GM
545 Entire Course Business Economics
( GM 545 Business Economics Week 1 )
GM 545 Business Economics Week 1 Supply and Demand (graded)
Question (1): Demand and Supply
Let’s discuss the tutorial Understanding and Applying Supply and Demand
in our Lecture this week.
(a) What is the difference between a change in demand
versus a change in quantity demanded?
(b) A change in supply versus a change in quantity
supplied?
(c) Why is it so important to differentiate between these
similar-sounding terms?
Question (1): Elasticity
Let’s discuss three different types of Elasticity:
1- Price Elasticity of Demand
2- Income Elasticity of Demand
3- Cross Elasticity of Demand
What are the differences between these different types of Elasticity?
How can you apply the above concepts on your jobs?
The best way to determine whether any product is elastic or
inelastic is to ask yourself whether there is a substitute for that product or
not.
The Gas example is a bit confusing. On one hand, some people view gas as
inelastic since regardless the increase in the gas price, you have to buy it.
On the other hand, other people view gas as elastic since there are substitutes
such as other sources of energy.
Based on the above discussion, what is your opinion? Is gas elastic or
inelastic?
Question (2) – APPLICATION on Demand and Supply
Think about a product that you have purchased recently (e.g. soda, diapers,
takeout meals, milk, shoes, manicure/pedicure, video game, etc.).
Explain how the law of demand affected your purchase. Give specific examples
of how the determinants of demand and supply affect this product (T-I-P-E-N and
P-R-E-S-T).
Question (3): Change in Demand Versus Change in Quantity Demanded
What is the difference between ‘change in demand’ and ‘change in quantity
demanded’? Can we use the two terms interchangeably?
What happens to the demand curve and the supply curve when any of these
determinants change? Give examples of scenarios that would cause a change in
demand versus a movement along the same demand curve and supply curve for this
product.
Discuss the new equilibrium price and quantity that result from these
changes. Can you demonstrate some of these changes graphically?
What do we mean by Total Revenue test of Elasticity? Any Examples?
Question (4): Price Ceiling and Price Floors
In market equilibrium, the price equilibrium is found where demand equals
supply. Let’s discuss the following 2 scenarios:
- For your
selected product, if the government places a mandated price ABOVE the
equilibrium price, how would this affect the market equilibrium?
- For your
selected product, if the government places a mandated price BELOW the
equilibrium price, how would this affect the market equilibrium?
-
-
( GM 545 Business Economics Week 2 )
GM 545 Business Economics Week 2 Perfect
Competition (graded)
Question (1): General Concepts
What do we mean by average productivity (AP) and marginal productivity (MP)?
What is the relation between average productivity and marginal productivity?
Examples?
In chapter 12, our focus is on the pure perfect competition market. However,
there are three other different market structures – Monopolistic Competition,
Oligopoly, and Monopoly. What are the key differences between these four
different market structures?
Think about a firm that you have done business with recently. What industry
does this firm belong to? For example, McDonald’s is a firm in the fast food
industry. What market structure would this industry fall under? What are the
names of other firms in this industry? Is it monopolistic competition,
oligopoly, monopoly, or perfect competition? Justify your classification of the
firm. Use the characteristics/features of the different market structure to
determine which market structure to classify your chosen firm.
Question (2): Short-run Production Costs
Question (2): Short-run Production Costs: Describe the distinctions between
fixed and variable costs and among total, average, and marginal costs.
Examples?
What is the difference between Economic profit, Normal profit, and
Accounting Profit?
Assume that you are the manager of a perfectly competitive firm
selling a product. What would you do in the short run–shut down or continue to
operate in each of the following 5 different scenarios:
1) Profit Maximization Case (Market Price >
Average Total Cost)
2) Normal Profit Case (Market Price = Average
Total Cost)
3) Loss Minimization Case (Average Variable
Cost < Market Price < Average Total Cost)
4) Shutdown Point Case (Average Variable Cost
= Market Price < Average Total Cost)
5) Must-Shutdown Case (Average Variable Cost
> Market Price)
Question (3): Long-run Production Costs
Question (3): Long-run Production Costs: How can you Use economies of scale
to link a firm’s size and its average costs in the long run.
How can you Use economies of scale to link a firm’s size and its average
costs in the long run?
(GM 545 Business Economics Week 3 )
GM 545 Business Economics Week 3 Oligopoly
and Game Theory (graded)
Question # 1 (Chapter 14) – Oligopoly:
What are the major characteristics of Oligopoly? Can you give some examples?
