Macroeconomics Answers

The global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments.

1. If PFIZER is the sole vaccine provider given the following information, answer the questions below:                                                                                                (3 Marks)

Output

Price/Unit

Total Cost

1

5500

1000

2

5000

1200

3

4500

1500

4

4000

2500

5

3500

4000

6

3000

5700

7

2500

7500

8

2000

9400

9

1500

11400

10

1000

13500

1. Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well.                                                                                 

1. Assume if many firms enter into the business of providing vaccine determine:  (2 Marks)

1. How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER is forced to operate in? Also, illustrate the same using the two-dimensional labeled diagram.

1. Assume the number of employed people in Pakistan is 22.5 million in 2020. The number of unemployed people during 2020 in Pakistan is 6 million, and the labor force participation rate is 60 percent.                                                            (1.5 Marks)

i.                   What is unemployment rate, size of the labor force and working age-population in the year of 2020 in Pakistan?

1. In each of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and justify your answer.                                           (2 Marks)

i.    The price of imported capital goods used in the production of sugar has increased.

ii.  The price of Tapal tea has increased.

1. Analyze and explain the effect of the minimum wage law on the unemployment rate. Explain your answer by using graph.                                                             (1.5 Marks)

The Government of Bangladesh opted for expansionary fiscal policy to fight economic depression. Identify the type of inflation it is expected to create and its impact on the wages. Illustrate the process on the graph.  

COVID-19 all around the world has restricted the economic activity. To stop the spread of the virus Pakistan like many other countries adopted the policy of smart lockdown. Shutting down of the industry has created adverse supply shock in the economy. While, the slowdown in business and economic activities the country is in the recessionary phase of the business cycle as the GDP growth for the FY 2020-21 is expected to be -0.2 accompanied by high unemployment and poverty rate.

a.      Reflecting on the above situation justify whether the State Bank of Pakistan should opt for easy or tight monetary policy as a stabilization policy. Also illustrate it graphically.  

a.      Reflecting on the above situation justify whether the Government of Pakistan should opt for expansionary or contractionary fiscal policy as a stabilization policy. Also illustrate it graphically.                                                                            

What happens to Pakistan’s economy (output and price) in the long run? Explain your   answers using graphs. 

In each of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and justify your answer.                      (2 Marks)

The price of imported capital goods used in the production of sugar has increased.

The price of Tapal tea has increased.

Analyze and explain the effect of the minimum wage law on the unemployment rate.

Explain your answer by using graph.

COVID-19 all around the world has restricted the economic activity. To stop the spread of the virus Pakistan like many other countries adopted the policy of smart lockdown. Shutting down of the industry has created adverse supply shock in the economy. While, the slowdown in business and economic activities the country is in the recessionary phase of the business cycle as the GDP growth for the FY 2020-21 is expected to be -0.2 accompanied by high unemployment and poverty rate.

a.     Reflecting on the above situation justify whether the State Bank of Pakistan should opt for easy or tight monetary policy as a stabilization policy. Also illustrate it graphically. 

Reflecting on the above situation justify whether the Government of Pakistan should opt for expansionary or contractionary fiscal policy as a stabilization policy. Also illustrate it graphically.    

If the price of beef rises and consumers buy more chicken and less beef, what kind of bias does the

consumer price index exhibit?

You have been hired by Kia as manager for its Pakistan operations. Assume following is the short￾run production function at their assembly plant outside Karachi:

Q = 10L2 – 0.5 L3

 where L is variable input labor, Q is output of Cars assembled

a. Find the ranges of the three stages of production.

c. At the end of the year it is expected that output will double with purchase ofnew 

equipment and machinery. The production function is estimated to be

Q = 60L.30K.70 

 where L is labor and K is capital.

Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2, 

do you observe increasing, decreasing or constant returns to scale?

You have been hired by Kia as manager for its Pakistan operations. Assume following is the short￾run production function at their assembly plant outside Karachi:

Q = 10L2 – 0.5 L3

 where L is variable input labor, Q is output of Cars assembled

b. Demonstrate the relationship between Total Production, Marginal Product and 

AverageProduct in a hypothetical graph and clearly label the three stages as per the 

values of Lyou observed in