ECON 545 Final Exam 2
ECON 545 Final Exam 2
1. (TCO A) Suppose you are hired to manage a small manufacturing facility that produces Widgets.(a.) (15 points) You know from data collected on the Widget Market that market demand has recently increased and market supply has recently decreased. As manager of the facility, what decisions should you make regarding production levels and pricing for your Widget facility? Remember that supply and demand are about the market supply and market demand, which is bigger than your own company. You are being given data on supply and demand for the whole market and are being asked what effect that has on you as a small part of that market. (b.) (15 points)
2. (TCO B) Here is some data on the demand for lettuce:...........(a.) (15 points) Is demand elastic or inelastic in the $6-$8 price range? How do you know? (b.) (15 points) If the table represents the demand faced by a monopoly firm, then what is that firm’s marginal revenue as it increases output from 160 units to 180 units? Show all work. (Be careful here!)
3. (TCO C) You have been hired to manage a small manufacturing facility whose cost and production data are given in the table below..........(a.) (6 points) What is the marginal product of the second worker? (b.) (6 points) What is the marginal revenue product of the fourth worker? (c.) (6 points) What is the marginal cost of the first worker? (d.) (12 points) Based on your knowledge of marginal analysis,
4. (TCO C) John operates a small business out of his home and has very little in terms of fixed costs. Answer the next questions (Parts A and B) on the basis of the following cost data for John’s firm operating in pure competition:...........(a.) (15 points) Refer to the above data. If the product price is $60, at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.(b.) (15 points) Refer to the above data. If the product price is $55 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
5. (TCO D) A software producer has fixed costs of $30,000 per month and her Total Variable Costs (TVC) as a function of output Q are given below:..........a.) (15 points) If software can only be produced in the quantities above, what should be the production level if the producer operates in a monopolistic competitive market where the price of software at each possible quantity is also listed above?
6. (TCO F) (a.) (20 points) Suppose nominal GDP in 1999 was $200 billion, and in 2001, it was $270 billion. The general price index in 1999 was 100 and in 2001 it was 150. Between 1999 and 2001, the real GDP rose by what percent? (b.) Use the following scenario to answer questions (b1) and (b2).In a given year in the United States, the total number of residents is 270 million, the number of residents under the age of 16 is 38 million, the number of institutionalized adults is 15 million, the number of adults who are not looking for work is 17 million, and the number of unemployed is 10 million.(b1.)
7. (TCO G and H) (a.) (15 points) Suppose your local Congress representative suggests that the federal government intervenes in the gasoline market to stop runaway price increases. Would you say that this view basically supports the Keynesian or the Monetarist school of thought? Why? What position would the opposing school of thought take on this issue?
8. (TCO G) (a.) Reserve requirement for banks is set at 5%. Your firm deposits its profits of $28,000 into the Third National Bank. (10 points) How much excess reserve does your deposit generate for the bank?(10 points)
9. (TCOs E and I) Let the exchange rate be defined as the number of dollars per Japanese yen. Assume that there is a relatively lower rate of inflation in the U.S. relative to that of Japan.(a.) (10 points) Would this event cause the demand for the dollar to increase or decrease relative to the demand for the yen? Why? (b.) (10 points)