Exam 1 - Maximum number of choices allowed is{0 Submitted by ZEHLER IAN(IFZ5002 on 11:06:40 PM Select regrade mode Choose a regrade mode Change points

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Unformatted text preview: Maximum number of choices allowed is {0}. Submitted by ZEHLER, IAN (IFZ5002) on 2/22/2015 11:06:40 PM Select regrade mode Choose a regrade mode Change points or correct answer ● Drop question Give full credit This regrade will affect all users who submitted this Assessment containing this question. Ok Cancel Regrade not available This is a linked Assessment or Question. Only the owner has edit rights. Cancel Regrade not available This content item's settings prohibit regrade on this item. Cancel Points Awarded 39.60 Points Missed 60.40 Percentage 39.6% 1. Given that the current wage is $100 and the price of output (Q) is equal to $3.00, complete the table on your exam sheet. Table for Individual Question Feedback Points Earned: 0.6/5.0 2. Use your table on the exam sheet to answer the following questions: 1. How many workers will the firm hire to maximize profits? 2. What are the maximum profits? 3. Explain why the firm doesn't hire one less worker as well as why the firm doesn't hire one more worker. They would need to hire 3 workers. The maximum profit is $50. From the above table, we ca if an additional unit of labor is employed beyond 3, then the wage rate exceeds the MRP. firm will make losses. On the other hand, if the firm employs one less labour, then MRP i than wage. By increasing one unit of labour further will increase profitability. Maximum profits are $150. Table for Individual Question Feedback Points Earned: 4.0/10.0 3. Now draw the W/MRP Labor Market Diagram associated with the table above on the area indicated on your exam sheet. Draw this as we did in the lectures, being sure to be clear on the areas that represent: • • • • labor costs, MRP (label the curve exactly as we did in lectures and homework), and the profit or loss (with actual numbers) Identify L* (as we did in lectures) Use different colors if at all possible. Label this initial point where the firm maximizes profit as point A. NOTE: You will be adding a point B to this diagram later in this part of the exam. Table for Individual Question Feedback Points Earned: 0.0/6.0 4. Draw a production function diagram in the indicated area on your exam sheet, making sure you label the diagram completely including this initial point as Point A. NOTE: You will be adding a Point B to this diagram later in this part of the exam. Table for Individual Question Feedback Points Earned: 0.0/3.0 5. Draw a supply curve on your exam sheet in the indicated area. Locate Point A consistent with your Points A above. To get a second point on this original supply curve, pretend that prices go up to $4 and map out the change in the profit maximizing output, like we did in the lectures. This will give us our original supply curve. NOTE: You will be adding a point B to this diagram later in this part of the exam. Table for Individual Question Feedback Points Earned: 0.0/3.0 6. Suppose, due to a technological innovation, the marginal product of each worker rises by four. At the same time, due to tight labor markets, the wages that you must pay rise to $120 per day. Additionally, preferences for your product rise and thus prices rise to $4.00. Given these new conditions, on a piece of scrap paper, fill in a table like the following. The current wage is $120 and the price of output (Q) is equal to $4.00. NOTE: You will not need to submit this table, but it will help you answer the following THREE questions. L Q MPL 0 0 -- Exam 1 Table 2 MRP Marginal Profit Total Profit -- -- 0 1 2 3 4 5 6 1. How many workers will you hire to maximize profits? 2. What are the maximum profits? 3. Why did the firm change their behavior given the changes above? Be sure to compare the profit if these changes occurred and the firm did not change their labor input to the profit of the firm when they act as a profit maximizer. They would need to hire 3 workers. The maximum profits would be $300. Though both price a have increased, the increase in the price has increased the marginal product of labor mor wage rate. So the profitability of the firm has increased. This has increased the labor d The firm hires 4 workers, maximum profits are $304. Table for Individual Question Feedback Points Earned: 1.0/5.0 7. 1. Now show these results on the W/MRP Labor Market diagram on your exam sheet labeling the new equilibrium point as Point B. 2. Show these results on your Production Function diagram on your exam sheet being sure to label everything including Point B. 3. Show these results on your Supply diagram on your exam sheet, being sure to label Point B. NOTE: Be sure to label everything completely. Use colors if possible. Table for Individual Question Feedback Points Earned: 0.0/8.0 8. Upload your exam sheet for Part 1 here. Upload File Sheet 1.doc Table for Individual Question Feedback Points Earned: 0.0/0.0 9. Assuming 2011 is the base year, fill out Table 1 on Exam Sheet 2 to answer this question. Assuming 2011 is the base year, what is the price index in 2012 and the inflation rate for the ‘typical college student’ between 2011 and 2012? Price Index 