week 8 final exam study guide

TCO A) Suppose you are hired to manage a small
manufacturing facility that produces Widgets.
(a.) You know from data collected on the Widget
Market that market demand has recently decreased and market supply has recently
increased. As manager of the facility, what decisions should you make regarding
production levels and pricing for your Widget facility?Remember that supply and demand are about the
market supply and market demand, which is bigger than your own company. You are being given data on supply and demand
for the whole market, and are being asked what effect that has on you as a
small part of that market. (b.) Now, suppose that following the supply and
demand changes in (a), a substitute good goes down in price, and your costs of
production decrease. What new decisions
will you make regarding production levels and pricing for your Widget
facility? (TCO B)
Here is some data on the demand for marshmallows:Price Quantity$10 1100$ 8 1300$ 6 1700$ 4 2300$ 2 3100(a.) Is demand elastic or inelastic in the $6-$8
price range? How do you know?(b.) If the table represents the demand faced by a
monopoly firm, then what is that firm’s marginal revenue as it increases output
from 1700 units to 2300 units? Show all work.TCO C) You
have been hired to manage a small manufacturing facility which has cost and
production data given in the table below.
Total TotalWorkers
Labor Cost Output Revenue 1 $500 100 $700 2 1000 280 1150 3 1500 440 1440 4 2000 540 1570 5 2500 600 1670 6 3000 630 1710 7 3500 640 1730(a.) What is the marginal product of the second
worker? (b.) What is the marginal revenue product of the
fourth worker? (c.) What is the marginal cost of the first
worker? (d.) Based on your knowledge of marginal analysis,
how many workers should you hire? Explain you answer. TCO C)
Answer the next questions on the basis of the following cost data for a
firm in pure competition: OUTPUT —— TFC ———- TVC 0 $100.00 0.00
1 100.00 70.00 2 100.00 120.00 3 100.00 150.00 4 100.00 220.00 5 100.00 300.00 6 100.00 390.00(a.) Refer to the above data. If the product price is $75, at its optimal
output, will the firm realize an economic profit, break even, or incur an
economic loss? How much will the profit
or loss be? Show all calculations. (b.) Refer to the above data. If the product price is $100, at its optimal
output, will the firm realize an economic profit, break even, or incur an
economic loss? How much will the profit
or loss be? Show all calculations. (TCO D) A
software producer has fixed costs of $18,000 per month and her Total Variable
Costs (TVC) as a function of output Q are given below: Q TVC Price1,000
$15,000 $25
2,000 20,000 24 3,000 30,000 23 4,000 50,000 22 5,000 80,000 20 (a.) If software can only be produced in the
quantities above, what should be the production level if the producer operates
in a monopolistic competitive market where the price of software at each
possible quantity is also listed above? Why? (Show all work). (b.) What should be the production level if fixed
costs rose to $48,000 per month? Explain.(TCO F) (a.) Suppose nominal GDP in 1999 was $100 billion
and in 2001 it was $260 billion. The
general price index in 1999 was 100, and in 2001 it was 180. Between 1999 and 2001, the real GDP rose by
what percent? (b.) Use the following scenario to answer
questions (b1) and (b2).In a given year in the United States, the total
number of residents is 230 million, the number of residents under the age of 16
is 38 million, the number of institutionalized adults is 15 million, the number
of adults who are not looking for work is 27 million, and the number of
unemployed is 12 million.(b1.)
Refer to the data in the above Scenario.
What is the size of the labor force in the United States for the given
year? (b2.)
Refer to the data in the above Scenario.
What is the unemployment rate in the United States for the given
year? (TCO G and
H) (a.) What are the arguments for and against the
use of fiscal policy to fight inflation, lower unemployment, and raise GDP
(Keynesian and Monetarist)? (b.) Any change in the economy’s total
expenditures would be expected to translate into a change in GDP that was
larger than the initial change in spending. This phenomenon is known as the
multiplier effect. Explain how the multiplier effect works. (c.) You are told that 80 cents out of every extra
dollar pumped into the economy goes toward consumption (as opposed to saving).
Estimate the GDP impact of a positive change in government spending that equals
$10 billion. (TCO
G) (a.) Third National Bank is fully loaned up with
reserves of $20,000 and demand deposits equal to $100,000. The reserve ratio is
20%. Households deposit $5,000 in currency into the bank. How much excess
reserves does the bank now have, and what is the maximum amount of new money
that can be created in the banking system as a result of this deposit? Show all work. (b.) What is the discount rate in the banking
system, and explain how the Fed manipulates this rate in order to achieve
macroeconomic objectives. TCO E and I)
Let the exchange rate be defined as the number of dollars per British
pound. Assume there is a decrease in
U.S. interest rates relative to that of Britain.(a.) Would this event cause the demand for the
dollar to increase or decrease relative to the demand for the pound? Why? (b.) Has the dollar appreciated or depreciated in
value relative to the pound? (c.) Does this change in the value of the dollar
make imports cheaper or more expensive for Americans? Are American exports cheaper or more
expensive for importers of U.S. goods in Great Britain? Illustrate by showing the price of a U.S.
cell phone in Britain, before and after the change in the exchange rate. (d.) If you had a business exporting goods to
Britain, and U.S. interest rates fell as they have in this example, would you
plan to expand production or cut back?
Why?