Macroeconomics Answers

Diverting major share of country's output/income to produce capital goods would help achieve higher productivity and higher standard of living

For a developing economy with lower per capita income and aspire to achieve higher productivity do you think this claim is valid ?

You are the country manager of a firm that produces and markets a generic type of soft 

drink in a competitive market in Ghana. In addition to the large number of generic products 

in your market, you also compete against major brands such as Coca-Cola and Pepsi. 

Suppose that, due to the successful lobbying efforts of sugar producers in Ghana, 

Parliament levies a ȼ1.20 per pound tariff on all imported raw sugar: the primary input for 

your product. In addition, Coke and Pepsi launches an aggressive advertising campaign 

designed to persuade consumers that their branded products are superior to generic soft 

drinks. How will these events impact the market outcomes of generic soft drinks if effect of 

the tariff is larger the effect of advertising of Coke and Pepsi on the generic type of soft 

drink? [Explain with an appropriate graph]

How will these events impact the market outcomes of generic soft drinks if effect of 

the tariff is larger the effect of advertising of Coke and Pepsi on the generic type of soft 

drink? [Explain with an appropriate grap

calculate net value added at factor cost from the following data

depreciation 20

intermediate cost 90

subsidy 5

sales 140

exports 70

change in stock (-) 10

imports of raw materials 30

 In explain how is fiscal policy could be effective in promote economic growth/ in restore from economic recession. o You may discuss about: the components in fiscal policy. (G & T) o How are the components able to increase aggregate demand. o Provide real world example/s in your explanation. o Elaboration is subject to student’s creativity and depth of study on the topic.

 Calculate (1) total real GDP year-on-year growth in Q2 of 2019 (that is, the percentage change from Q2 2018 to Q2 2019) and that of Q2 2020 and (2) year-on-year real growth of non-oil private sector in Q2 2019 as well as Q2 2020. o Chart: Draw a bar chart showing the real growth rates (in (1) and (2) above). In the same chart, add the real growth rate in 2020 of the whole world, Arab World, MENA region, emerging and developing Economies, advanced Economies. Real growth rates of those regions are calculated by IMF

https://www.stats.gov.sa/en/814

https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD

Assume the economy in the United States has the following data:

• Consumption = $12 trillion
• Defense spending = $3 trillion
• Government Purchases = $5 trillion
• Net Exports = -$100 billion
• Imports = $500 billion
• Investment Spending = $2 trillion
• Social Security Payments = $1.5 trillion
• Household Income = $19 trillion
• Exports = $400 billion
• Rate of Unemployment = 7.8%

1. What is the GDP? Show your calculations.

2. Using only the data above, is the economy in a recession?

Part III: 20%

Question One: The following production table provides estimates of the maximum amounts of output possible with different combinations of two input factors, X and Y. (Assume that these are just illustrative points on a spectrum of continuous input combinations.)

a)     Do the two inputs exhibit the characteristics of constant, increasing, or decreasing marginal rates of technical substitution? How do you know?

b)     Assuming that output sells for $3 per unit, complete the following tables:

c) Assume that the quantity of X is fixed at 2 units. If output sells for $3 and the cost of Y is $120 per day, how many units of Y will be employed?

d) Assume that the company is currently producing 162 units of output per day using 1 unit of X and 3 units of Y. The daily cost per unit of X is $120 and that of Y is also $120. Would you recommend a change in the present input combination? Why or why not?

Question two: The total cost equation of a firm is given by the equation where TC is total cost and Q is the level of output.

a. What is the firm’s total fixed cost?

b. What is the equation for the firm’s total variable cost (TVC)?

c. What is the equation for the firm’s average total cost (ATC)?

d. What is the equation for the firm’s marginal cost (MC)?

Question five: Suppose that business travelers and vacationers have the following demand for airline tickets from City X to City Y:

a)     As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the arc elasticity method in your calculations.)

b)     Why might vacationers have a different elasticity from business travelers?

Part II: 20%

Question One: Mathematically show that

Where MR is marginal revenue; ε_p is price elasticity of demand

Question Two: TV is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops marketing the “Eye Watch KRMY-TV” design indicate that

                             Q = 1,500 – 200P

where Q is T-shirt sales and P is price.

A. How many T-shirts could KRMY-TV sell at $4.50 each?

B. What price would KRMY-TV have to charge to sell 900 T-shirts?

C. At what price would T-shirt sales equal zero?

D. How many T-shirts could be given away?

E. Calculate the point price elasticity of demand at a price of $5.

Question Three: Silkwood Enterprises specializes in gardening supplies. The demand for its new brand of fertilizer, Meadow Muffins, is given by the equation Q = 120 - 4P.

a. Silkwood is currently charging $10 for a pound of Meadow Muffins. At this price, what is the price elasticity of demand for Meadow Muffins?

b. At a price of $10, what is Silkwood’s marginal revenue?

c. What price should Silkwood charge if it wishes to maximize its total revenue?

d. At the total revenue maximizing price, what is the price elasticity of demand for Meadow Muffins?

Question three: Characterize each of the following statements as true or false, and

explain your answer.

a)     If marginal revenue is less than average revenue, the demand curve will be downward sloping.

b)    Profits will be maximized when total revenue equals total cost.

c)     Marginal cost must be falling for average cost to decline as output expands.

d)     Marginal profit is the difference between marginal revenue and marginal cost and will always equal zero at the profit-maximizing activity level.

Question Four: The market for pizza has the following demand and supply schedules:

a)     Graph the demand and supply curves. What are the equilibrium price and quantity in this market?

b)     If the actual price in this market were above the equilibrium price, what would drive the market toward the equilibrium?

c)     If the actual price in this market were below the equilibrium price, what would drive the market toward the equilibrium?