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2.1. Consider a fiat money/barter system like that portrayed in this chapter. Suppose the number of goods J is 100. Each search for a trading partner costs an individual 2 units of utility.
a. What is the probability that a given random encounter between individuals of separate islands will result in a successful barter?
b. What are the average lifetime search costs for an individual who relies strictly on barter?
c. What are the average lifetime search costs for an individual who uses money to make exchanges?Now let us consider exchange costs. Suppose it costs 4 units of utility to verify the quality of goods accepted in exchange and 1 unit of utility to verify that money accepted in exchange is not counterfeit.
d. What are the total exchange costs of someone utilizing barter?
e. What are the total exchange costs of someone utilizing money?
Open Economy S = I In an open economy suppose that GDP is $12 trillion. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion and imports are $3 trillion.
A food-products company has recently introduced a new line of fruit pies in six U.S. cities: Atlanta, Baltimore, Chicago, Denver, St. Louis, and Fort Lauderdale. Based on the pie's apparent success, the company is considering a nationwide launch.
b.Determine the cross-price elasticity of demand between good X and good Y, and state whether these two goods are substitutes or complements. c.Determine the outcome elasticity of demand, and state whether good X is a normal or inferior good.
There is also a slim chance the legislature will provide the full funding and bonds don't need to be sold, a 5% chance. There is also a 1% chance that a donor will come forward and put their name on the building and pay 10% of the cost. What is th..
zachary has opened a retirement account that will pay 5 interest each year he plans to deposit 10 of his annual salary
Let MUa=Z=10-x and MUb=Z=21=2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B- that is, x=y=10. How is the..
A perfectly competitive firm has a total cost function TC(Q)=10 million + 5Q + Q2/10,000. Of its total fixed cost of $10 million, $9 million can be avoided if the firm produces an output of zero, but $1 million is completely unavoidable.
The market for college hockey players is characterized by the following supply and demand curves, where Q is the number of athletes and P is the weekly wage in excess of their scholarship payments QD = 1600 - 20P, QS = -900 + 30P
How might protective tariffs reduce both the imports and the exports of the nation that levies tariffs?
investment projects in the economy that yield an expected rate of return of 25 percent or more. But suppose there are $10 billion of investment projects yielding expected returns of between 20 and 25 percent; another $10 billion yielding between 1..
Calculate how much total spending as a percentage of GDP has increased since the 1960s.
Consider the production of Good X. Good X is produced using only labor, which can be supplied by either humans or robots, with the production function given by X=f(H,R)=H + R. Humans and robots are perfect substitutes for each other.
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