Homework Help for Economics

For a monopolistically competitive firm,

A) price is equal to marginal revenue.
B) price is greater than marginal revenue.
C) price is less than marginal revenue.
D) price can be greater than or less than marginal revenue.

“Japanese labor productivity is roughly the same as that of the US in the manufacturing sector, while the US is more productive in the service sector. But most services are nontradable. Some have argued that this poses a problem for the US, because US’s comparative advantage lies in things US cannot sell on world markets. ”

To evaluate this statement, develop a small Ricardian model: Japan has roughly a third of the population of the United States, so set L = 30 and L ∗ = 10. Suppose there are two manufacturing sectors (i.e., cars and electronics), and a non-tradable service sector. Suppose that the technologies have labor productivity of one in all sectors for Japan. Let the US have a labor productivity for manufacturing sectors of one as well, and a productivity of services of 2. Let utility be Cobb-Douglas, with a share of expenditure on cars and electronics of 0.15 each, and a share of expenditure on services of 0.7. Suppose there are extremely small trade costs between countries, which you normally ignore, but in case of indifference between home and foreign sourcing in the absence of trade costs, the good will be bought from home. Trade costs are infinite for services.

1. Solve the model, e.g., derive results for production, consumption, wages, and prices in each country and calculate welfare in each country.

2. Now assume that the US had a labor productivity in services of 1, but a labor productivitity in cars of 2. Again, solve the model, e.g., derive results for production, consumption, wages, and prices in each country and calculate welfare in each country.

3. Use your results from the previous to steps to comment on the statement above.

Suppose that a consumer can purchase apples for $1, and bananas for $0.50. The consumer wishes to eat two pieces of fruit a day. The consumer is willing to spend $10/week on fruit.

a) Draw the consumer’s budget constraint, showing the different combinations of apples and bananas that can be purchased for $10.

b) If that consumer is you, what combination of fruit would you purchase, and why?

This question studies how inflation has varied across time and space in the United States.

A. Speculate as why the cost of living has grown differentially in the New York Metropolitan area relative to the Detroit Metropolitan area.

B. Suppose that you are a twin. And you and your twin graduated from NYU in 1984. Your twin took a job in Detroit and has remained there. And her nominal salary increased with the rate of the CPI for All Urban Consumers. You took a job in Manhattan and your nominal salary increased with the rate or the CPI of All Urban Consumers. Who is better off you or your twin? In a narrow sense? In a broad sense? Why or why not? Please provide an argument for and an argument against.

A tropical country can produce winter coats, but there is no domestic demand for these coats. Would this country gain from free trade in winter coats? How?

In the town of Pleasantville there is a perfectly competitive industry consisting of 160 firms that produce widgets. The short run marginal cost curve for each firm is given by MC = 175 + 40Q. All of the widgets are sold in the town which consists of 200 identical consumers, each which the following demand curve P = 425 - 20Q. Round your answers to one decimal point.

a. What is equilibrium price of widgets for the industry and the total quantity of widgets sold in Pleasantville?

b. What is the price charged by each firm and what quantity of widgets will each firm produce?

c. How much profit will each firm make if Fixed costs are $200 per firm?

d. Could the short run equilibrium determined above also be a long run Equilibrium for the industry? If so, how you do know? If not, what must occur in order for the industry to achieve a long run equilibrium?

How do you find the nominal GDP?

We suggested above that an annually increasing renewal fee would be an efficient means of setting optimal patent life. Similarly, suppose that owners who wanted to restrict future use of their property had to pay a fee for each year that the restriction runs. For example, if my will stipulates that Blackacre should be used exclusively as a residence for 100 years, then I would have to make provision in my will to pay the state for each year that the restriction runs. In effect, the state deducts an annual fee from a bequest for a testator who desires to impose posthumous restrictions on property for a specified number of years. At what level would you set such a fee? Would it be the same for all types of conditions and all types of property? Is such a fee more efficient than the rule against perpetuities?

How can understanding what kind of learner you are help you to determine which type of document would help you understand better: process explanation or instructions?

Please put in own words, only giving credit to the answer that is detailed and not copied and pasted.

The chapter notes that global strategy can change over time for a firm. MTV is highlighted as one example in Exhibit 10.7. Conduct a web search of a firm you know to be operating internationally and determine its current global strategy position. How long has the firm stayed with this approach? Can you find evidence it had a different global strategy earlier?

Suppose there are two firms (firms 1 and 2) producing good X. Firm 1 has a marginal cost of $10 per unit
of X produced, while firm 2 has a marginal cost of $20 per unit of X produced. Suppose the two firms
decide to form a cartel and have the following collusive agreement: each firm will produce q = 30. In this
case, Q = q1 + q2 and that firms always receive the same price P at any given time. (10 marks)
a) What profit will each of the firms receive at the cartel agreement? (2)
b) Does either firm have an incentive to cheat (by increasing output to q = 40)? (2)
c) What is the Nash Equilibrium in this case? (3)
d) Is there anything Firm 2 can do to keep both firms producing according to the cartel agreement? (3)
Hint: Compare the profits Firms 1 and 2 earn in the cartel agreement and the Nash. Think back to the
Coase Theorem we looked at a few weeks ago…

Explain briefly how a contractionary gap OR an expansionary gap is formed (choose one; cite clearly which of the two you are explaining, and don’t just give a definition of each--say why they are formed).

What is a negative externality?

What are short-run and long-run adjustments?

What causes a production possibilities frontier to shift outward?