Homework Answers

Which one of the following statements about tax is true?

A. Proportional tax is when everybody pays the same amount of tax.

B. Income tax is levied on a yearly basis.

C. Excise tax is a progressive tax.

D. Regressive tax is when all taxpayers pay the same rate.

The production function of a firm is given by Q=4L^0.5K^0.5 suppose the cost of labour is birr 40 per unit and the cost of using capital is Birr 10 per unit.

A. Determine the amount of labour and capital that should be used in order to minimize the cost to product 40 units of output?

B. Calculate the minimum cost of producing 40 units?

A monopolist with the cost function C=1/2Q^2 faces a demand curve Q=12-P,

A. What will be his equilibrium price and quantity?

B. If for some reason the firm behaves as if it were in a perfectly competitive industry, what will equilibrium price and quantity?

C. How much money will the firm require to forgo monopoly profits and behave competitively instead?

Show that minimum wage rate set above the market clearing wage rate causes excess supply of labour. Why would government impose minimum wage despite knowing its effect on unemployment?

The incidence of a tax any economic agent in a competitive market depends largely upon the elasticity of supply and demand of the factor. So graphically show these impacts and the burden shared by buyer and seller of the factor if an amount of $X is imposed. Draw all possible situation while ringing change in the Supply curve. Also graphically indicated what will be the net burden of tax if the tax is imposed either on consumer side or on the producer side. Make a parallel comparison.

If we have unemployment rate 4.0% , labor force 120000 and labor force participation rate 65.0% then how many are employed and how many are unemployed?

Consider an economy that is characterized by the following equations:

C = 150 + 0.65(Y - T) - 200r

T = 100 + 0.2Y I = 200 - 200r

G = 500

X = 100

IM = 150 + 0.1(Y - T) - 100r

L = - 25 + 0.5Y - 500r

M = 133, 200

P ^ (SR) = 120

(Consumption)

(Taxation)

(Investment Demand)

(Government Expenditure)

(Exports)

(Imports)

(Money Demand) (Money Supply)

(Short-Run Price Level)

Answer each of the following questions. In your answers, be sure to state any assumptions that you impose and provide an explanation.

Derive the AD and SRAS curves.

Solve for the short-run equilibrium in the AD-SRAS model. Is your solution the same as in part 3 above? Why or why not?

Is the fiscal multiplier in this economy larger or smaller than if the asset market were not accounted for in the model? Briefly explain.

True or false? The aggregate demand curve is downward-sloping because the demand for goods and services increases as the price decreases. Briefly explain.

Amazon is changing the way we buy. Soon there will be no more shopping malls or big stores. Thinking of yourself as a customer is this the next evolution of retailing as we know it? does this concern you? tell us why or why not. (250 words)