"Interest rates were expected to increase by 85% of all consumers in the May 2004 survey, more than ever before," said Richard Curtin, the Director of the University of Michigan’s Surveys of Consumers. "More consumers in the May 2004 survey cited th..
"It is often impossible to obtain precise information about the pattern of future revenues, costs, and interest rates. Therefore, the process of economic optimization is futile." Discuss this statement...
A can of lemonade is priced at €0.75 in Europe and 12 pesos in Mexico. What would the peso–euro exchange rate be if purchasing power parity holds? If a monetary expansion caused all prices in Mexico to double, so that lemonade rose to 24 pesos, what ..
A commercial fisherman charts the following relationship between hours spent and the quantity of fish caught per trip.
a. What is the marginal product of each hour spent fishing?
b. Using these data, graph the fisherman’s production function. Explai..
A company faces two kinds of risk. An idiosyncratic risk is that a competitor might enter its market and take some of its customers. An aggregate risk is that the economy might enter a recession, reducing sales. Which of these two risks would more li..
A company has an investment project that would cost €10 million today and yield a payoff of €15 million in four years.
a. Should the firm undertake the project if the interest rate is 11 per cent? 10 per cent? 9 per cent? 8 per cent?
b. Can you work ..
A company is considering building a bridge across a river. The bridge would cost €2 million to build and nothing to maintain. The following table shows the company’s anticipated demand over the lifetime of the bridge:
a. If the company was to build t..
A consumer has an income of €30,000 a year and divides this income between buying food and spending on leisure. The average price of a unit of food is €15 and the average price of a unit of leisure is €10. Draw the consumer’s budget constraint and dr..
A government announces a decision to increase investment in spending on higher education with the intention of increasing the participation rate in higher education by young people, to 45 per cent (i.e. that 45 per cent of school leavers choose to go..
A government wants to reduce the incidence of anti-social behaviour which can result from excess alcohol consumption by young people aged between 18 and 25. Which do you think leads to a fairer market outcome: a specific tax on every unit of alcohol ..