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When a country's currency depreciates, who benefits the most and who loses the most? Consider businesses, consumers and government. If you say businesses benefit, what type of businesses benefit the most? How does a change in the value of the dollar affect consumers? How does it impact prices and interest rates? Who benefits the most from an appreciating dollar? Also, consider whether it makes a difference if your discussion involves short-run and long-run analysis.

 

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019

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b. private individuals and businesses don�t care about our environment.

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d. the media focuses on negative stories.

e. private individuals and businesses lack incentives to take full account of the consequences of their actions.

4. An externality exists when

a. some of the costs of producing a product affect people unable, within a market system, to influence how much of a product should be produced.

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d. active participation of the United States in both the International Monetary Fund and the World Bank.

e. protection to shipping offered by the U.S. strategic presence in vital commercial areas, such as the Middle East.

18. Which of the following statements about international trade restrictions is true?

a. They typically benefit foreign producers at the expense of domestic consumers.

b. They ensure that countries will specialize in those products which they can produce most efficiently.

c. In the majority of cases they harm consumers.

d. They ensure that only efficient producers survive.

e. They ensure that higher-quality goods are provided at lower prices.

Please circle the right answer. (two points each)

1. If the price of gasoline is $2.0, and the price elasticity of demand is 0.5, how much will a 10 % reduction in the quantity placed on the market increase the price?

a.There will be 22% increase in the price

b.There will be 5% increase in the price

c.There will be 10 % increase in price

d.There will be 20% increase in price

e. None of the above

2.The consumer's budget line

a. indicates the options from which the consumer can choose

b. identifies the optimal basket for the consumer.

c. identifies the tastes of the consumer

d. ranks the baskets of goods in the order the consumer prefers them

e. shows that the consumer prefers more better than less

3. In the long run, a profit-maximizing firm will choose to exit a market when
a. fixed costs exceed sunk costs.
b. average fixed cost is rising.
c. revenue from production is less than total costs.
d. marginal cost exceeds marginal revenue at the current level of production.

4. When a perfectly competitive firm makes a decision to shut down, it is most likely that
a. price is below the minimum of average variable cost.
b. fixed costs exceed variable costs.
c. average fixed costs are rising.
d. marginal cost is above average variable cost.


5. Which of the following will always cause the demand curve for a product to shift to the right?

a. an increase in income whether the good is a compliment or substitute

b. an increase in the price of the compliment

c. an increase in the price of a substitute

d. an increase in technology

e. a decrease in the price of the good


6. Consumers understandably like lower prices, but they should understand there is a great difference between a lower price produced by the government price ceiling and a lower price that comes about through normal market channels, one benefits the consumer, the other may not.

a. This statement is not true, Consumers are benefited when the government lowers the price and the consumers are benefited when businesses lower the price.

b. This is because when the government forces prices down, there is a shortage and reduction in total surplus. Lower prices through markets don't create shortage but they do benefit consumers.

c. this is because the government forces prices down, there is a surplus and reduction in total surplus. Lower prices through markets don't create surpluses but they do benefit consumers

d. This is because when markets force the prices down, there is a shortage and reduction in total surplus. Lower prices through government actions don't create shortages but they do benefit consumers

e. None of the above


7. How does an increase in the price of a variable input affect the AC and the MC curves?

a. MC shifts to the right and AC increases.

b. MC shifts to the left and AC increases

c. MC shifts to the right and AC does not change

d. MC does not change but AC increases

e. none of the above

 

8. Which of the following is a characteristic of a perfectly competitive market?
a. Firms are price setters.
b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.

9. In a perfectly competitive market, the process of entry or exit ends when
a. firms are operating with excess capacity.
b. firms are making zero economic profit.
c. firms experience decreasing marginal revenue.
d. price is equal to marginal cost.

 

10. The relative price of two goods is shown by:

a. the slope of an indifference curve

b. the slope of the budget line

c. the diminishing marginal rate of substitution

d. the slope of the income-consumption curve

e. none of the above

11. When firms have an incentive to exit a competitive market, their exit will

a. drive down market prices.
b. drive down the profits of existing firms in the market.
c. decrease the number of goods supplied in the market.
d. All of the above are correct.

12. If a perfectly competitive firm currently produces where the price is greater than the marginal cost, it

a. will increase its profits by producing more.
b. will increase its profits by producing less.
c. is making positive economic profits.
d. is making negative economic profits.

 

13. Does a consumer well being vary along a demand curve?

a. Yes. When price increases, consumers move to a lower indifference curve.

b. Yes. When price increases, consumers move to a higher indifference curve.

c. No. When price increases, consumers stay on the same indifference curve.

d. No. When price increases, the higher price has no effect on budget constraints or indifference curves.

e. None of the above

 

14. If a competitive firm sets its output such that marginal revenue, marginal cost, and average total cost are equal, economic profit must be:

a. Negative

b. positive

c. Zero

d. Indeterminate from the given information

15. Which of the following is a characteristic of a perfectly competitive market?


a. Firms are price setters.

b. There are few sellers in the market.
c. Firms can exit and enter the market freely.
d. All of the above are correct.



1.(18 points) A public school district is investigating whether to purchase a new school bus to take over the rural-most route in the district. They have two options:

A modern, eco-friendly bus complete with seat belts and air conditioning, will have a first cost of $104,000, cost savings (in terms of fuel efficiency and maintenance costs) of $20,000/year the first year, and decreasing by $800 per year thereafter (so $19,200 the second year, $18,400 the third year, etc…). It’s estimated that the salvage value will be $8,000 at the end of its 12 year life.

A more basic bus will have a first cost $72,000 and cost savings of $12,800 per year. It is estimated that the salvage value will be $5000 at the end of its 12-year life.

Assume that the school district also has the option to stay with their current fleet (so the do nothing option is also available), and the MARR is 5%.

a. Use Benefits to Costs analysis to determine which of the options, if any, would be most economical for the school district.

b.Suppose the modern (more expensive) bus can be purchased for $99,000. How does this affect the Benefits to Costs analysis? Does this change your decision from part “a”, or further reinforce it?

c. At what first cost of the modern (more expensive) bus are the two alternatives in this example equally desirable?

Data for #4 part (c)

Modern

Basic

Cost

X

$70,000

Uniform annual benefit

$20,000 in year 1, decreasing by $800/year thereafter

$14,000 in year 1, decreasing by $500/year thereafter

Salvage value

$8000

$5000

d.In this problem only the economic consequences were evaluated. Do you think this type of decision is only economic, or are there other factors that could/would/should be considered? Briefly discuss…

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