Question (2): What is the difference between “CARTELS” and
“Non-Collusive Oligopoly”?
Question (3): What do we mean by Game Theory? How is it
related to Oligopoly?
Question # 1 (Chapter 15) – Monopoly:
Chapter 15 discusses one of the four different types of market
structures which is Monopoly. Here are 3 questions which summarize the key
points on Monopoly.
Question (1): What are the characteristics of Pure
Monopoly? Can you give some real examples?
Question (2): Are there any differences in equilibrium
between pure competition and pure monopoly? If yes, what are these differences?
Question (3): Price Discrimination
What are the three different types of Price Discrimination? Can you give
some examples on each type of discrimination?
Question (4): Regulating Monopoly
What are the two approaches for regulating Monopoly?
( GM 545 Business Economics Week 4 )
GM 545 Business Economics Week 4 Unemployment
and Inflation (graded)
Question # 1: Business Cycles
What do we mean by the Business Cycles?
Question # 2: NIPA Accounts
What is the difference between GDP, GNP, and NDP?
** What is the difference between GDP, GNP, and NDP?
Please go to FRED website: http://research.stlouisfed.org/fred2/, and bring
to the discussion the most recent data for US GDP
Question (3): the ‘Expenditure Approach’ Versus the ‘Income
approach’
What is the difference between the ‘Expenditure Approach’ and the ‘Income
approach’ to GDP?
Question # 1: Unemployment
What are the three different types of unemployment, and which of them
are serious concerns for an economy?
Question (2): Actual Unemployment Data
Click on this website that gives data on unemployment rates in the U.S.
ranked by State.
http://www.bls.gov/web/laumstrk.htm.
Please take a look at the unemployment rate for your state. Is it higher or
lower than the average for the entire U.S.? Why?
Question (3): Inflation
(a) What is inflation?
What is the difference between stagflation, disinflation, and deflation?
(b) What are the
effects of inflation on the economy? Why is a high rate of inflation bad for an
economy
Question (1): What do we mean by fiscal policy? What are
the different types of fiscal policy?
Question (2): Fiscal Policy and Aggregate Demand
Can you explain how fiscal policy (making changes to government spending and
taxes) would affect aggregate demand (AD)?
How do these two mechanisms of expansionary policy differ?
Question (3): Policy Choices
If the government had the option to either make changes to the tax
rates or vary government spending to combat a recession that is already in
progress, which of these two fiscal policies do you think would have a greater
time lag to see its effect on output, employment, and inflation?
Question (1): Crowding-out Effect
Describe the harmful impact of the crowding-out effect on the economy.
Question (3): Aggregate Demand
What is the aggregate demand (AD) curve? What are the components
of AD? What factors can shift the AD curve?
Question (4): Multiplier Effect
What’s meant by the Multiplier Effect? Any examples?
GM 545 Business Economics Midterm Exam Answers
What happens to bicycle supply?
Question 2. Question :
(TCO A) Ceteris paribus, Brand A Plain potato chips and Brand B Plain potato
chips are substitutes in consumption. The price of Brand A Plain potato chips
increases.
(4 pts.) a. What happens to the demand for Brand B Plain potato chips?
(6 pts.) b. What happens to the demand for Brand A Plain potato chips?
Question 3. Question :(TCO A) The number of new home
sellers in a given market decreases.
(4 pts.) What happens to the supply of new homes?
(6 pts.) What happens to the demand for new homes?
Question 4. Question :TCO A) A market is in equilibrium
with equilibrium quantity MEQ and equilibrium price MEP.
(2 pts.) a. What happens to Market Equilibrium Quantity (MEQ) if there is an
increase in supply?
(4 pts.) b. What happens to Market Equilibrium Price (MEP) if there is a
decrease in supply and a decrease in demand?
(4 pts.) c. What happens to MEP if there is an increase in demand followed
by a decrease in supply followed by another increase in demand?
Question 5. Question :The following table shows part of the
demand function for tickets to an outdoor summer concert by a popular singing
group:
Price (P)…Quantity (Q)
50……….. 100
35………. 180
20…………300
10…………500
- (2 pts.)
What is demand elasticity in the $10 – $20 price range? Is demand elastic,
inelastic, or of unitary elasticity? Calculate the value and show all of
your work. Be sure to use the midpoint equation used to determine
elasticity.
