Questions and Answers of Introduction To Economics

Plot the Van der Pol equation from the initial point (x(0),y(0))5 (0.5,0.5) for the following values of m. Take dt50.01 and t from 0 to 1500 (i) m521 (ii) m50 (iii) m51 What do you conclude?
In each of the following let x(0)50.01, x(0)50.0105 and t from 0 to 50. (i) Show that x(t11)52.5x(t)(12x(t)) is not sensitive to initial conditions. (ii) Show that x(t11)53.62x(t)(12x(t)) is
Plot the following function for t50 to 50 x(t11)53.67x(t)(12x(t)) for the initial values (i) x(0)50.2 (ii) x(0)50.2001 Is this function sensitive to initial conditions?
Consider the following quadratic (Berry, 1996, p.117) x(t11)5x2(t)21 (i) What are the fixed points? (ii) What are the values of the attracting two-cycle?
Consider the following function x(t11)52x(t)22x2(t)2l (i) What are the fixed points? (ii) What is the bifurcation value of l? (iii) What type of bifurcation does this function have?
Consider the numerical example in section 9.3. (i) Suppose the debt/income ratio was to be stabilised at b555%. What is the level of the primary deficit/surplus to GDP that will achieve this? (ii)
A country has 2% inflation, is growing at 2.5% and has a nominal interest rate of 6% and a debt/income ratio of 40%. It presently has a budget deficit as a percentage of GDP of 3% and involves no
A country is growing at 3% and has a debt/GDP ratio of 50%. Assuming no money financing, what is the primary budget deficit/surplus that keeps the debt/income ratio constant when(i) The real interest
For the economy in the numerical example in section 9.3, where b(0)550% (i) At what time period does the debt/income ratio equal 100%? (ii) If the nominal interest rate is higher so i2gy52.5%, at
A country has no inflation, is growing at 2.5% and has a nominal interest of 4%. It is presently running a budget deficit as a proportion of GDP of 6%. (i) What is the expression for b(t) in terms of
Consider the following Dornbusch model under perfect foresight e50.75y12.510.02(s2p) p50.2(e2y) md5p10.75y20.2r md5ms5155 r5r*1se se5s y510, r*512.5 (i) What is the equilibrium exchange rate and
For the system x5x1y11 y52x2y15 (i) Find the fixed point. (ii) Transform the system into deviations from the fixed point. What are the characteristic roots of this transformed system? (iii) Derive
Verify that the following two systems have saddle-point solutions at the origin (i) x52x1y y53x (ii) x5x14y y54x27y Plot trajectories for initial point (22,5).
For the system x5x13y y55x13y (i) What is the fixed point of the system? (ii) Set x5lx and y5ly. What are the equations for the two arms of the saddle-point? Which is the stable arm and which the
For the system x5x12y y53x1y (i) Establish the fixed point. (ii) Derive the equations for the two isoclines and establish the vector of forces. (iii) Derive the equation for the stable and unstable
Consider the following three-firm oligopoly model p5202Q Q5q11q21q3 TC152q1 TC252q2 TC352q3 Dynamics of the firm 147 (i) What is the Cournot solution? (ii) Firm i chooses qi (t) to maximise pi (t),
Consider the following Cournot model with identical quadratic total costs p592Q Q5q11q2 TC150.5q1 2 TC250.5q2 2 (i) What is the Cournot solution? (ii) Firm 1 chooses q1(t) so as to maximise p1(t),
Consider the following model of oligopoly in which total costs are different p592Q Q5q11q2 TC153q1 TC251.5q2 (i) What is the Cournot solution? (ii) Assume firm 1 chooses q1(t) so as to maximise
Consider the following diffusion model for a new product in which at the moment no sales have taken place DF(t11)5(0.00510.02F(t))(12F(t)) (i) What are the fixed points of this system? (ii) At what
Consider the discrete advertising model of section 7.3. A product has present sales of 100,000 with sales declining at a rate of 2% per period. The maximum absorption per period is 250,000. £10,000
Use the model in qu. 4, and set the initial values at their equilibrium level. What are the implications of a fall in the natural level of income (a rise in the natural rate of unemployment) from 60
Consider the following model Dy(t11)55(102p(t))10.25Dpe(t11) p(t)50.25(y(t)260)1pe(t) Dpe(t11)50.5(p(t)2pe(t)) (i) What is the equilibrium for this model? (ii) Plot on the same diagram income against
Consider the following model Dy(t11)510(202p(t))10.75Dpe(t11) p(t)50.5(y(t)215)1pe(t) Dpe(t11)52(p(t)2pe(t)) (i) Derive the two fundamental difference equations for this model. (ii) What is the fixed
Consider the following two models (i) What are the recursive equations for each model and what is their fixed point? (ii) Compare the adjustment of prices in each model.
