Macroeconomics Answers

If the store currently charges a price of $50, then increases that price to $60, what happens to total revenue from shoe sales (calculate P * Q before and after the price change)? Repeat the exercise for initial prices being decreased to $40 and $20, respectively. 

1. Omer and Hanna are in an argument where Omer says that in a two sectoral economy the income of one sector is equal to the expenditures of the other sector, where else Hanna believes the otherwise. Using the two-sectoral diagram justify who in your opinion is right and why. (5 marks)

4.   A perfectly competitive firm has total revenue and

total cost curves given by:

            TR = 100Q                           TC = 5,000 + 2Q +

0.2 Q²

a.         Find the profit-maximizing output for

this firm.

b.         What profit does the firm make?

3.  The table below shows the weekly relationship between output and number of workers for a factory with a fixed size of plant. P= 10$: w=100$

Number of Workers

Output

0

  0

1

 50

2

110

3

300

4

450

5

590

6

665

7

700

8

725

9

710

10 

705

a.   Calculate the marginal product of labor.

b.   At what point does diminishing returns set in?

c.   Calculate the average product of labor.

d.  Find out optimum level of variable input usage 

What do you think are the defining characteristics of a science? Does the study of the economy have these characteristics? Do you think macroeconomics should be called a science? Why or why not?

Consider a consumer who consumes only two goods, x and y. His utility over these two goods is given by U(x,y) = xy. The budget constraint of the consumer is given by 3x + 9y = 216, where 3 is the price of good x, 9 is the price of good y and 216 is the total income of the consumer.

(a) Find the optimal quantities of good x and y that the consumer is going to consume. Show the solution in a graph. What level of utility is the consumer going to achieve with this bundle?

(b) Now assume that the price of good x increases to 6. Find the new optimal consumption bundle and show it in a graph

Explain the reasoning for existent of financial institutions.

Consider a consumer whose utility function is given as: U (x, y) = xy, where x and y denote the quantities of goods x and y consumed. The budget constraint faced by the consumer is: 4x + 8y = 120, where 4 is the price of good x, 8 is the price of good y and 120 is the income of the consumer.

a) Find the optimal quantities for x and y consumed by the consumer. Show your solution diagrammatically

b)Following on the answer in a, now assume that the price of good x increases to 8. Find the new quantities consumed by the consumer

How is interest rate determined by classical, Keynesian and hicksian school of thought

In Figure 11-10( Dornbusch Fischer ) the economy can move to full employment by an expansion in either money or the full employment deficit . Which policy leads to E1 and which to E2 ? How would you expect the choice to be made ? Who would most strongly favor moving to E1 ? Versus E2? What policy would correspond to "balanced growth"?