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Question 1
a) State the general meaning of elasticity as it applies to economics. Define the price elasticity of demand.
b) A storm destroys half the banana crop. Is this event more likely to hurt banana farmers if the demand for bananas is very elastic or very inelastic? Explain.
c) Define the law of diminishing returns. Why is this law considered a short-run phenomenon?
d) Although managerial economics is based primarily on microeconomics, explain why it is also important for managers to understand macroeconomics
e) Define scarcity and opportunity cost. What role do these two concepts play in the making of management decisions?
Question 2
a) What are the key points in a short-run production function that delineate the three stages of production?
b) Explain the relationship between the law of diminishing returns and the three stages of production.
c) Explain the relationship between a firm’s short-run production and its short-run cost function. (Focus on the marginal product of an input and the marginal cost of production).
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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