Consider the following model in which expected inflation is zero y(t)51210.2(m2p(t)) p(t11)2p(t)51.5(y(t)2yn) m510 yn58 (i) What is the fixed point of this model and is it stable? (ii) If p(0)515,
Set up model (5.22) using the parameter values in model (5.17), except let b53. What is the new equilibrium and the trajectory of the economy for the following events (i) A fall in G from 25 to 22?
Set up model (5.22) using the parameter values in model (5.17). What are the new equilibrium and the trajectory of the economy for the following events (i) A rise in autonomous taxes from 0 to 10?
Use model (5.17) to establish the new equilibrium and to construct trajectories for the following events (i) A fall in the money supply from 8 to 5. (ii) A fall in business expectations resulting in
Set up a vector force diagram for model (5.14) and illustrate possible trajectories for the economy in (Y,r)-space for each of the following (i) A fall in government spending. (ii) A fall in the
Set up model (5.8) on a spreadsheet and assume instantaneous money market adjustment and sluggish goods market adjustment. Establish the new equilibrium and plot the trajectory of the economy in
(i) Establish the trajectory of the following discrete system x(t11)52210.25x(t)10.4y(t) y(t11)51022x(t)10.5y(t) (x(0),y(0))5(2.5,15) (ii) What is the fixed point of the system and does the
(i) Establish the trajectory of the following discrete system x(t11)5282x(t)1y(t) y(t11)5420.3x(t)10.9y(t) (x(0),y(0))5(2,8) (ii) What is the equilibrium value of the system and does the trajectory
(i) Use a spreadsheet and Euler’s approximation to construct the trajectory for the following system. Use 0.05 for the time interval and t50 to 200 x52x13y y53x12y (x(0),y(0))5(1,0) (ii) Verify
(i) Use a spreadsheet and Euler’s approximation to construct the trajectory for the following system. Use 0.05 for the time interval and t50 to 200 x523x1y y5x23y (x(0),y(0))5(2,10) (ii) Verify
Construct diagrams showing isoclines and vector forces for the following systems (i) x53x y5 y (ii) x5x23y y522x1y
Use the model of section 3.8 embodied in model (3.17) and (3.19). Set initial income at its equilibrium level of 1766.667. Let government spending rise from G5200 to G5300. Plot the resulting dynamic
Use the model of section 3.7 on the multiplier–accelerator. Let b50.7 and v51.5 and let Y(0)5300. Derive the level of income, Y(t), consumption, C(t), and investment, I(t). Form the series C(t)2C*
Use the spreadsheet used to express model (3.9) to analyse the following model C(t)520010.8Yd(t) Yd(t)5Y(t)2Tx(t) Tx(t)51010.25Y(t) I5250 G5500 E(t)5C(t)1I1G DY(t11)50.5(E(t)2Y(t)) (i) Establish the
Use the model in qu. 1 with I15150. Set initial income at the equilibrium level. Derive the dynamic multiplier k(t) as defined by (3.8) for a rise in investment of 50. Comment on your result.
Use the model in qu. 1 to verify the following propositions. Take Y(0) 53000 (i) A rise in autonomous consumption spending or a rise in investment or a rise in government spending by 50 leads to the
Use the spreadsheet used to express model (3.7) to analyse the following model C(t)520010.8Y(t) E(t)5C(t)1I1G I5150 G5250 DY(t11)50.5(E(t)2Y(t)) (i) Establish the equilibrium level of Y and C. (ii)
Given the cobweb model qd(t)51823p(t) qs(t)521014pe(t) pe(t)5p(t21) q(t)5qd(t)5qs(t) (i) Establish the recursive equation for p(t). (ii) If a ceiling price of pU55 is set, establish the new recursive
Given the following nonlinear cobweb model qd(t)52425p(t) qs(t)52412(pe)2(t) pe(t)5p(t21) q(t)5qd(t)5qs(t) (i) Establish the recursive equation for p(t). (ii) What are the fixed points for this
For the Goodwin model in section 2.5, set p(0)52 and p(1)52. If r50.5, does the system still exhibit a divergent oscillatory price path? Is this true for r523, 20.1, 0.1 and 1?