110 and inflation of 28.6% Inflation rate = 9.8% Table for Individual Question Feedback Points Earned: 2.0/5.0 10. Assuming 2012 is the base year, fill out Table 2 on Exam Sheet 2 to answer this question. Assuming 2012 is the base year, what is the price index in 2011 and the inflation rate for the ‘typical college student’ between 2011 and 2012? Price Index 95 and inflation of 8% Inflation = 5.6%. Table for Individual Question Feedback Points Earned: 2.0/5.0 11. Why is your answer in Question 10 above different than your answer in Question 9? Be as specific as possible explaining why the typical college student behaved the way they did. The answer for 10 has a substitution bias the student made. Price of concerts went up 28% price of sporting events fell. Table for Individual Question Feedback Points Earned: 4.0/5.0 12. What is the chain – weighted rate of inflation for the ‘typical college student? The chain weighted rate of inflation would be 9.4% Correct answer is 7.7%. Table for Individual Question Feedback Points Earned: 2.0/5.0 13. Upload your Exam Sheet for Part 2 here. Upload File Table for Individual Question Feedback Points Earned: 0.0/0.0 14. Use the information below for Questions 14 and 15 This information comes from the self sufficiency article that we talked about in the lectures. The numbers represent the cost of a given basket of goods and services. We declare Westmoreland County as the ‘base’ county. • • • • Clarion, $20,500 Sullivan, $18,100 Westmoreland, $24,000 Allegheny, $28,700 What is the price index in Clarion county? In Sullivan county? In Allegheny county? Clarion 85.4 Sullivan 75.4 Allegheny 1.2 Allegheny = 119.6. Table for Individual Question Feedback Points Earned: 3.0/5.0 15. If you made $50,000 per year in Clarion county, how much would you need to make in Allegheny county to have the same purchasing power as you have with $50,000 in Clarion county? You would need to make 60,000 to have the same purchasing power. Correct answer is $70,023. Table for Individual Question Feedback Points Earned: 2.0/5.0 16. Use the information below for Questions 16 and 17. A make believe economy produces the following 3 goods. Good 2011 2011 2012 2012 Quantity Price Quantity Price Apples 50 $1.50 55 $2.00 Oranges 10 $1.50 10 $1.50 Pears 40 $1.00 30 $1.50 Assuming 2011 is the base year, calculate real GDP and the GDP price deflator in 2012. The real GDP is 170 the GDP price deflator is 125 real GDP: 127.5 GDP price deflator: 133.33 Table for Individual Question Feedback Points Earned: 2.0/5.0 17. Assuming 2011 is the base year, calculate the percent change in real GDP and the percent change in the GDP deflator between 2011 and 2012. GDP $130 Percentage change -28% Change in GDP = -1.9%. Deflator change = 33.33%. Table for Individual Question Feedback Points Earned: 2.0/5.0 18. Suppose that in Japan can produce 4 cars in 4 hours and 20 HD TVs in 6 hours. The US can produce 4 cars in 4 hours and 20 TVs in 3 hours. Explain which country has a comparative advantage in producing cars and which country has a comparative advantage in producing TVs, In your answer, be sure to be very specific as to how you identified the comparative advantage in each country and define how one goes about identifying comparative advantage. Japan has comparative advantage in producing cars. The opportunity cost of producing 4 ca 20 TVs = 13.33 TVs. The US, their OC of producing 4 cars is 4/3 X 20 TVs = 26.66 TVs. Sin the comparative advantage in cars. The US has comparative advantage in TVs their OC of producing 20 TVs is 4/3 X 4 cars = 5. Japan's OC of producing 20 TVs is 4/6 X 4 cars = 2.6 cars. The US has comparative advanta Table for Individual Question Feedback Points Earned: 8.0/8.0 19. Assuming that this is what is produced in each country (4 cars and 20 HD TVs), nothing more and nothing less, explain how both countries can benefit through trade. Again, be very specific in terms of identifying the gains from trade and how each country is better as compared to not trading at all. Japan would not benefit from trading cars but the US would because they would save 1 hour regard to car production. The US is producing TVs and spends 4 hours producing 20 TVs and saves 3 hours since they spending 4 + 3 = 7 hours before trade. US saves 3 hours of work from the trade. Both would benefit from trade. Table for Individual Question Feedback Points Earned: 3.0/6.0 20. Suppose the one year nominal interest rate is 3 percent and that the expected inflation is equal to 4 percent. The price index over this one year period went from 214 to 218. Compare the exante real rate of interest to the ex-post real rate of interest. Which real rate of interest would you more likely be willing to spend today and which real rate of interest would you more likely be willing to save and why? Ex- ante real = 3% - 4% = -1% Ex - post real = 3% - (-0.4%) = +2.6% More likely to spend w/ the ex-ante because real rates are expected to be negative. Also ex-post real rate is + 2.6%, So I am more likely to save. Ex-post real = 1.1%. Table for Individual Question Feedback Points Earned: 4.0/6.0 Continue Time expired Your time has expired. The assessment has been automatically submitted. OK ...
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