- (4 pts.)
Assume demand elasticity is 1.3 in the $35 – $50 price range. In this
range of demand, by what percentage would quantity demanded change if
price increases by 9 percent? Show your detailed calculations.
- (4 pts.)
What is the effect of a price decline from $35 to $20 on total revenue for
the event? Does total revenue (TR) increase, decrease, or remain the same?
By how much? Show your detailed calculations.
( GM 545 Business Economics Week 5 )
GM 545 Week 5 Fiscal Policy (graded)
Question (1): What do we mean by fiscal policy? What are
the different types of fiscal policy?
Question (2): Fiscal Policy and Aggregate Demand
Can you explain how fiscal policy (making changes to government spending and
taxes) would affect aggregate demand (AD)?
How do these two mechanisms of expansionary policy differ?
Question (3): Policy Choices
If the government had the option to either make changes to the tax
rates or vary government spending to combat a recession that is already in
progress, which of these two fiscal policies do you think would have a greater
time lag to see its effect on output, employment, and inflation?
Question (1): Crowding-out Effect
Describe the harmful impact of the crowding-out effect on the economy.
Question (3): Aggregate Demand
What is the aggregate demand (AD) curve? What are the components
of AD? What factors can shift the AD curve?
GM 545 Week 6 Discussions ( graded )
a. What is quantitative easing?
b. Why might quantitative easing have led investors, banks, and
pension funds to engage in excessive risk taking?
What are the different definitions or components of MONEY? What do
we mean by M1 & M2?
Can you please go to the FRED website and try to find the value of
M1 and M2 during the second quarter in 2013? Here is the link: http://research.stlouisfed.org/fred2/categories/24
Also, why aren’t credit cards parts of the money supply?
Question (2): Money Creation Process
What is the money multiplier? What’s meant by money creation process?
Question (3): The structure of Federal Reserve Bank
What is the structure of the Federal Reserve Bank? Review the bios of the
current members of the Federal Reserve Board at:
http://www.federalreserve.gov/BIOS.
Comment on the make-up of the board–the composition–ages, gender, level of
education, work experience, etc.
a. Why was the Japanese government trying to drive
down the yen?
b. What actions was the Japanese government taking to drive down the
yen?
Question (1): Monetary Policy
What are the different tools of the monetary policy? Which one is the most
important tool? Why?
Question (2): Monetary Policy Effectiveness
What measures were taken by the U.S. Government and Federal Reserve to
counteract the financial crisis of 2007 and 2008? If you were the chairman of
the Fed during the recent financial crisis in 2007-2008, would you use
expansionary or Contractionary monetary policy? How you will use the monetary
policy tools?
Is the Federal Reserve’s monetary policy or the Federal Government’s fiscal
policy more effective in fighting inflation or fighting recession?
Question (3): Monetary Policy Independence
Should the Fed remain independent from political authority or should the
President and Congress have a say in their operations? Why? Why not?
( GM 545 Business Economics Week 7 )
GM 545 Business Economics Week 7 Comparative Advantage (graded)
Question (1): What is the trade account?
Is the U.S. having trade deficit or trade surplus with Canada and Mexico?
What have been some major causes of the large U.S. trade deficits
since 1992?
What is a major benefit
(you could address that issue) or a
major cost
(or you could address that issue) associated with
trade deficits?
Question (2): What is the Law of the Comparative Advantage?
How can this law explain gains from trade?
What are some examples of goods that the U.S. has comparative advantage in
producing? Take a look at the tag of the shirt/dress/pants you are wearing
today. Where was it made? Anyone wearing “Made in America” items of clothing
today? We sometimes hear people say “Buy American.” Why don’t we?
Question (3): Trade Barriers
We have established that society as a whole benefits from free trade.
Under what conditions would you advocate for trade restrictions?
What are the Costs to Society of Tariffs? Who are the winners, and who are
the losers? Which is the lesser of two evils, tariffs or quotas?
GM 545 Week 7: The Global Economy – Discussion
Question (1) – Currency appreciation/depreciation
If U.S. consumers enjoy buying more German goods, will
the demand for euros rise or fall? How will this affect U.S.
dollars against euros?
