Ch 17 revised 2005

Ch 17 revised 2005 - CHAPTER 17 MACROECONOMIC INDUSTRY...

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7. a. The robotics process entails higher fixed costs and lower variable (labor) costs. Therefore, this firm will perform better in a boom and worse in a recession. For example, costs will rise less rapidly than revenue when sales volume expands during a boom. b. Because its profits are more sensitive to the business cycle, the robotics firm will have the higher beta. 8. a. Housing construction (cyclical but interest-rate sensitive): (iii) Healthy expansion b. Health care (a non-cyclical industry): (i) Deep recession c. Gold mining (counter-cyclical): (iv) Stagflation d. Steel production (cyclical industry) (ii) Superheated economy 9. a. Oil well equipment: Book answer: Relative decline (Environmental pressures, decline in easily-developed new oil fields) Note: Actually, oil demand is not decreasing and it may require more equipment, not less to extract the same amount of oil per year. b.
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Ch 17 revised 2005 - CHAPTER 17 MACROECONOMIC INDUSTRY...

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