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Assignment1-Spring2008

Principles of Macroeconomics (with Xtra!)

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ECMC40 Economics of Organization: ASSIGNMENT 1 Due: Thursday, Feb 14 th , 2008, (Must be submitted on or before 11:00 am) Submissions after 11:00 am on Thursday, February 14 th WILL NOT BE accepted under ANY circumstance. Instructions: You can submit an individual or group assignment. If you submit group assignment, there should be no more than FOUR students in your group and you MUST submit only ONE copy. A title page MUST be attached with your assignment; it MUST include your name(s), student number(s). Staple your assignment (Paper clips are not accepted). A PENALTY OF 10% OF THE TOTAL MARKS WILL BE IMPOSED IF YOU DO NOT HAVE A TITLE PAGE or STAPLE YOUR ASSIGNEMNT. Label your graphs; otherwise, marks will be subtracted. No credit will be given if you do not show your work. Your answer should be structured in a way such that those know little about economics will have no difficulty understanding your argument/answer. Total marks: 60 points. Q1. In the past few years, several American and European firms opened “hypermarts”, enormous stores that sell groceries, household goods, hardware, and other products under one roof (i.e. Costco, Sam’s Club etc). What are the possible economies of scale that might be enjoyed by hypermarts? What are the potential diseconomies of scale? Are there any other important cost issues that might matter for such an outlet? Explain. Q2. Consider the following pairs of situations. In each pair, which situation is more likely to be susceptible to coordination problems? A) Maintenance of corporate landscaping by a gardening company versus maintenance of a football or soccer stadium’s grass turf by a gardening company. B) Design of a toolbox to hold tools versus design of a wafer to hold the wires of a microscopic silicon chip.
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Q3. In many modern industries the following patterns seem to hold: A) Small firms are more likely to outsource production of inputs than are large firms; B) Standard inputs (such as a simple transistor that can be used by several
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