For a few months, prior to your vacation trip to Europe, you find that the
exchange rate for your U.S. dollar has decreased relative to the Euro. If
you were a U.S. citizen or resident, are you pleased? Explain
Question (2) – Floating Exchange Rate:
What is freely floating exchange rate? What factors cause the value of the
U.S. dollar to go up or down? In particular, explain how inflation, interest
rates, and political factors can affect the currency for any country. Any
Examples?
Question (3) – Fixed Exchange Rates:
What’s meant by ‘Bretton Woods System’? Why China use fixed exchange rates?
(GM 545 Business Economics Paper project 1)
The Microeconomic Paper tests your ability to apply economic principles to a
business decision. Select one situation from the items outlined below: A toD.
Complete the paper on the selected situation as specified below. The completed
paper is a professional report and is due in Week 3 (150 points). See the grading
rubric at the end of this document.Be sure to use the DeVry library for finding
data; avoid questionable sources, such as Wikipedia.
The following is a list of the specific required information, research,
graphs, and math to be included in each answer regardless of the scenario
chosen.
- Demand
Determinants:
- Each
individual determinant analyzed for your situation, with examples
applicable to your situation(3 points each) and research (2 points
each)showing current demand data or most recent past data, except for the
expectations determinant in which you need to use data estimating future
market conditions.
- (10
points)Price Elasticity of Demand facing you in your scenario, including
actual calculation of it using the midpoint formula. If you can’t find data,
then determine the price elasticity from the characteristics and make up
numbers to use. Be sure to identify this if you use this approach. This
will help you in deciding the slope of your demand curve below.
- (10
points)Graph the demand facing your situation. Note that this requires
information from the supply determinant analysis before deciding how to
draw the curve(s), as you may need a separate MR curve.
- Supply
Determinants:
- Each
individual determinant analyzed for your situation, with examples applicable
to your situation(3 points each) and research (2 points each)showing
current supply data or most recent past data, except for the expectations
determinant in which you need to use data estimating future market
conditions.
- (20
points)You need to be very specific in the cost of production
determinant to identify fixed, variable, and marginal cost in order to
derive your supply curve for the graphing component. You will need to
explain and show how profit maximization or loss minimization output and
price are determined. You will need to do the math using actual figures
[cited] or your own estimated figures [identified as such] and explain
why you expect short run economic or normal profits, acceptable loss or
temporary shutdown, and how you will know which it is.
- The
number of sellers determinant must contain your analysis of the kind of
market structure in which your firm or labor service will be sold.
- (10
points)Price Elasticity of Supply you have based on the cost of
production changes as output changes, including actual calculation of it
using the midpoint formula. If you can’t find data, then determine the
price elasticity from the characteristics and make up numbers to use. Be
sure to identify this if you use this approach. This will help you in deciding
the slope of your supply curve.
- (10
points)Graph your supply situation using the numbers from your earlier
cost of production analysis.
- Recommendations—(40
points) what are your recommendations explained by your analysis?
- Paper
presentation—(10 points) good format, citations, lack of spelling errors,
etc.
Situation A
Jenny, your niece, is a smart high-school student who wants to make
intelligent choices for her future. Hearing of your course in business
economics, she has e-mailed you asking for advice on whether to become a doctor
and on the best location to practice it. She recognizes the high costs of
tuition and the years of study involved in becoming a doctor. She wants to
evaluate if that career choice is an optimal decision for her, so she has asked
you for advice.
Having read the piece “Fewer Physicians Move, a Sign of Career Caution” on
page 20 of the textbook, you recognize the significance of such a career
decision for Jenny. You decide to educate yourself about the market for physicians
in terms of supply and demand, elasticity, costs of production, pricing, and
economic or normal profit or loss. You want to provide Jenny with the most
informed advice possible.
Situation B
Your neighbor Cindy wants to start a contracting business for installing
solar panels. She has heard of the cost savings that households and businesses
can make each year by installing solar panels on their roofs. Cindy has also
heard of government incentives for installing solar panels. Being concerned
about the environment and wishing to reduce pollution, Cindy thinks installing
solar panels also serves a good social purpose. But she does not want to risk
her life savings on a venture that might not succeed or become profitable
enough. After hearing from you about taking this course in business economics,
she decides to ask you for advice.
At first, you are hesitant to give investment advice. Then you read the
piece “US boosts ‘game-changer’ solar technology in bid for global market
share” on page 374 of the textbook. You realize there are more pieces to the
decision than Cindy is considering. You decide to research the market in terms
of supply and demand, elasticity, costs of production, pricing, and economic or
normal profit or loss. You want to provide Cindy with the most informed advice
possible.