Set up the following adaptive expectations model on a spreadsheet qd(t)510022p(t) qs(t)522013pe(t) pe(t)5pe(t21)2l(pe(t21)2p(t21)) q(t)5qd(t)5qs(t) (i) If l50.5, what is the equilibrium price and
Set up the following cobweb model on a spreadsheet for t50 to 10 qd(t)51823p(t) qs(t)521014pe(t) pe(t)5p(t21) q(t)5qd(t)5qs(t) (i) What is the equilibrium price and quantity? (ii) Given p(0)53, does
Given the model qd(t)510022p(t) qs(t)522013p(t) Dp(t11)50.1(qd(t)2qs(t)) q(t)5min(qd(t), qs(t))(i) Establish the equilibrium price and quantity. (ii) Use a spreadsheet to plot p(t) and q(t), given
Establish the fixed points of the following continuous models and their stability/instability properties (i) x5522x (ii) x5x21x25 (iii) x5x312x22x22
Establish the fixed points of the following nonlinear discrete systems and establish their stability/instability properties (i) x(t11)531x2(t)25x(t) (ii) x(t11)5x3(t)12x2(t)22 (Note:
Represent a phase line for the periodic solution to the linear equation x(t11)532x(t) x(0)51
Establish whether the systems in qu.1 are globally stable or globally unstable.
Establish the fixed points of the following discrete systems and show the path of the system from the given initial condition (i) x(t11)5520.2x(t) x(0)52 (ii) x(t11)52213x(t) x(0)50.5 (iii) x(t11)531
4. Suppose that the Department of Justice catches wind of the predator’s actions and files suit against the predator.Present several examples of false assertions the predator’s managers might
3. Based on the managers’ estimate that they will make the economic profit of $1.13 million for six years, is the predatory pricing profitable? In 1911, the U.S. Justice Department charged Standard
2. Ignoring the illegality of the act and possible prosecution, for how many years must the predator earn the economic profit of $1.13 million to make the predatory pricing profitable? In 1911, the
1. What is the present value of the firm’s economic loss? In 1911, the U.S. Justice Department charged Standard Oil of New Jersey (now ExxonMobil) with unlawfully monopolizing the petroleum
16.2. Suppose that you are a consultant for a firm like Yoo, a company building apartments and condominiums worldwide. You are charged with determining the number of floors to include in a proposed
16.1. Riverside Technologies Incorporated (RTI) is a small firm in North Sioux City, SD, that provides IT solutions for other companies. In addition to providing IT services and computer hardware
4.7 Employee Paul was injured at your plant. Last year Paul had $100,000 in medical expenses(which your firm has already paid). This year and every other year in the future those expenses will
4.6 You are deciding whether to send several of your employees to a training session. The cost of the session is $20,000. You estimate that if they receive this training, your firm’s after-tax
4.5 A competitor has infringed your patent, so you are entitled to recover lost profits. You have calculated lost profits of $12 million. The jury, in a burst of common sense, has awarded your
4.4 You are the manager of a large printing shop.You have the opportunity to buy a used six-color offset press for $1,000,000. Transporting and installing the press costs another $1,500,000 and will
4.3 Noting the success of Energizer’s long-running advertising campaign featuring a robotic rabbit and AFLAC’s campaign showcasing a duck, you decide to combine the two ideas and run a two-year
4.2 You have sold bonds that promise to pay $400 in interest at the end of each year until the end of the year in which the bond matures. At that time you will also pay the $12,000 in principal.a. If
4.1 Say that you work for a bank that has purchased a bond issued by Verizon. The bond promises to make interest payments of$500 at the end of each year for the next six years. At the end of the
3.4 As a manager at BMW, you are considering leasing a plant to build batteries for your electric-powered BMW i3 vehicle. Suppose that BMW’s current cost of batteries is $8,000 per car. You predict
3.3 Say that you are manager at a firm like LGI Technology, a lighting company that produces LED lights. Currently, your firm manufactures the LEDs it uses in-house. Technological advances have led
3.2 As a manager at AbbVie, a major pharmaceutical company, you work in the division responsible for the best-selling drug Humira. Humira is administered in preloaded syringes. To investigate the
3.1 You are a manager at a firm like Terrapin Ridge Farms, a company that produces dressings, dips, sauces, and jams. One of the jams is strawberry and fig. Currently, your company buys 20,000 pounds
2.3 Your company owns a minor league baseball team and is considering building a new stadium.The local governments refuse to help build the stadium, so you must fund it yourself.The stadium will cost
