Economics of Enterprise Answers

Consider the following autoregressive (AR(2) ) process. Determine if it is stationary.

Yt = 0.37Yt-1+ 0.49Yt-2+ ut

where ut

is a White noise.

. Layla desires to form an investment portfolio by using the following stocks. The four stocks’ returns, and variance-covariance matrix are given as follows.

Stock

Return %

Stock

Return %

Var-Cov

X

Y

Z

V

X

8

X

25

20

-13.5

30

Y

10

Y

20

64

7.2

24

Z

15

Z

-13.5

7.2

81

-18

V

18

V

30

24

-18

100

Assume short selling is allowed.

a) Calculate the expected return and standard deviation of an equally weighted portfolio of the four stocks.

b) What weight combinations will give the minimum standard deviation portfolio? What are the expected return and standard deviation of that portfolio?

c) If Layla desires 16% rate of return, what weight combinations give that? What is the minimum standard deviation of that portfolio?  

Consider the following functional relations between x and y.

Y = (2x² – 6x-20)²

a) at what values of x will the function have zero slope?

b) identify whether those zero slope points are maximum or minimum values of the function.

the importance price elasticity of supply in manufacturing sector and agriculture sector.

Show that the cardinal ordinal approaches have basically the same equilibruim conditions.

In a perfectly competitive and constant cost industry, all firms are identical. If the market demand function is: QD = 600P, a typical firm's cost function is: TC = 9³ - 20q² + 120q.

a. In the long run, what is the firm's equilibrium production decision?

b. In the long run, what is the market equilibrium price and quantity? What is the industry's long-run supply curve?

c. In the long run, how many firms will stay in the industry?

d. If the government decide to impost a $7 tax per unit, what is the new long-run equilibrium market price and quantity?

e. How many firms are producing after the tax?

Analyze the impact of insurance sector on gross domestic product (GDP) and financial help of an economy. Also explain why focusing simply on GDP can be harmful for economic development of a country?

Which competative markets can use price descrimination as a pricing strategy and why? In what ways three degress of price discrimination are different from each other? How can insurance industry use this price in extracting surpluses from consumers?

What is opportunity cost of spending the $100 now? Explain

The cost of producing a certain item consist of P102 per unit for labor and material cost and P54 per

unit for other variable cost. The fixed cost per month amounts to P850,000. The item is sold at P740 each.

a. Determine the break-even quantity per month.

b. How many units must be produced each month in order that the net profit equals the cost?

c. What is the net profit it for a production of 4,000 units per month, in pesos?