Situation C
Cousin Edgar is always thinking of the next business idea. This time, he
plans to invest in buying two gas stations. He reckons American consumers have
come to accept the high gasoline prices, and estimates world prices for
gasoline to increase even further with high demand from India and China.
Besides, Cousin Edgar thinks he will make a good profit on the sale of
convenience items at each station. But before buying the gas stations, he
decides to ask for your advice because you are taking this course in business
economics.
You happened to read the piece “$4-a-Gallon Gas Fueling Fears for Recovery”
on page 196 of the textbook. Being skeptical of Cousin Edgar’s optimism on the
profitability of selling gasoline and convenience items, you decide to research
the market in terms of supply and demand, elasticity, costs of production,
pricing, and normal or economic profit or loss. You want to provide Cousin
Edgar with the most informed advice possible.
Situation D
After hearing of you taking this course in business economics, Uncle Dan has
e-mailed you asking for advice on his 100-acre corn farm. He mentioned how,
after 30 years of growing corn, he wishes to leave that commodity’s market and
enter a more profitable market instead. He is thinking of planting some organic
crop. But he is not sure which crop would be most profitable. He already knows
that going organic requires changing some of his practices to qualify for the
certification. Therefore, he wants to know how much it costs to become a
certified organic farmer, and which crop would be best suited for him to grow
given his current equipment.
Luckily before you can find time to answer Uncle Dan’s e-mail, you read the
piece on “organic farming in the United Kingdom” on page 422 of the textbook.
Recognizing the costs and risks for Uncle Dan in making the switch, you decide
to research the market in terms of supply and demand, elasticity, production
costs, pricing, and economic or normal profit or loss. You decide to educate
yourself about organic farming so that you can provide Uncle Dan with the most
informed advice possible.
Microeconomic Paper as a Professional Report
Your paper should be organized into five parts as listed below.
- Title Page—Name, course, and date
- Introduction to situation, but do NOT copy
the scenario. Briefly summarize the situation and identify
the microeconomic issue(s) to be decided from the perspective of the
organization.
- Relevant Economic Principles: Determinants
of Demand, Supply, etc. and Relevant Data
Identify the variables that are critical in addressing the issue(s). Gather
and present the relevant data on the variables by searching the DeVry Online
Library. Ask a librarian for help if needed. Use in-text citation to report the
source(s) of the data. Graphs may be included here.
- Recommendations and Economic Justification
Formulate and present your recommendations for addressing the issue(s) based
on the relevant data and economic principles identified above. Justify your
recommendations in terms of the economic impact on those affected.
- References
List the full references for at least five sources alphabetically in APA
format.
Grading Rubric
|
Section
|
Points earned
|
Points
|
Description
|
|
Paper Presentation
|
|
10
|
Good format, citations, lack of spelling errors,
etc.Correct Title page and Reference pages
|
|
Relevant Data: Demand: 30 pointsSupply: 50 points
|
|
80
|
Demand Determinants and Research Data (15 points)Price
Elasticity of Demand (10 points)Graph of Demand (5 points)Supply Determinants
and Research Data (15 points + Profit Max/Cost of Production Analysis = 20
points for total of 35 points)Price Elasticity of Supply (10 points)
Supply graph (5 points)
|
|
Recommendations
|
|
40
|
What are your recommendations explained by your analysis?
|
|
Total
|
|
130
|
A quality paper meets or
exceeds these requirements
|
( GM 545 Business Economics Final Project )
The Macroeconomic Paper tests your ability to apply economic principles to a
business decision considering the impact of macroeconomic variables. Select one
situation from the items outlined below: A to D. Complete the paper on the
selected situation as specified below. The completed paper is a professional
report and is due in Week 6 (200 points). See the grading rubric at the end of
this document. Be sure to use the DeVry library to find data, and avoid
questionable sources, such as Wikipedia.
Each of the scenarios has a list of macroeconomic areas you are to address,
with sources, in your answer. Briefly you are to research and show how these
apply to your scenario: GDP growth rate (20 points), the business cycle,
unemployment, and inflation(40 points), fiscal policy and level of unemployment
(40 points), monetary policy and interest rates (40 points), and demographics
(10 points).
