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| Managers of the Brennan Company used regression analysis to obtain the following estimate of the demand function for its product: log Q = 2 – 1.2 log P + 1.5 log I where Q is quantity demanded, P is price, and I is consumers’ disposable income. a. Brennan’s president is considering a 5% price reduction. He argues that these results indicate that such action will result in a 6% increase in the number of units sold by the firm. Do you agree? Why or why not? b. The firm’s treasurer calculates that the probability that the t statistic of log P is as large (in absolute value) as it is, given that log P has no real effect on log Q, is about 0.5. He says that the estimate of the price elasticity is unreliable. Do you agree? Why or why not? c. How can the managers obtain a more accurate estimate of the price elasticity of demand? |
Managers of the Brennan Company used regression analysis to obtain
The Following rates are available in the markets: Current spot exchange
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| The Following rates are available in the markets: Current spot exchange rate: $ 1.000/SFr Current 30-day forward exchange rate: $1.010/SFr Annualized interest rate on 30-day dollar-denominated bonds: 12% (1.0% for 30 days) Annualized interest rate on 30-day Swiss franc-denominated bonds: 6% (0.5% for 30 days) a. Is the Swiss franc at a forward premium or discount? b. Should a U.S.-based investor make a covered investment in Swiss franc-denominated 30-day bonds, rather than investing in 30-day dollar-denominated bonds? Explain. c. Because of covered interest arbitrage, what pressures are placed on the various rates? If the only rate that actually changes is the forward exchange rate, to what value will it be driven? |
The Bergen Company and the Gutenberg Company are the only
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| The Bergen Company and the Gutenberg Company are the only two firms that produce and sell a particular kind of machinery. The demand curve for their product is P = 580 – 3Q where P is the price (in dollars) of the product, and Q is the total amount demanded. The total cost function of the Bergen Company is TCB = 410QB where TCB is its total cost (in dollars) and QB is its output. The total cost function of the Gutenberg Company is TCG = 460QG where TCG is its total cost (in dollars) and QG is its output. a. If these two firms collude and they want to maximize their combined profit, how much will the Bergen Company produce? b. How much will the Gutenberg Company produce? c. Will the Gutenberg Company agree to such an arrangement? Why or why not? |
The following figure shows the hypothetical OCA criteria with the
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| a. Which of the countries satisfies the OCA criteria for joining a monetary union? b. Compare Poland and the United Kingdom in terms of the OCA criteria regarding market integration with the Eurozone. Discuss one possible source of differences in integration with the EU in the two countries. c. Compare Poland and the United Kingdom in terms of the OCA criteria regarding symmetric versus asymmetric shocks (relative to the Eurozone). Discuss one possible source of differences in symmetry with the EU in the two countries. d. Suppose that policy makers in both Poland and the United Kingdom care only about being able to use policy in response to shocks. Which is more likely to seek membership in the EMU and why? e. What did the ERM crises reveal about the preferences of the United Kingdom? Why has the United Kingdom sought membership only in the EU without seeking membership in the Eurozone? Consider other costs and benefits not in the diagram, both economic and political. f. What did membership of the Eurozone reveal about the preferences of Greece? Consider other costs and benefits not in the diagram, both economic and political. |
The following data give real GDP, Y, capital, K, and
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| Units and sources are the same as in Table 3.1 on page 57. Assume that the production function is Y = AK0.3IN0.7. a. How much did Canadian total factor productivity grow between 1960 and 1970? Between 1970 and 1980? between 1980 and 1990? b. What happened to the marginal product of labour between 1960 and 1990? Calculate the marginal product numerically as the extra output gained by adding one million workers in each of the two years. (The data for employment, N, is measured in millions of workers, so an increase of one million workers is an increase of 1.0.) |
business-human-resource-management
As the HR Director of a U.S.-based company that is
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| As the HR Director of a U.S.-based company that is looking at global opportunities in China, you have been asked by the company president to prepare an outline for an HR strategic plan as part of the company’s expansion process. You need to develop an HR strategic plan that will integrate the goals, objectives, and strategies of the HR Department with those of the company. The plan also needs to support the objectives of other departments within the company. To get ideas on how to develop an HR strategic plan, go to www.workinfo.com. What other company strategic objectives must the HR strategic plan integrate and support? |
Bob, Carol, and Ted are residents of a tiny commune
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| Bob, Carol, and Ted are residents of a tiny commune in darkest Peru. Bob currently has a utility level (Ub) of 55 utils, Carol’s utility (Uc) is 35 utils, and Ted’s utility (Ut) is 10 utils. Alice, the benevolent ruler of the commune, has discovered a policy that will allow her to redistribute utility between any two people she chooses in a util-to-util transfer. a. If Alice believes the social welfare function is given by W = min(Ub, Uc, Ut), i. Recommend a transfer that will improve social welfare, if any such transfers are possible. ii. What is the highest level of welfare that the commune can achieve, and how must utility be divided among Bob, Carol, and Ted? b. If Alice believes the social welfare function is given by W = Ub + Uc + Ut, i. Recommend a transfer that will improve social welfare, if any such transfers are possible. ii. What is the highest level of welfare that the commune can achieve, and how must utility be divided among Bob, Carol, and Ted? c. If Alice believes the social welfare function is given by W = U b × U c × U t , i. Recommend a transfer that will improve social welfare, if any such transfers are possible. ii. What is the highest level of welfare that the commune can achieve, and how must utility be divided among Bob, Carol, and Ted? |
Suppose short-run inverse demand in a monopolistically competitive market is
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| Suppose short-run inverse demand in a monopolistically competitive market is represented by: p(x) = 18 – 0.2x. Cost is given by: TC(x) = 320 + 2x + 0.05×2. a. (liven these demand and cost conditions, what price, output, and profits result in the short run? b. What will happen as the firm moves from the short to the long run? Suppose entry or exit causes the demand curve to rotate on its p axis. In particular, assume that inverse demand can be described by: p(x) = 18 – n ? x. c. What output and price result in LRMCE? |
Consider a Solow model where the production function no longer
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| Consider a Solow model where the production function no longer exhibits diminishing returns to capital accumulation. This is not particularly realistic, for reasons discussed in Chapter 4. But it is interesting to consider this case nonetheless because of what it tells us about the workings of the Solow model. Assume the production function is now Yt = ?Kt. The rest of the model is unchanged. (a) Draw the Solow diagram in this case. (b) Suppose the economy begins with capital 0, and show how the economy evolves over time in the Solow model. (c) What happens to the growth rate of per capita GDP over time? |
Suppose there are two inputs in the production function, labor
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| Suppose there are two inputs in the production function, labor and capital, and these two inputs are perfect substitutes. The existing technology permits 1 machine to do the work of 3 workers. The firm wants to produce 100 units of output. Suppose the price of capital is $750 per machine per week. What combination of inputs will the firm use if the weekly salary of each worker is $300? What combination of inputs will the firm use if the weekly salary of each worker is $225? What is the elasticity of labor demand as the wage falls from $300 to $225? |
