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5. Critically assess the methods used to generate empirical estimates of both short- and long-run cost functions. Do the empirical difculties encountered rob the resulting estimates of any general operational utility? ti. 'Ahout half of all advertising expenditure is wasted. The problem lies in knowing which half.' Discuss this statement and assess the useful- ness of managerial models of advertising allocation decisions. 7:". Analyse the effects of an increase in interest rates on the investment activity of a prot maximising rm. Does it matter if ination increases in proportion to the increase in interest rates? 3. (a) Show that an increase in the unit value of stock will lead to a less than proportionate fall in the optimum amount of stock held. What assumptions underlie your answer? (1)) A rm faces a uniform annual demand of moms units. The purchase cost of stock is 10 per unit, whilst the cost of ordering stock is 20, and the cost of holding stock is 14% of the average stock value. Find the Economic Order Quantity and the Mini- mum Acquisition Com. How are your answers affected by: (i) the fact it takes two weeks between placing an order and stock arriving; (ii) the offer of a 1% discount off the purchase cost if stock is ordered in lorry loads of 1'? one units. 9. \"The market allocates resources to the rms that best meet the needs of consumers.' Discuss. 10. 'The force of competition. the desires of managers and the needs of shareholders combine to ensure that rms maximise prot.' Discuss. 3. The following is true about chronic hunger in the world: a. About 1 billion people suffer from chronic hunger and most of these people are engaged in farm work b. About 1 billion people suffer from chronic hunger and most of these people live in urban areas c. About 3 billion people suffer from chronic hunger and most of these people are engaged in farm work d. About 3 billion people suffer from chronic hunger and most of these people live in urban areas c. None of the above statements is correct 4. A major argument for the use of biotechnology is a. in genetic engineering, which increases biodiversity b. in low-income countries, where the benefits are most likely to exceed risks c. in tissue culture, where the risks are small d. Both a and c are correct e. Both b and c are correct 5. Daly and Cobb's Index of Sustainable Economic Welfare (ISEW) per capita for the United States a. fell for about two centuries, then rose from 1976 to 1992 b. fell for the two centuries through 1992 c. rose for about two centuries, then declined from 1976 to 1992 d. rose for the two centuries through 1992 6. Daly and Cobb's Index of Sustainable Economic Welfare (ISEW) per capita a. adds environmental damage and resource depletion to gross product b. adds the import of goods and services from abroad to gross product c. subtracts environmental damage and resource depletion from gross product d. subtracts the gain of leisure time from gross product e. subtracts the services of government capital from gross product 7. For Daly, the limiting factor in economic development is a. entrepreneurship b. human skills c. natural capital d. physical capital 8. In the video on "GNP and the Index for Sustainable Economic Welfare (ISEW)," Martin Evers, a critical student, a indicated a better numerical measure of the quality of life b. indicated that environmental jobs are the fastest growing job category in the US c. indicated that scholars know how the economy and environment interact d. objected to measuring welfare in economic terms 9. In the video, Daly advocated investing part of the profit from the exploitation of non-renewable resources in a mining b. new capital equipment c. non-renewable substitutes d. renewable substitutes 10. The business people (for example, from Volkswagen and ABB), in the video, "Greenbucks: The Challenge of Sustainable Development," advocated cleaner technology, "green cotton," and recyclable cars, through a growing realization of the earth's limits b. investing in alternative energy c. taxes so businesses pay for negative externalities d. both a and b e. both b and c 11. Daly's impossibility theorem contends that a humans are already using almost 100 percent of the earth's net primary productivity b. increases in population will stimulate future economic growth c. non-renewable resources prevent the world attaining US consumption levels d. the stock of mineral deposits is adequate for rapid economic growthE10. Use the same data as in the previous exercise, except that you now swap the loan into floating-rate (at FIBOR). What are the payments on the loan, on the swap, and on the combination of them? Is there a gain if you could have borrowed DEM at FIBOR + 1 percent?Questions 1 and 2 have a combined weight of 60 minutes. 