Situation A
Rick, your friend, runs a small manufacturing plant that produces parts for
the auto industry. Rick is thinking of expanding his operations to meet the
increasing demand from car manufacturers. Hearing of your taking this course in
business economics, he asks you for advice on how to go about making the
expansion decision.
At first you are reluctant to give investment advice, but then you happen to
read the piece “U.S. Auto Sales Estimates Cut as Confidence Slows Rebound” on
page 634 of the textbook. You suddenly realize that Rick needs to take a number
of macroeconomic variables into consideration for the expansion decision. You
decide to research the economy in terms of GDP growth rate, interest rates,
level of unemployment, the business cycle, fiscal policy, monetary policy,
international trade, and demographics. You want to provide Rick with the most
informed advice possible.
Situation B
Your neighbor Cindy wants to start a contracting business for installing
solar panels. She has heard of the cost savings that households and businesses
can make each year by installing solar panels on their roofs. Cindy has also
heard of government incentives for installing solar panels. Being concerned
about the environment and wishing to reduce pollution, Cindy thinks installing
solar panels also serves a good social purpose. But she does not want to risk
her life savings on a venture that might not succeed or become profitable enough.
After hearing from you about taking this course in business economics, she
decides to ask you for advice.
At first you are hesitant to give investment advice. Then you read the piece
“Postal Service Considering Cutting 120,000 Jobs” on page 668 of the textbook.
You realize there are more pieces to the decision than Cindy is considering.
You decide to research the economyin terms of GDP growth rate, interest rates,
level of unemployment, the business cycle, fiscal policy, monetary policy,
international trade, and demographics. You want to provide Cindy with the most
informed advice possible.
Situation C
Cousin Edgar is always thinking of the next business idea. This time, he
plans to invest in buying four gas stations. He reckons American consumers have
come to accept the high gasoline prices, and estimates world prices for
gasoline to increase even further with high demand from India and China.
Besides, Cousin Edgar thinks he will make a good profit on the sale of
convenience items at each station. But before buying the gas stations, he
decides to ask for your advice because you are taking this course in business
economics.
You happened to read the piece “Bank Lending Signals a Strengthening
Economy” on page 856 of the textbook. Cousin Edgar needs financing for his new
business,but you realize there are more macroeconomic factors he needs to
consider in timing his decision. You decide to research the economy in terms of
GDP growth rate, interest rates, level of unemployment, the business cycle, fiscal
policy, monetary policy, international trade, and demographics. You want to
provide Cousin Edgar with the most informed advice possible.
Situation D
After hearing of you taking this course in business economics, Uncle Dan has
e-mailed you asking for advice on his 100-acre corn farm. He mentioned how,
after 30 years of growing corn, he wishes to leave that commodity’s market and
enter a more profitable market instead. He is thinking of subdividing his land
and building homes and shops. He reckons he could make a good profit by selling
the homes and renting the shops.
Before you can find time to answer Uncle Dan’s e-mail, you read the piece
“Will the Fed’s New Policies Revitalize the Housing Market?” on page 896 of the
textbook. Recognizing the costs and risks for Uncle Dan in making the switch,
you decide to research the economy in terms of GDP growth rate, interest rates,
level of unemployment, the business cycle, fiscal policy, monetary policy,
international trade, and demographics. You decide to educate yourself about
macroeconomics so that you can provide Uncle Dan with the most informed advice
possible.
Macroeconomic Paper as a Professional Report
Your paper should be organized into five parts as listed below.
- Title Page: Name, class, and date
- Introduction to situation but do NOT copy
the scenario. Briefly summarize the situation and identify
the macroeconomic issue(s) to be decided from the perspective of the
organization.
- Business cycles, unemployment, inflation,
international—comparative advantage, exchange rates, trade, etc., monetary
policy and interest rates, and fiscal policy and unemployment.Identify
the variables that are critical in addressing the issue(s). Gather and
present the relevant data on the variables by searching the DeVry Online
Library. Ask a librarian for help if needed. Use in-text citation to
report the source(s) of the data. Graphs may be included here.
- Recommendations and Economic Justification
Formulate and present your recommendations for addressing the issue(s) based
on the relevant data and economic principles identified above. Justify your
recommendations in terms of the economic impact on those affected.
- References
List the full references for at least five sources alphabetically in APA
format.
