Other Economics Answers

Which of the following occurs in the long-run equilibrium under perfect competition?

Question 2 options:

Firms make economic profit

Price exceeds marginal revenue

Average cost equals marginal cost

Firms makes zero accounting profit but negative economic profit

A sales representative for a struggling computer supply firm has a chance to close a multimillion dollar deal for an office system to be installed over a two year period. The machines for the first delivery are in the company’s warehouse, but the remainder would have to be ordered from the manufacturer. Because the manufacturer is having difficulty meeting the heavy demand for the popular model, the sales representative is not sure that subsequent deliveries can be made on time. Any delay in converting to the new system would be costly to the customer; however the blame could be placed on the manufacturer. Should the sales representative close the deal without advising the customer of the delivery problem? Discuss the pros and cons of the decision the sales representative chooses to take.

3 b. You have studied Business Ethics in a structured manner in this program. Has it helped you with tools to better manage your decision making process as a business person? Explain in your own words

Futuristic was a newly setup firm in 2019. It is in the business of providing artwork. However, being in the business of standard art objects (non-essential items), it did not do well once it was hit by COVID-19. It has a selling price of ₹2,500 per piece and a variable cost of ₹1,000 per piece. It incurs an annual fixed cost of ₹30,00,000. a. The manager of the business wishes to know-  the number of art pieces they must sell to be at the break-even point  the contribution margin whether the firm is earning a profit or incurring a loss by selling 2,100 art pieces

Q.1(a) Suppose investors prefer one-year bonds to two-year bonds and will

purchase a two-year bond only if they expect to receive an additional 2% over

the returns from holding one-year bonds. Currently, one-year bonds yield 6%,

but investors expect the yield to fall to 2% next year.

(i) Which of the three models of term structure is relevant in this case?

(ii) What is the yield on a two-year bond?

(iii) Is the yield curve flat, downward sloping or upward sloping? Explain.

(b) Write a short note on the NPA problem in the Indian Banking System?

Suppose you express the Cobb–Douglas model given in Eq. (7.9.1) as follows:

Yi = β1Xβ2

2i Xβ3

3i ui

If you take the log-transform of this model, you will have ln ui as the disturbance

term on the right-hand side.

a. What probabilistic assumptions do you have to make about ln ui to be able to

apply the classical normal linear regression model (CNLRM)? How would you

test this with the data given in Table 7.3?

b. Do the same assumptions apply to ui ? Why or why not?

Consider the Cobb–Douglas production function

Y = β1Lβ2Kβ3 (1)

where Y = output, L = labor input, and K = capital input. Dividing (1) through by

K, we get

(Y/K) = β1(L/K)β2Kβ2+β3−1 (2)

Taking the natural log of (2) and adding the error term, we obtain

ln (Y/K) = β0 + β2 ln (L/K) + (β2 + β3 − 1) ln K + ui

where β0 = ln β1.

a. Suppose you had data to run the regression (3). How would you test the hypothe-

sis that there are constant returns to scale, i.e., (β2 + β3) = 1?

b. If there are constant returns to scale, how would you interpret regression (3)?

c. Does it make any difference whether we divide (1) by L rather than by K?

Given that frozen yogurt and ice cream are substitutes, how does a shift in preferences in favour of yogurt affect the equilibrium price and quantity of ice cream?

If people begin to favour science fiction novels to a greater degree than previously, what is the effect on the equilibrium price and quantity of novels?

The demand curve is QD=500-1/2P

Find the point at which point elasticity is equal to -1.

Find the slope, x-intercept, and y-intercept of C(x)=200x+40,000