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The following table shows the production possibilities of two countries in making cars and airplanes:
Hours needed to make one:
Amount produced in 2400 hours:
Car
Airplanes
Cars
Airplanes
Japan
30
150
80
16
United States
50
200
48
12
a. What is the opportunity cost of a car in Japan? What is the opportunity cost of an airplane in Japan? (2)
b. What is the opportunity cost of a car in USA? What is the opportunity cost of an airplane in USA? (2)
c. By looking at the table, say which city has an absolute advantage in both the goods? Why? (2)
Japan has a comparative advantage in which good and USA has a comparative advantage in which of the two goods? Why?
assume a pfizer has a monopoly in the antidepressants and pfizer cannot price discriminate Use a graph to illustrate the market price of Zoloft sold
Second question
2.consider a lottery with two equally likely outcomes ,$25 and $144,with associated utility function of individuals A,Ua(m)=root of 100m and individual B,Ub(m)=5m square
A.determine expected utility and utility of expect ed value of the lottery for each individual ?
B.define and compare certainty equivalent of individual A and B ?
C.compare risk premium of individual A and B ? why risk premium of individual A is higher ?
D.Compare and interpret the absolute risk aversion ,rA(m) of the two persons ?
3).consider a farmer in a rural village and a business man in an urban area that adopt various risk reduction strategies in Ethiopia .Assume also that most farmers in Ethiopia do not insure for crop and livestock failure and businessmen also hardly insured against property loss.
A) suggest at least two strategies adopted to reduce risk by each agent ?
B) explain concisely how each strategy can reduce risk by agents ?
1 a farmer faced with the choice of agricultural project A or B.in project A (crop production project ) and project B(dairy farming project ),the outcomes and the probabilities of out comes are as follows ፡
Project A
.10 percent chance of earning the profit of birr 16 million .
.80 percent chance of earning the profit of birr 9 million .
.10 percent chance of earning nothing .
Project B
.40% chance of earning the profit of birr 16 million .
. 30% chance of earning the profit of birr 8 million
.30% chance of earning nothing .
A.what are the expected values of these two projects .
B.which project should you recommend to the farmer and why ?
C.if the utility function of the farmer is u(w)=root of wealth ,where w is wealth of the farmer and which project should the farmer choose and why ?
A sample of 20 observations corresponding to the regression model
Y i =α + βX i + U i gave the following data.
∑y = 21.9
∑x = 186.2
∑ (x− ¯ x)(y− ¯ y) = 106.2
∑ (y− ¯ y) 2= 86.9
∑ (x − ¯ x) 2= 215.4
(a) Estimate α and β
(b) Calculate the variance of our estimates
Suppose a small country produces only food and clothing. An earthquake destroys many of the clothing factories, but the ability to produce food is unaffected.
A fall in price of from 1 shs 0.50 per bushel to 9.20 per bushel, the quantity of the demand from 18800 to 21200 per bushells. What is the price elasticity of demand?
A new factory in a small town has an annual payroll of $6 million. It is expected that 60% of this money will be spent in the town by factory personnel. The people in the town who receive this money are expected to spend 60% of what they receive in the town, and so on. What is the total of all this spending, called the total economic impact of the factory, on the town each year?
1) Consider a consumer with a utility function U (x, y) =X2 + Y2, the consumer intends to spend birr 80 on the two goods and price of good X and price of good Y are birr 2 and birr 4, respectively
A. Calculate the optimum consumers consumption amount of X and Y
B. Find the maximum utility that consumer obtain from consuming the two goods?
C. Calculate MRSxy at equilibrium, and interpret your result
Suppose market of a good x can be illustrated by following two equations.
Deman P= 82-0.07Q
Supply P= 14+0.09Q
a) Calculate the equilibrium and quantity in the market.
b) Suppose a tax of $3 is imposed on the supplier of this market. Calculate the quantity after tax, consumer's price, producer's price and government revenue.
