Q1) [Marginal Decision Making] Suppose a mid-size company xyz is currently selling 1 million units of...

   

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Q1) [Marginal Decision Making] Suppose a mid-size company xyz is currently selling 1 million units of its product per year. Managers at the company are considering whether to raise production to 1.2 million per year. One manager argues, "increasing production from 1 million to 1.2 million is a good idea because we will make a total profit of $5 million if we produce 1.2 million." Do you agree with her reasoning? What, if any, additional information do you need to decide whether the company should produce the additional 0.2 million units of its product? [your answer has to be at least 2-3 full sentences, most importantly look at this problem with a perspective of marginal decision making] [3 points] Q2) [Demand] Many consumers use peanut butter and jelly together. Table below shows quantity demanded for peanut butter per month in a small town at various prices when price of jelly is at the level given in the parenthesis. Now, the draw a graph for market demand for peanut butter. You will have two demand curves in the same graph, one when the price of jelly is $3 per pound, and the other when price of jelly is $4 per pound. Price in vertical axis, quantity demanded in horizontal axis. [4 points] Table: Per month market demand for Peanut Butter Quantity Demanded in lbs. (when Jelly is $3 per lb) 150 170 200 Price ($) per pound 432 Quantity Demanded in lbs (when Jelly is $4 per lb) 140 160 180 Now, using the information from above graph and table choose the right answer in the following question: If Good B (Jelly, for ex.) is a complement to Good A (Peanut butter, for ex.), then an increase in the price_ of Good B:. a. increases the quantity demanded of Good A. b. decreases the quantity demanded of Good A. c. will cause the demand for Good B to increase. Explain your answer choice in one or two sentences. d. decreases the demand for Good A. e. increases the demand for Good A. Q3) [Demand Supply and Market] Two events occurred simultaneously in the market for personal computer during past couple of decades: (1) an improvement in technology to manufacture computers [supply], and (2) increase in use of personal computers [demand]. If the change in (1) is a lot bigger than (2), what would happen to equilibrium price and quantity, show using a graph. How do the new equilibrium price and quantity compare with original equilibrium price and quantity, state clearly in words.[4 points] Q4) [4 points] Good A Good B 2012 (base or reference year) P $30 $100 Q 900 195 P B. Compute real GDP in 2013. 2013 Q $35 1,000 P Use the above data to solve these problems, show your work: A. Compute nominal GDP in 2012. $105 200 $100 2014 $40 1050 Q 205 c. Compute the "GDP deflator Prince Index", also known as "Average Price level relative to base year price", in 2014. [Formula needed: GDP Deflator Price index = (Nominal GDP/Real GDP)*100] 3 Q1) [Marginal Decision Making] Suppose a mid-size company xyz is currently selling 1 million units of its product per year. Managers at the company are considering whether to raise production to 1.2 million per year. One manager argues, "increasing production from 1 million to 1.2 million is a good idea because we will make a total profit of $5 million if we produce 1.2 million." Do you agree with her reasoning? What, if any, additional information do you need to decide whether the company should produce the additional 0.2 million units of its product? [your answer has to be at least 2-3 full sentences, most importantly look at this problem with a perspective of marginal decision making] [3 points] Q2) [Demand] Many consumers use peanut butter and jelly together. Table below shows quantity demanded for peanut butter per month in a small town at various prices when price of jelly is at the level given in the parenthesis. Now, the draw a graph for market demand for peanut butter. You will have two demand curves in the same graph, one when the price of jelly is $3 per pound, and the other when price of jelly is $4 per pound. Price in vertical axis, quantity demanded in horizontal axis. [4 points] Table: Per month market demand for Peanut Butter Quantity Demanded in lbs. (when Jelly is $3 per lb) 150 170 200 Price ($) per pound 432 Quantity Demanded in lbs (when Jelly is $4 per lb) 140 160 180 Now, using the information from above graph and table choose the right answer in the following question: If Good B (Jelly, for ex.) is a complement to Good A (Peanut butter, for ex.), then an increase in the price_ of Good B:. a. increases the quantity demanded of Good A. b. decreases the quantity demanded of Good A. c. will cause the demand for Good B to increase. Explain your answer choice in one or two sentences. d. decreases the demand for Good A. e. increases the demand for Good A. Q3) [Demand Supply and Market] Two events occurred simultaneously in the market for personal computer during past couple of decades: (1) an improvement in technology to manufacture computers [supply], and (2) increase in use of personal computers [demand]. If the change in (1) is a lot bigger than (2), what would happen to equilibrium price and quantity, show using a graph. How do the new equilibrium price and quantity compare with original equilibrium price and quantity, state clearly in words.[4 points] Q4) [4 points] Good A Good B 2012 (base or reference year) P $30 $100 Q 900 195 P B. Compute real GDP in 2013. 2013 Q $35 1,000 P Use the above data to solve these problems, show your work: A. Compute nominal GDP in 2012. $105 200 $100 2014 $40 1050 Q 205 c. Compute the "GDP deflator Prince Index", also known as "Average Price level relative to base year price", in 2014. [Formula needed: GDP Deflator Price index = (Nominal GDP/Real GDP)*100] 3

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A To calculate nominal GDP in 2012 we need to multiply the quantity of each good by its corresponding price For Good A we have the quantity of 705 multiplied by the price of 40 giving us a total of 28... View the full answer