f07 ec51 practice problems for final exam

f07 ec51 practice problems for final exam - A GRAB BAG OF...

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Economics 51D 16 November 2007 A GRAB BAG OF PRACTICE PROBLEMS 1. In the January 16 th Wall Street Journal, breakingviews.com wrote “Microprocessors, cellphones, software and TVs seemingly have little in common except their economics. To get started, companies invest huge sums in research and development and building out plants. But the marginal cost of producing an extra phone, chip, or TV is vanishingly small.” This quote refers to the fact that, over the past several decades, the marginal cost of computer chips has continued to decline as technology continued to advance. During the past 15 years, there was a huge wave of computerization in business after the PC had finally become commercially useful, thanks to improvements in chips and especially in software for networking. But now, as the January 23 Wall Street Journal reports, “Many companies are finding that they have enough software and hardware to run their businesses,” adding that the growth in spending on computers will slow to the rate of overall economic growth. Show and explain, using one of the models from the course, how the 90s were very good years to be in the computer chip business, and the 00s are expected to be awful, even though both periods face a similar decline in the marginal cost of computer chips. 2. One of the front-page articles on the Wall Street Journal on Friday, January 19 was “High Prices Prod Developed World to Curb Oil Use.” The main point of the article, as the title suggests, is that the high oil prices of the past several years have caused a fall in demand for oil and its distilled products. One quote from the article is the following: “The tipping point where oil prices begin to erode demand was reached last summer, several industry analysts said.” It was followed by the quote “The fall in oil use by the industrialized world is a sign that the
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This note was uploaded on 03/31/2009 for the course ECON 5161 taught by Professor Fullenkampf during the Fall '07 term at Duke.

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f07 ec51 practice problems for final exam - A GRAB BAG OF...

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