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Q. Suppose a bank is faced with two types of borrowers - a high risk borrower that should be charged an interest rate of 9% and a low risk borrower that should be charged an interest rate of 4%. There is a 30% chance of getting a high risk borrower and a 70% chance of getting a low risk one. What is the expected interest rate that will be charged by a bank that cannot exactly distinguish between the two types but knows the probabilities of each type? What would be the result in this market for loans?
Illustrate what is worth analysis and Illustrate what things and conditions are to be kept when doing worth analysis of products and or construction work. Illustrate what are advantages of utilizing yearly worth analysis.
Zelda Manufacturing has are unique product that sells for $15 per unit and marginal cost is $7.50. Conclude Lerner index for Zelda Manufacturing. Does this index indicate market power.
Discuss an industry that would meet the conditions of a perfectly competitive industry and how the individual firms would respond to an increase in the market demand for the product.
Graph the best response functions. Find the Nash Equilibrium of this game. What happens with the levels of law enforcement and crime (in Nash Equilibrium) when the cost of law enforcement c goes up?
Why are trade negotiations usually mercantilist, ie, why does country A agree to reduce its trade barriers in exchange for country B also agreeing to lower trade barriers, when economic theory says that both A and B benefit
What is the effective rate of protection for the automobile industry in country A, if there is a tariff of 25 percent on imported automobiles and a tariff of 50 percent on imported inputs used in this industry.
Using the information on exhibit 2 calculate the consumer price index in the current year.
Calculate the expected utility of each project according to this criterion. (c) Is this individual risk adverse, risk neutral, or risk seeking?
How will this affect the firm’s profit maximizing use of coal and output? d) What is the advantage and the disadvantage of placing a tax on the burning of coal to reduce global warming?
Explain how did mortgage-backed securities spread losses during the mortgage default crisis.
Suppose that a firm's only variable input is labour. When 50 workers are used, average product of labour is 50 and marginal product of labour is 75. Wage rate is $80 and total cost of fixed input is $500. Illustrate what is average variable cost. ..
Barriers to entry help maintain market power and earn positive economic profits. These factors apply to all imperfectly competitive firms. Discuss these barriers are and provide a real-world application of it.
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