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Country A has 120 units of labor available, while country B has 240 units available. Each country can produce two goods. The table lists the respective unit labor requirements, i.e., the number of units of labor it takes to produce one unit of output.

Country Food Clothing Total labor A 3 2 120 B 4 3 240

a. Compute the output per worker of clothing and the output per worker of food in each country. b. Which country has an absolute advantage in clothing, and in food? c. Create a graph of each country's PPF (with food on the y-axis) and indicate the equations defining each frontier. Indicate country B's variables with a superscript *. d. What is the price of clothing, in terms of food, in each country? e. Using the previous answers, what is the pattern of trade? answer all it is okay f. Assuming that trade occurs, what do we know about the equilibrium price in free trade? g. Show in a graph that both countries are better off with free trade. h. In which country would you choose to live, that is, in which country can you earn higher real wages?

Generate a covariate matrix X of dimension n k, where n = 500 and k = 4. The first column in X should be a column of ones and the other three columns can be generated from a relatively diffuse normal or uniform distribution. Let = (1,1.25,1.5,1.75)and let 2= 1. Simulate y from the model y = X + , where N(0,2In). (This process is exactly the same as the one in lab assignment 1. Therefore, you can reuse your codes.) 1. Estimate by ordinary least squares, and let OLS denote this estimator for . Compute s2as discussed in class. 2. Estimate and 2by maximizing the log-likelihood function derived in class. Let MLE and 2MLE denote the two estimators respectively. 3. Compare MLE with OLS . Compare 2MLE with s2. 4. Is MLE an unbiased estimator of ? Why? Is 2MLE an unbiased estimator of 2? Why?

1. Identify the protagonist's situating and potential decision to be made (

2. Review the background information about KBA ( a. Objectives b. Previous accomplishments c. What decision(s) need to be made

3. Assess Risk Implications & Pertinent Models, Theories or Frameworks ). a. Definition and types of risks b. Potential risk analysis models c. Banking Cyber security risks

4. Analyze Anticipated Respective Risk Impacts

a. Technology based analysis ( i. What are costs of technology sensitive risks (monetary/non-monetary)? 2 ii. What are the technology mitigation cost? iii. What are the technology mitigation benefits? iv. Analyze the technology cost/benefit ratios.

b. Policy based analysis i. What are costs of policy sensitive risks (monetary/non-monetary)? ii. What are the policy mitigation cost? iii. What are the policy mitigation benefits? iv. Analyze the policy cost/benefit ratios.

c. Awareness based analysis i. What are costs of awareness sensitive risks (monetary/non-monetary)? ii. What are the awareness mitigation cost? iii. What are the awareness mitigation benefits? iv. Analyze the awareness cost/benefit ratios.

d. Choose one (Technology, Policy or Awareness) analysis ( i. What are costs of XX sensitive risks (monetary/non-monetary)? ii. What are the XX mitigation cost? iii. What are the XX mitigation benefits? iv. Analyze the XX cost/benefit ratios

Consider a simple economy with two individuals, Elena and Julia. The economy is endowed with 30 cups of delicious Colombian coffee and 30 French croissants each month. Elena and Julia's preference for these goods are given by their utility functions

E= 1/3 2/3

J= 2/3 1/3

Where is the amount of delicious Colombian coffee (in cups) and is the number of French croissants.

a. Draw the indifference curves for Elena and Julia for a utility level of 10 and 20 (Draw delicious Colombian coffee in the vertical axis and French croissants in the horizontal axis). b. If each individual only had 15 cups of delicious Colombian coffee, how much French croissants would each individual be willing to give up in order to have another loaf of bread if the initial amount of croissants is also 15? (Hint: You need to find the MRS for Elena and Julia. You would need to use some calculus to answer this question. However, if you are a bit rusty with your calculus you can use the following: the utility functions here are called Cobb-Douglas, and they take the form = '( this implies a generic MRS equal to )*= , )

Suppose families are single-parent families: for each parent in generation there are 1 + children and these belong to the next generation. Any financial wealth left by a person who just died is inherited equally by the 1 + children. For members of generation the probability of staying alive three periods is thus 1 c) Given the pure rate of time preference in what direction does a decrease in affect the effective rate of time preference for a middleaged person? d) Suppose that there are no life annuity For a young belonging to generation whose parent dies at the end of period with financial wealth , the period budget constraints are 1 + = + 1 1 + 2+1 + +2 = +1 + (1 + ) 3+2 = (1+)+2 Explain. Interpret +2 : is it saving in period + 1 or what? e) Suppose that for some unexplained reason all members of generation 1 happens to have the same financial wealth at the time of retirement. Yet, after one period an inegalitarian distribution of wealth within generations tends to arise although all individuals have the same rate of time preference. Explain in a few words why.

At a certain point in time a competitive market for private life annuities arises. Then before retiring middle-aged individuals place part or all their financial wealth in life annuity contracts issued by the life insurance companies. These use the deposits to buy capital goods which are rented out to the production firms. Next period the production firms pay back a risk-free return, 1 + per unit of account invested. At the same time, the insurance companies distribute their holdings (with interest) to their surviving depositors in proportion to their initial deposits. f) Suppose that the insurance companies have no operating costs. Their aim is to maximize expected profit. Then, given free entry and exit, in equilibrium what will expected profit in the annuity industry be? g) In equilibrium, how much will each surviving depositor receive per unit of account initially deposited?

h) Suppose somebody claimed: "The middle-aged individuals will choose to hold all their financial wealth in the form of life annuities." True or false? Why? i) What will the wealth distribution within generations in the long run look like?

Consider an individual's saving problem in Blanchard's "perpetual youth" model (standard notation): max ()=0 0 = Z 0 (ln )(+) s.t. 0 = ( + ) + where 0 is given, lim 0 (+) 0. a) Briefly interpret the objective function, the constraints, and the parameters. b) Derive first the first-order conditions and the transversality condition, next the Keynes-Ramsey rule. c) Derive the full solution to the problem, i.e., find the consumption function. Hint: combine the Keynes-Ramsey rule with strict equality in the intertemporal budget constraint. d) How will a rise in the interest rate level affect current consumption and saving? Comment in terms of the Slutsky effects.

d) Write down the perfect foresight transversality condition of a household with infinite horizon. In fact there are three ways of writing it. Indicate all three. e) State with your own words what the transversality condition says in each of the three versions. IV.4 Demography and the rate of return The Blanchard OLG model for a closed economy is described by the two differential equations