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Internationalcrude oil prices have climbed up to an all-time high of $105 a barrel for the first time since 2014 after failure of diplomatic efforts between Russia and Ukraine failed resulting into military conflict. This has resulted into crude oil prices and the resulting pump prices for consumers going up globally. Analysts have predicted that the prices will rise much higher amid fears of major disruption to the global energy supply
chain. Russia is one of the world’s largest producers of oil and natural gas and disruptions in its output.
(a) Discuss briefly the difference between ‘spot price’ and ‘future price’
(b) Do you support GRZ’s Fuel Subsidy Removal policy? Why? Explain with one paragraph.
(c) Suppose that you are the owner and manager of a small business (Give it a name for your hypothetical business). Briefly explain how a hike in fuel prices would affect your business costs, sales, competitiveness, and profit. Use one paragraph.
Trade Kings, one of the biggest companies in Zambia, has hired you to advise them on pricing policy. One of the things the company would like to know is how much a 1.5 percent increase in prices of all the goods they are selling arelikely to affect sales. What critical information you have to have in order to appropriately advice the company? Explain why these facts are important.
A discriminatory movie monopolist sells the service to college students and lecturers. The demand function for students is 𝑄s = 200 − 25𝑃 and the demand function for lecturers is
𝑄l = 400 − 25P. Marginal cost is $5 per ticket.
(a) Which degree (type) of price discrimination the monopolist applied? Why?
(b) Calculate the amount of ticket the firm sells for students.
(c) Calculate the amount of ticket the firm sells for lecturers.
1. Suppose you are the manager of a Golf Club with monopoly power. A typical consumer’s
inverse demand function for your firm’s product is 𝑃 = 100 − 20𝑄, and your cost function is C(Q) = 20Q.
(a) If you apply a two-part pricing strategy, how much would be the membership fee and the per unit price?
(b) How much additional profit do you earn using a two-part pricing strategy compared with single price strategy?
1.Define nominal exchange rate and real exchange rate.
2.What are the two main types of exchange-rate systems?
3.What explains the behavior of net exports represented by the J curve?
4.How does real exchange rate affect net exports? Explain and give one example.
Freedom Bank has received a loan application from a private company Automatic Corporation. An abbreviated portion of the financial information provided by the company is shown below:
Total assets $1,260,000
EBIT 158,000
Net working capital 84,000
Book value of equity 360,000
Accumulated retained earnings 320,000
Total liabilities 1,140,000
What is the Z-score for Automatic Corporation? What does the score predict?
ABC and DEF are identical firms except that DEF is more levered. Both companies will remain in business for one more year. The companies’ economists agree that the probability of the continuation of the current expansion is 80 % for the next year, and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $2.7 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.1 million. ABC’s debt obligation requires the firm to pay $0.9 million at the end of the year. DEF’s debt obligation requires the firm to pay $1.2 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 15 percent.
a. What is the value today of ABC’s debt and equity? What about that for DEF’s?
b. DEF’s CEO recently worried that its firm value should be lower than ABC’s because the firm has more debt and therefore more bankruptcy risk. Do you agree or disagree with this statement?
20 goods without substitute (examples of inelastic goods)
1. Suppose the following information is true for country A:
a. Average annual income : $6,500 per family
b. Average consumption of meat: 200 pounds
c. Estimated income elasticity of demand: 10
d. Average price per pound of meat: $1.00
e. Population composed of one million families
Let us assume that the government wants to provide adequate nutrition to the families so that each family is able to afford 250 pounds of meat per year. This can be done by transferring income to the families by the government.
By using the above information, compute the cost of this program.
1. Assume that in 2018 only 1,000 UHV students sign up for the 1,500 positions in UHV residence halls at a set contract price of $3,000 per year.
a. If UHV lowers the contract price to $2,500/year and 500 more students sign up, what is the price elasticity of demand for residence hall positions? You must show your work.
b. Depict the situation on a supply and demand graph. Be sure to label your graph.
c. With the information about demand elasticity, if the university president asked for your advice, would you recommend the price be cut, or not?