Grading Rubric
|
Section
|
Points earned
|
Points
|
Description
|
|
Paper Presentation
|
|
10
|
Good format, citations, lack of spelling errors,
etc.Correct title page and reference page
|
|
Relevant Data:GDP, Business Cycle, International, Monetary
Policy, Fiscal Policy, Demographics
|
|
130
|
GDP (20 points)Business cycles, unemployment, inflation
(40 points)Monetary Policy and interest rates (30 points)Fiscal policy and
unemployment (30 points)Demographics (10 points)
|
|
Recommendations
|
|
40
|
What are your recommendations explained by your analysis?
|
|
Total
|
|
180
|
A quality paper meets or
exceeds these requirements
|
( GM 545 Business Economics Week 8 )
GM 545 Business Economics Final Week 8 Final Exam
Question :
(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 and market supply have both increased recently. 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) Now, suppose that
following the supply and demand changes in (a), a substitute good goes up in
price, and your costs of production increase. What new decisions will you make
regarding production levels and pricing for your Widget facility?
2.
Question :
(TCO B) Here is some data on the demand for marshmallows:
Price Quantity
$10 100
$ 8 300
$ 6 700
$ 4 1300
$ 2 2200
(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 1300 units to 2200 units? Show all work. (Be careful here!)
3.
Question :
(TCO C) You have been hired to manage a small manufacturing
facility whose cost and production data are given in the table below.
Total Total
Workers Labor Cost Output Revenue
1 $500 100 $700
2 1000 280 1150
3 1500 440 1440
4 2000 540 1570
5 2500 600 1670
6 3000 630 1710
7 3500 640 1730
(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, how many workers should you hire? Explain you answer.
4.
Question :
(TCO C) Answer the next questions on the basis of the
following cost data for a firm in pure competition:
OUTPUT —— TFC ———- TVC
0 $100.00 0.00
1 100.00 70.00
2 100.00 120.00
3 100.00 150.00
4 100.00 200.00
5 100.00 270.00
6 100.00 360.00
(a.) (15 points) Refer to the above data. If the product
price is $45 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 $75 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.
Question :
(TCO D) A software producer has fixed costs of $18,000 per
month and her Total Variable Costs (TVC) as a function of output Q are given
below:
Q TVC Price
1,000 $15,000 $25
2,000 20,000 24
3,000 30,000 23
4,000 50,000 22
5,000 80,000 20
(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? Why? (Show all work).
(b.) (15 points) What should be the production level if
fixed costs rose to $48,000 per month? Explain.
6.
Question :
(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.) (5 points) Refer to the data in the above scenario.
What is the size of the labor force in the United States for the given year?
(b2.) (5 points) Refer to the data in the above scenario.
What is the unemployment rate in the United States for the given year?
7.
Question :
(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? (Be brief — you can answer this
in 2 or 3 brief paragraphs).
(b.) (10 points) Any change in the economy’s total
expenditures would be expected to translate into a change in GDP that was
larger than the initial change in spending. This phenomenon is known as the
multiplier effect. Explain how the multiplier effect works.
(c.) (15 points) You are told that 90 cents out of every
extra dollar pumped into the economy goes toward consumption (as opposed to
saving). Estimate the GDP impact of a positive change in government spending that
equals $20 billion.
8.
Question :
(TCO G)
(a.) (20 points) Third National Bank is fully loaned up with
reserves of $20,000 and demand deposits equal to $100,000. The reserve ratio is
20%. Households deposit $5,000 in currency into the bank. How much excess
reserves does the bank now have, and what is the maximum amount of new money
that can be created in the banking system as a result of this deposit? Show all
work.
(b.) (20 points) What is the discount rate in the banking
system? Explain how the Fed manipulates this rate to achieve macroeconomic
objectives.
9.
Question :
(TCO E and I) Let the exchange rate be defined as the
number of dollars per British pound. Assume there is a decrease in U.S.
interest rates relative to that of Britain.
(a.) (10 points) Would this event cause the demand for the
dollar to increase or decrease relative to the demand for the pound? Why?
(b.) (10 points) Has the dollar appreciated or depreciated
in value relative to the pound?
(c.) (10 points) Does this change in the value of the
dollar make imports cheaper or more expensive for Americans? Are American
exports cheaper or more expensive for importers of U.S. goods in Great Britain?
Illustrate by showing the price of a U.S. cell phone in Britain before and
after the change in the exchange rate.
(d.) (10 points) If you had a business exporting goods to
Britain, and U.S. interest rates fell as they have in this example, would you
plan to expand production or cut back? Why?