1. Evaluate and critically examine the pros and cons of the Uruguay Round of GATT. Limit your essay to the inclusion of the following topics as they relate to GATT: the issue of national sovereignty, special interest influences, the neoclassical free trade argument, the new 10 trade theory argument (see Mussa, Krugman, and Mcculloch), multilateral vs trade bloc and bilateral agreements, the loss of tariff revenue, welfare gains, the factor price equalization theorem, government procurement laws, real growth in GDP estimates attributable to GATT, compensation of the losers, and proposed definitions of dumping. You will lose points if these topics are not addressed. 2. Critically assess President Clinton's foreign trade policy agenda. Comment on his trade initiatives (since he became President). With reference to GATT, from your midterm to the present, comment on U.S. political momentum and maneuvering. Technical questions 3. Draw the offer curves for the U.S. and Japan. (2) Assume there are only two goods: cars and beef. The U.S. imports cars. Suppose the U.S. imposes a 10 percent tariff on cars. Assume the tariff revenue is redistributed in the form of beef. Show graphically (assume that Japan's offer curve is elastic in the relevant region of consideration) Place Cars on the horizontal axis. a. the effect on the volume of trade. What happens to imports? Exports? (3) b. the tariff revenue. (1) c. the tariff. (1) d. the effect on welfare. (1) e. the effect on the DTOT. (1) f. the effect on the WTOT. (1) g. how large would the tariff have to be to maximize the welfare of the U.S. (1) Suppose instead the tariff revenue was distributed in the form of cars. Show graphically h. the effect on the volume of trade. What happens to imports? Exports? (1) i. the tariff revenue.(1) j. the tariff. How does it compare to the previous case? (2) k. the effect on welfare. (1) 1. the effect on the DTOT. (1) m. the effect on the WTOT. (1) Assume that Japan's offer curve is inelastic (such that the Meltzer paradox occurs) in the relevant region of consideration and assume that the tariff revenue is redistributed in the form of beef. Show graphically n. the effect on the volume of trade. What happens to imports? Exports? (2) o. the tariff revenue. (1) p. the tariff. (1) q. the effect on welfare. (1) r. the effect on the DTOT. (1) s. the effect on the WTOT. (1) 4. Given that an import tariff is imposed, what does the Stopher-Samuelson theorem infer? (3) a. Explain intuitively why the theorem holds. (5) b. Does the theorem hold in the three cases discussed in question (3.)? (2) 5. Assume there are two goods: beef and cars (capital intensive) two countries: Japan (capital abundant) and the U.S.: and two inputs: labor and capital. a. State and then graphically demonstrate the H-O theorem. (5) b. According to the H-O theorem, what are the general equilibrium effects associated with free trade? Be sure to take into account the factor price equalization theorem. (6 c. Suppose that the growth of capital is positive and that of labor is zero in the U.S. According to the Rybczyski theorem, how is production affected (prove your statement via an Edgeworth Box), how is the TOT affected, and how is the level of welfare affected in the U.S.? (7) 6. What is the Leontief Paradox? Give one explanation to explain the paradox. (7) Final 1995, International Trade and Development Name_ (60 minutes for the essays) Choose 2 of the following essays. 1. Cite some recent examples of foreign direct investment. Is foreign direct investment beneficial to the host country? What problems (give examples-China, India, Nigeria, etc.-from artfolio) hay the WSJ articles) are associated with foreign direct investment? What influence does foreign - BOP statistic nd public aQuestion 5 (20 points) In climate economics many talk about a carbon budget, i.e., the total accumulation of carbon allowed under various scenarios for global warming. Let Sy denote the maximum accumu- lated carbon in CO, equivalents. For accumulated emissions above Sy some essential pro- duction becomes very costly. Let M, denote climate gas emissions in CO2 equivalents per time period from consumption. For simplicity, assume there are no emissions from produc- tion, i.e., all emissions are caused by consumption. This yields the following objective function: w= J, U (C,)edi , where where G is con- sumption at /, and 8 is the discount rate. The utility in time period / is increasing at a de- creasing rate in consumption, Cr, i.e., U'(Cr ) > 0 and U"(Cr )