2.2 Why does including the depreciation allowance as another cost increase the net present value of an investment?
2.1 You can make an investment that will immediately cost $52,000. If you make the investment, your after-tax operating profit will be $13,000 per year for five years. After the five years, the
1.9 In your role as a manager, you are negotiating a contract with a construction company to build part of a new plant. The construction will take three years and will cost $9 million.Would you
1.8 The New York Yankees signed pitcher Masahiro Tanaka to a seven-year contract. Because Mr. Tanaka was under contract in Japan with the Golden Eagles, the Yankees paid them $20 million to release
1.7 What is the present value of $15,000 received at the end of the year for the next seven years at a discount rate of 6 percent? Now suppose that the payments are delayed for a year, so that the
1.6 Use the discount factors presented in Table 16.1 to answer the following questions:a. What is the present value of $1,000 received at the end of four years if the discount rate is 6 percent?b.
1.5 The longer the time until an amount of money will be received, the larger the discount factor.Why?
1.4 When the discount rate rises, what happens to the present value of an amount of money you will receive in the future? Why?
1.3 What is the impact of an increase in the discount rate on the discount factor? Explain your answer.
1.2 What is the present value of $80,000 per year for 10 years at a discount rate of 9 percent?Explain your answer.
1.1 What is the present value of $500,000 received at the end of 5 years at a discount rate of 6 percent?
You have seen how managers can decide whether to make or buy the containers they need. Let’s modify the example by supposing that the more carafes the company produces, the more the workers learn
Suppose that you and the other managers of an electric car maker like Tesla, Inc., have announced your plan to build a huge, 10-million-square-foot battery factory at a cost of$5 to $6 billion. The
Say that you are the owner of a firm like the local H&R Block and you are deciding the timing of an expenditure of $75,000 on new computers. You will buy the computers with your own internally
You are a manager at a car rental company similar to Avis Car Rental. You can buy a Ford Focus for $21,000, rent it for two years, and make an operating profit of $4,500 per year, which you receive
You are negotiating a $1 million loan for your employer. The lender offers you a choice:• Payment schedule A requires you to pay $100,000 at the end of the year for the first five years, with a
16.4 Apply the concepts of present value and the net present value rule to make profitmaximizing managerial decisions
16.3 Use present value calculations to answer the make-or-buy questions that managers face.
16.2 Describe how salvage values, taxation, debt financing, depreciation, and risk affect capital budgeting.
16.1 Explain the importance of present value calculations to managerial decision making.
15.2. The Weinandt Family Farm in Wynot, NE, raises livestock and grows crops. Commonly grown crops in Nebraska are corn and soybeans.Suppose that you are helping a farm similar to the Weinandt
15.1. Alorica is a customer relationship management firm that provides customized customer support via phone, Internet, and social media for companies in a variety of industries.It has many locations
5.5 Suppose that you are in charge of security at the Museum of Modern Art in New York. You have hired guards to protect the art overnight while the museum is closed.a. Carefully explain the
5.4 The Federal Motor Carrier Safety Administration(FMCSA) regulates the hours a truck driver may drive. One regulation limits the time a driver may drive to a maximum of 11 hours and then only after
5.3 Professional athletes are incredibly competitive, even outside their own sports. Many professional baseball players, for example, would eagerly play pickup basketball games.a. Because he fears
5.2 When Nortel Networks, a bankrupt data-networking equipment manufacturer auctioned its patents, it allowed all the potential bidders to thoroughly examine the patents. Why did Nortel’s managers
5.1 Suppose that you are an executive with the North Dakota Department of Trust Lands, the state government agency that manages the lands given to the state by the federal government when North
4.8 The bonuses of midlevel bank loan managers are often based on the profits but not the losses of the loans they approve. Suppose that an executive can make two types of loans: risky loans, which
4.7 Explain the difference between moral hazard and adverse selection.
4.6 Corporations sometimes buy back shares of their stock, which they then cancel, so that the number of outstanding shares is smaller.For example, in 2017, American Airlines Group announced that it

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