Help me to understand the following questions better.
HW 1 (1) - Word (Product Activation Failed) SERT DESIGN PAGE LAYOUT REFERENCES MAILINGS REVIEW VIEW 1. Towards the end of the 20th century, the U.S. government wanted to save money by closing a small portion of its domestic military installations. While many people agreed that saving money was a desirable goal, people in areas potentially affected by a closing soon reacted negatively. Congress finally selected a panel whose task was to develop a list of installations to close, with the legislation specifying that Congress could not alter the list. Since the goal was to save money, why was this problem so hard to solve? 2. Your car gets 29 miles per gallon (mpg) at 60 miles per hour (mph) and 25 mpg a 70 mph. At what speed should you make a 525-mile trip: a. If gas costs $3 per gallon and your time is worth $18 per hour b. If gas costs $4 per gallon and your time is worth $12 per hour c. If gas costs $5 per gallon and your time is worth $9 per hour 3. A firm is planning to manufacture a new product. As the selling price is increased, the quantity that can be sold decreases. Numerically the sales department estimates: P =$475-0.250 Where P = selling price per unit and Q = quantity sold On the other hand, management estimates that the average unit cost of manufacturing and selling the product will decrease as the quantity sold increases, They estimate C = $480 + $22,500 Where C = cost to produce and sell Q per year The firm's management wishes to maximize profit. What quantity should be sold? How much profit will be made? ENGLISH (CANADA)2. You have collected the following data on output and total variable costs: \" m m m a. b. Identify the range of output exhibiting increasing returns (increasing MP} and the range exhibiting diminishing returns {decreasing MP}. Cmrent xed costs for the company equal $136,5U. Draw two graphs, both with Q on the horizontal axis: one graph shows WC and TC, and the other shows AVG, AC, and MC. Suppose that the government imposes a $T5, property tax hike on all businesses; how will that affect your two graphs; is, which cost curves will be affected and how? Suppose instead that the government consist your production process to he polluting, and iruposes a $35!} tax per unit produced (replacing the property tax in the previous question)- How does this tax increase compare to the property tax increase, in terms of the effect on your company's cost curves? Tfour boss says "either of these taxes is going to force us to change our production levels." Given what you know about optimization analysis, how would you respond? IS-LM Model (Based on Mankiw Ch. 12 #3). Use the information about the following economy to build the IS-LM model. a. The consumption function is given by C = 300 + 0.6(Y - ). The investment function is / = 700 - 80r. Government spending and taxes are both 500. Graph the IS curve for this economy. Be sure to label the x- and y-axes. b. The money demand function is (M/p) = Y - 200r. The money supply M is 3,000 and the price level P is 3. On the same graph as in part a.), graph the LM curve. c. Find the equilibrium interest rate r and the equilibrium level of income Y. Label the equilibrium values on your graph. d. Suppose that government spending is increased from 500 to 700. How does the IS curve shift? What are the new equilibrium interest rate and level of income? Show the shift and the new equilibrium on your graph. e. Suppose instead that the money supply is increased from 3,000 to 4,500. How does the LM curve shift? What are the new equilibrium and level of income? On a new graph, show the original IS and LM curves and then show the shift and the new equilibrium. f. With the initial values for monetary and fiscal policy, suppose that the price level rises from 3 to 5. What happens? What are the new equilibrium interest rate and level of income? On a new graph, show the original IS and LM curves and then show the shift and the new equilibrium. g. . For the initial values of monetary and fiscal policy, derive and graph an equation for the aggregate demand curve (Hint: Solve the IS and LM curves in terms of r. Then combine them and solve for Y in terms of P.). What happens to this aggregate demand curve if fiscal or monetary policy changes, as in parts d.) and e.) (simply state which direction the aggregate demand curve shifts in each case)?(12 points} Consider the payoff matrix below. The players make their choices simultaneously and without communication between them. The game will be played only once. Each player is aware of the whole payoff matrix. B Firm B A Raise P Hold P Cut P Raise P 20 30 40 Firm A 2D SCI 20 Hold P 4E! 30 5E] 3D 40 40 Cut P '10 2E! 30 2D SCI 10 a. If Firm A decides to raise its price and Firm B decides to cut its price, what is Firm B's payoff? b. Does Firm A have a dominant strategy? If so, what is it? c. Does Firm B have a dominant strategy? If so, what is it? d. Which option raise, hold, cut should Firm A choose? e. Which option should firm B choose? f. Is there a Nash equilibrium in this game? If so, which outcome is it? (Describe the outcome by giving A's option and B's option.) (4 points} How many Nash equilibria could there be, at most, in a game with a 3 x 5 payoff matrix? (El points} Consider the payoff matrix below. Two firms are thinking about offering a new model of their product. There is not enough demand for both firms to have good sales if they both offer the new model. a. What is a value of X that will make this game a prisoner's dilemma prob em? b. As a prisoner's dilemma problem, which outcome is the dominant strategy equilibrium? c. As a prisoner's dilemma problem, which outcome would the firms choose if they could collude? (Assume that the two firms can talk to each other, but they cannot exchange funds for each other's cooperation.)
