Five essay questions; you are to answer all of them About 1/3 page to 1/2 page f


Five essay questions; you are to answer all of them
About 1/3 page to 1/2 page for each answer
Be sure to think back about the topics we have learned in the past weeks
1)
Long-run real interest rates are expected to
increase. An accountant and an MBA student (who just finished his course of
Managerial Economics) were interviewed regarding the effect of this increase.
Keeping all these constant, their answer would likely differ. How do you guess
the interviewed will answer? Does the difference in response matter? If, yes,
why> if not why not?
2)
Many cities have experienced a substantial
decrease in the amount of garbage being collected after they changed from
levying a flat tax on each household to a system where the homeowner is charged
a fee for each bag or can picked up. Would this have been the result of a
change in demand or a change in the quantity demanded? Would you recommend the
flat fee or the fee per bag? Why? This is a change in quantity demanded, not a
change in demand. Include graphic.
3)
Define three types of elasticity of demand.
Indicate how you would use information from recent research paid by your
company that the own-price elasticity of your product is -1.2 and not -0.8 as
previously thought. (20 points)
Include-Price elasticity, Cross-price
elasticity, Income elasticity
4)
A magazine, in an article dealing with
management, wrote, “When he took over the furniture factory three years ago…
[the manager] realized almost immediately that it was throwing away at least
$100,000 a year worth of wood scrap. Within a few weeks, he set up a task force
of managers and workers to deal with the problem. And within a few months, they
reduced the amount of scrap to $7,000 worth [per year]”. Was this necessarily
an economically efficient move? Explain your answer.
5)
If all the assumptions of perfect competition
hold, why would firms in such an industry have little incentive to carry out
technological change or much research and development? What conditions would
encourage research and development in any of the competitive industries?


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