Exam 3: Exchange and Markets

If demand is represented by Q_d = 50 - 0.5P + 0.005I where I = $50,000 and supply is represented by Q_s = 100 + 0.4P -2W where wages (W)= $15.00,compute the equilibrium price and quantity.What happens if income falls to I = $40,000?

Suppose Sam and Kevin can produce pens and pencils as shown in the table below. (a)Who has a comparative advantage in producing pens? Who has a comparative advantage in producing pencils? (b)Suppose Sam and Kevin have to each give Flip,a common friend,10 pens and 10 pencils.Is there a trade that will make both of them better off? If a trade that would make both of them better off exists,describe such a trade.If there is no such trade that would make both of them better off,explain why.

What are externalities and why is Ronald Coase an important figure in economics?

Which one of the following does not cause a shift in the demand curve for gasoline?

MACROSOFT's top management is contemplating the development and marketing of three new software products (a word processor,a spreadsheet application,and a web browser).However,it needs to decide whether to launch them separately or as a package.The CEO proposes to delegate the decision to a team formed with representatives from each department.Why does this proposal make economic sense?

Which of the following is an advantage of carrying out economic transactions through firms?

Assume the government introduces a $0.50 per gallon tax on gasoline.Which of the following is true?

Faith and Hope are 30-year-old identical twins.The only difference between them is their credit score.Faith has a proven record of repaying debts.Faith can borrow money at 4.5 percent.Hope has often missed debt payments.Hope can borrow at 8.5 percent. They are considering enrolling in an evening MBA program.They plan on completing the program in two years.Assume the annual tuition is $16,000 for both years.They also anticipate that the nonmonetary costs of obtaining an MBA will be $40,000 per year.The twins anticipate that after graduation in two years,their earnings will be $10,000 per year higher until they retire at age 62.Should Faith enroll in the evening MBA program? Should Hope enroll in the evening MBA program?

Assume the market for hammers is perfectly competitive and the current price is $15.If,at this price,the quantity of hammers demanded is 15,000,while the quantity supplied is 25,000,then

The production and distribution of goods and services in an economy is said to be Pareto-efficient if

What are the goals of an economic system? What is the criterion to measure the effectiveness of a system?

Assume Pollutex Inc.produces paper in its plant located on Lake Ontario,half a mile away from CleanAir Camping.Pollutex employs an obsolete production process,dumping pollutants in the lake.The camp has experienced a steady decline in the number of attendees since Pollutex moved nearby.In particular,the owners forecast that CleanAir Camping will generate a profit of only $50,000 a year in the future,which is $150,000 less than the one generated before Pollutex moved nearby.A cleaner production process is available,which would not require dumping the pollutants in the lake.However,converting the plant would increase yearly costs by $100,000.Is the current situation Pareto efficient?

Currently XYZ's compensation system is such that only top managers receive compensation based on the company's performance,while everybody else in the company receives a fixed salary.Moreover,top managers have full discretion over the launch of new products.Due to the failure of the last three products launched by XYZ,top managers are contemplating modifying the allocation of decision rights concerning new products.What changes would make more economic sense?

A competitive equilibrium price guarantees that

According to Ronald Coase,for a free-market economy to work efficiently,there needs to be

Assume the current market price of candles is such that there is a surplus (i.e.,excess supply).Which of the following best describes the adjustment process in a competitive market?

According to Ronald Coase,allocation of resources in a free-market economy will be efficient as long as

Which of the following is an example of positive externalities?

The following diagram shows a market in equilibrium.If there was a $3.00 price floor,

Price controls on gasoline