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| John is a salesman for the local car dealership. He can divide his 40-hour work week between talking to customers that walk in the door and calling possible prospects. Let W be the number of hours each week he spends on walk-ins, and let P be the number of hours spent on calling prospects. In a typical week, the number of cars John sells depends on the time he spends on these tasks as follows: N(W, P) = 09W – 0.01W2 = 0.5P. John earns a bonus of $1,000 for each car he sells. How should he divide his time between walk-ins and calling prospects? |
John is a salesman for the local car dealership. He
Wilma and Betty must split $10 by playing the ultimatum
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| Wilma and Betty must split $10 by playing the ultimatum game, which works as follows. First, Wilma proposes an integer between 0 and 10 (inclusive), representing the amount she will keep for herself (Betty gets the rest). Second, Betty either accepts or rejects the proposal. If she accepts it, the money will be divided as proposed. If she rejects it, neither will receive anything. Illustrate this game by drawing a tree and solve it by reasoning in reverse (there may be more than one equilibrium). Do you think people would actually play the game this way? Why or why not? |
Read the article by Lori G. Kletzer and Robert E.
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| Read the article by Lori G. Kletzer and Robert E. Litan, “A Prescription to Relieve Worker Anxiety,” Policy Brief 01-2, (Washington, D.C.: Peterson Institute for International Economics), available online at www.iie.com/publications/pb/ pb.cfm?researchid=70, which refers to the U.S. recession of 2000 and 2001. Then answer the following: a. Under the most recent version of Trade Adjustment Assistance (TAA) in the United States that they refer to, how many extra weeks of unemployment insurance are workers eligible for? What two criteria must workers meet to qualify for this extra unemployment insurance? b. Consider the proposal for “wage insurance” that Kletzer and Litan make in their article. What criteria would workers need to qualify for this insurance? What amount of extra income would they receive from the insurance? c. If Kletzer and Litan’s new plan for “wage insurance” had been adopted by the United States, what would have been the budgetary cost in 1999 when unemployment was 4.2%? How does this compare with the amount that is now spent on unemployment insurance? |
The McCauley Company hires a marketing consultant to estimate the
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| The McCauley Company hires a marketing consultant to estimate the demand function for its product. The consultant concludes that this demand function is Q = 100P -3.1I2.3A0.1 where Q is the quantity demanded per capita per month, P is the product’s price (in dollars), I is per capita disposable income (in dollars), and A is the firm’s advertising expenditures (in thousands of dollars). a. What is the price elasticity of demand? b. Will price increases result in increases or decreases in the amount spent on McCauley’s product? c. What is the income elasticity of demand? d. What is the advertising elasticity of demand? e. If the population in the market increases by 10%, what is the effect on the quantity demanded if P, I, and A are held constant? |
In the same apple–computer trade example given in Section 19.5,
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| In the same apple–computer trade example given in Section 19.5, suppose that because of technology transfer, the South becomes just as productive as the North at producing apples: one unit of southern labor can now produce 160 apples instead of 100. (a) Autarky: Redo Table 19.3 to reflect this change. Assume the other parameter values are unchanged. (b) Free trade: Do the same thing for Table 19.4. (c) Discuss the differences: How do the gains from trade change? Who benefits from the improvement in technology in the South? |
Suppose the demand and supply for wheat are described by
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| Suppose the demand and supply for wheat are described by the following equations: QD = 10 — P; Qs = 2 + P, where P is the price in dollars, Q); is quantity demanded in millions of bushels per year, and Qs is quantity supplied in millions of bushels per year. a. Solve for equilibrium price and quantity of wheat. b. Would a government-set price of $5 create a surplus or a shortage of wheat? How much? Is $5 a price ceiling or a price floor? |
A few years ago, a new online insurer appeared. Found
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| A few years ago, a new online insurer appeared. Found at www.ticketfree.org, the insurer offered, for a price, up to $500 of coverage against speeding tickets. a. Who has more valuable information in this potential transaction, the buyer of speeding ticket insurance or the seller? b. Explain why the existence of information asymmetries creates an adverse selection problem in the market for speeding ticket insurance. c. What is likely to happen to the behavior of both faster and slower drivers once they have purchased speeding ticket insurance? What is this kind of problem called? d. Ticketfree.org is no longer in operation. Use your answers to (b) and (c) to explain why. |
business-human-resource-management
You have recently been given the responsibility to update all of
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| You have recently been given the responsibility to update all of the company’s job descriptions to comply with the Fair Labor Standards Act (FLSA) classifications. The company president believes his secretary is an exempt employee and she is not eligible for overtime pay when she works more than 40 hours in a workweek. You need to prepare a memorandum outlining the essential job functions/ duties and giving an opinion about whether the secretary position qualifies for an exempt status classification. To assist you in making this determination, go to www.dol.gov/whd/flsa. Assuming you identify that the secretarial position would not be qualified as exempt, what approach will you take to inform the president of your determination? |
Suppose a profit-maximizing monopolist producing Q units of output faces
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| Suppose a profit-maximizing monopolist producing Q units of output faces the demand curve P = 20 – Q. Its total cost when producing Q units of output is TC = 24 + Q2. The fixed cost is sunk, and the marginal cost curve is MC = 2Q. a) If price discrimination is impossible, how large will the profit be? How large will the producer surplus be? b) Suppose the firm can engage in perfect first-degree price discrimination. How large will the profit be? How large is the producer surplus? c) How much extra surplus does the producer capture when it can engage in first-degree price discrimination instead of charging a uniform price? |
The New York State Electric and Gas Corporation filed a
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| The New York State Electric and Gas filed a request for a 10.7% increase in electric revenues. The reasons given to justify the increase were that the value of the firm’s plant and equipment had increased by $140 million, operating costs had increased, and investors required a higher rate of return. a. Why should an increase in the value of the firm’s plant and equipment result in an increase in the amount of revenue allowed by the Public Service Commission? b. Why should an increase in operating costs have the same effect? c. Why should the attitude of investors regarding what they require as a rate of return be relevant here? |
