Homework Help for Economics

Michael Sandel, an acclaimed Harvard Philosopher has claimed that even if markets
may under perfect conditions allocate resources ‘efficiently’ it may not be moral or ethical
always, use Sandel’s works as available online/ journals etc to argue for or against this view.

Please solve

What do you understand by the term “Official cash rate (OCR) in New Zealand, and how does it work as a tool of monetary policy? Briefly explain the answer without the use of a diagram, citing appropriate references, including the webpage of the Reserve Bank of New Zealand (RBNZ).

Consider a variant of the 𝑛-firm version of Cournot’s model in which each firm’s average cost function is U-shaped, rather than being constant. Suppose that there are infinitely many firms, all of which have the same cost function 𝐶. Assume that 𝐶(0) = 0, and that for 𝑞 > 0 the function 𝐶(𝑞)/𝑞 (the average cost function) has a unique minimizer q; denote the minimum of 𝐶(𝑞)/𝑞 by p. (See Figure 1.) Assume that the inverse demand function 𝑃 is decreasing.

Show that in any Nash equilibrium of the game the firms’ total output 𝑄^∗ satisfies

𝑃(𝑄^∗ + 𝑞) ≤ 𝑝 ≤ 𝑃(𝑄^∗).                                                                                (1)

(That is, the price is at least the minimal value p of the average cost, but is close enough to this minimum that increasing the total output of the firms by q would reduce the price to at most p.)

To establish these inequalities, show that if 𝑃(𝑄^∗) < 𝑝 or 𝑃(𝑄^∗ + 𝑞) > 𝑝, then 𝑄^∗ is not the total output of the firms in a Nash equilibrium, because in each case at least one firm can deviate and increase its profit. (You need to identify the firm that can profitably deviate and the deviation it can profitably make.)

Figure 1: The Average Cost Function of Each Firm

If Hamburger Helper is an inferior​ good, then, ceteris paribus​, a decrease in income will lead to?

A. rightward shift of the supply curve of Hamburger Helper.

In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually two years, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the “residual value,” computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, the manufacturer lost an average of $480 on each returned car (the auction price was, on average, $480 less than the residual value).

1. Why was the manufacturer losing money on this program?
2. What should the manufacturer do to stop losing money?

In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually two years, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the “residual value,” computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, the manufacturer lost an average of $480 on each returned car (the auction price was, on average, $480 less than the residual value).

1. Why was the manufacturer losing money on this program?
2. What should the manufacturer do to stop losing money?

A consumer's spending is restricted because of

A) marginal utility.

B) total utility.

C) a budget constraint.

D) utility maximization.

Question 2 (15 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product. Imagine further that you or your consumers face an asymmetric information problem.

a. (5 points) Please explain in detail what this asymmetric information problem, and who is facing it (your firm or your consumers).

b. (10 points) Please explain how you solved this problem.

Question 3 (11 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product.

a. (3 points) Think about your production process. Please explain the technology that you use in the production process.

b. (8 points) How do you think the technology that you use, affects the market structure and/or the demand of your product? Note that this question is NOT about how technology affects your production process, therefore, NOT about productivity, NOT about the cost structure.

Question 2 (15 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product. Imagine further that you or your consumers face an asymmetric information problem.

a. (5 points) Please explain in detail what this asymmetric information problem, and who is facing it (your firm or your consumers).

b. (10 points) Please explain how you solved this problem.

Question 3 (11 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product.

a. (3 points) Think about your production process. Please explain the technology that you use in the production process.

b. (8 points) How do you think the technology that you use, affects the market structure and/or the demand of your product? Note that this question is NOT about how technology affects your production process, therefore, NOT about productivity, NOT about the cost structure.

Question 2 (15 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product. Imagine further that you or your consumers face an asymmetric information problem.

a. (5 points) Please explain in detail what this asymmetric information problem, and who is facing it (your firm or your consumers).

b. (10 points) Please explain how you solved this problem.

Question 2 (15 points)

Imagine that you own your business. It does not need to be the same as in other questions, you are allowed to pick a different firm or product. Imagine further that you or your consumers face an asymmetric information problem.

a. (5 points) Please explain in detail what this asymmetric information problem, and who is facing it (your firm or your consumers).

b. (10 points) Please explain how you solved this problem.

A firm uses two inputs in production: capital and labor. In the short run, the firm cannot adjust the amount of capital it is using, but it can adjust the size of its workforce. What happens to the firm’s average total cost curve, the average variable cost curve, and the marginal cost curve when 
a. the cost of renting capital increases?
b. the cost of hiring labor increases?

A purely competitive firm finds that the market price for its product is $20. It has a fixed cost of $100 and a variable cost of $10 per unit for the first 50 units and then $25 per unit for all successive units. (20)

Does price exceed the average variable cost for the first 50 units?

Firms like Spicy Pizza sell pizza and other products that are differentiated in nature. While numerous pizza chains exist in most locations, the differentiated nature of these firms’ products permits them to charge prices above marginal cost. Given these observations, is the pizza industry most likely a monopoly, perfectly competitive, monopolistically competitive? Justify your answer mentioning the main features of the market competition, use relevant diagrams. If new firms enter into the industry what will happen to Spicy Pizza’s profit calculation? Use diagram.