e This are the questions c

Consider a horizontally differentiated product market in which two firms are located at any points l1 and l2 on the real line, respectively, with the notation l1 l2. Firms produce at marginal costs c. There is a continuum of consumers of mass 1 who are uniformly distributed on the unit interval. They have unit demand and have an outside utility of . A consumer located at x [0; 1] obtains indirect utility v = max (v1; v2) with v1 = r (x l1) 2 p1 if she buys one unit from firm 1 and v2 = r (l2 x) 2 p2 if she buys from firm 2. Firms have marginal costs equal to c.

a. Suppose that prices are regulated at pi = 2c. In the game in which firms simultaneously decide where to locate their product, characterize the Nash equilibrium.

b. Determine the demand function for each firm for each admissible price pair (p1; p2) given locations l1 and l2.

c. Suppose that the two firms simultaneously set prices. Determine the market equilibrium for all possible combinations of (l1; l2).

d. Suppose that the social planner chooses first-best optimal prices. Which price pairs would be socially optimal for the pair of locations l1 = 0 and l2 = 1/2?

e. Compare your results obtained in (c) and (d) for locations l1 = 0 and l2 = 1/2. Is the equilibrium socially efficient? Depending on your answer elaborate on the sources of the inefficiency or give the reason for efficiency.

a. Build a decision tree to evaluate the decision facing Harlow. What would you recommend? (Be sure to state all your assumptions and show all your analysis.)

b. To which assumption (other than Mr. Merck's) is your analysis most sensitive, and what might be done to manage the related risks?

c. Foresight Consulting has offered to conduct research that will enable it to predict KL-798's outcome in the Phase 1 trials. How much would this information be worth to Merck if Foresight's predictions were always correct?

2. Suppose we relax the assumption that we will always follow Mr. Merck's advice. How much does the expected value increase? Now what should we do with regard to KL-798?

1. Assume a US bank has a small portfolio of Japanese yen what sort of exchange rate movement would the bank be most concerned about? 2. What are the primary responsibilities of the Federal Open Market Committee? 3. Of the major tools of monetary policy which is used most often and why? 4. What is a primary risk of trading with Fed Funds? How was this risk in play during the crisis of 2008 - 2009?

5. What are the major sources and uses of funds for US commercial banks? Where do these appear on the balance sheets of commercial banks and of what significance are they? 6. Think about the principal assets of commercial banks, what are these? What does this asset structure inform us about the risk impacting a commercial bank? 7. What does a commercial banks' CAMELS rating of '2' imply? What if it were '4'? 8. What if a commercial banks asset utilization ratio were to increase, if other balance sheet items remain constant what, what will happen to return on equity (ROE)? 9. Commercial banks are subject to overlapping layers of regulation and authority, and what are the forms of protection and regulations that are imposed on CB's to ensure their customer safety and soundness? 10.In the US there is the phenomenon of shadow banking. What is this, how does it differ from traditional commercial banking and are there any special risks associated with its use? 11.Please describe some of the reasons for the saving and loan crisis of the 1980's? What does that episode tell us about the regulation of financial institutions in the 21st Century? Do you think that we, as a financial system, learned anything from this earlier crisis? 12.What is the relative size of the credit union industry to commercial banking and of what significance is this? What functions doe CU's perform which banks do not?

dentify a firm that provides pricing plans to customers.

1) Describe at least two alternative pricing plans offered by the firm. 2) Which pricing plan is likely to have the higher marginal cost? Explain. (Remember that uncertainty is a kind of cost - for example, uncertainty over residual value in a leasing arrangement.) 3) What kinds of customers (what attributes or concerns) are likely to be attracted to each plan? 4) Which set of customers is likely to have the more elastic demand? Why? 5) Does it seem likely that the price markup is lower for the plan aimed at customers with more elastic demand? Explain.

a. Build a decision tree to evaluate the decision facing Harlow. What would you recommend? (Be sure to state all your assumptions and show all your analysis.)

b. To which assumption (other than Mr. Merck's) is your analysis most sensitive, and what might be done to manage the related risks?

c. Foresight Consulting has offered to conduct research that will enable it to predict KL-798's outcome in the Phase 1 trials. How much would this information be worth to Merck if Foresight's predictions were always correct?

2. Suppose we relax the assumption that we will always follow Mr. Merck's advice. How much does the expected value increase? Now what should we do with regard to KL-798?