Question 2 You have been hired by the Commonwealth of Massachusetts to evaluate a welfare reform put in place by the state, which made it very unpleasant to be on welfare by imposing harsh training requirements on those in the program. Specifically, Massachusetts wonders if the harsher requirements induced women to supply additional labor supply, and hence earn more in labor income. Welfare is only available to single mothers in the state. Welfare was reformed for residents of Boston in 2005, but not for residents of Springfield (a town in western Massachusetts) until 2007. For your evaluation, you are provided the following data on the average monthly earnings of different groups of women in the two cities for two years, 2004 and 2006. City Year Marital Status Labor Income Boston 2004 Single 175 Boston 2004 Married 300 Boston 2006 Single 210 Boston 2006 Married 290 Springfield 2004 Single 120 Springfield 2004 Married 200 Springfield 2006 Single 125 Springfield 2006 Married 210 1. Propose two difference-in-difference estimators of the impact of the 1995 welfare reform in Boston. For each, give: (a) The assumptions required for the DD estimator to be valid. (b) A scenario under which the assumptions would be violated2. Suppose that the Medicare system begins with retrospective payments. Under this scheme, doctors choose whichever level of r they feel is appropriate, and then the Medicare program gives the doctors $40 for every unit of a that they prescribe. (a) Under these incentives, what amount of care will each doctor prescribe? How does your answer depend on A? To what does A = 0 correspond? To what does A = 1 correspond?C) It is positively related to the elasticity of supply. D) It is the reciprocal of the elasticity of supply. 14. Suppose the demand for a drug is completely inelastic while the supply is elastic. The burden of a per unit tax on the drug will A) be shared by the buyers and sellers. B) fall entirely on the sellers. C) fall entirely on the buyers D) fall on neither the buyers nor the sellers. 15. Suppose that an individual allocates his or her entire budget between two goods, food and clothing. Can both goods be inferior? Explain. Both goods A. can be inferior because more is not necessarily preferred to less. B. can be inferior if they are substitute goods. C. can be inferior because an increase in income does not have to be spent on either good. D. cannot be inferior because an increase in income must be spent on one of the two goods. E. cannot be inferior if they are complementary goods. 16. A Giffen good A. has a downward sloping demand curve. B. has an upward sloping demand curve. C. will experience an increase in demand as consumer's income increases. D. will never be purchased. 17. When the price of good X increases and all goods (including X) are normal goods, the income effect leads consumers to buy A. more of good X and less of other goods. B. less of all goods. C. more of all goods. D. less of good X and more of other goods. 18. A monopolist maximizes profits at a quantity where A. Total Revenue equals Total Cost B. Marginal Revenue equals Marginal Cost C. Price equals Marginal Cost D. Price equals Average Cost 19. Isocost lines are straight because the slope of such lines A. equals the ratio of the marginal products of the inputs, which is fixed. B. equals the marginal rate of technical substitution, which is fixed. C. equals the ratio of input prices, and these prices are fixed.C) It is positively related to the elasticity of supply. D) It is the reciprocal of the elasticity of supply. 14. Suppose the demand for a drug is completely inelastic while the supply is elastic. The burden of a per unit tax on the drug will A) be shared by the buyers and sellers. B) fall entirely on the sellers. C) fall entirely on the buyers D) fall on neither the buyers nor the sellers. 15. Suppose that an individual allocates his or her entire budget between two goods, food and clothing. Can both goods be inferior? Explain. Both goods A. can be inferior because more is not necessarily preferred to less. B. can be inferior if they are substitute goods. C. can be inferior because an increase in income does not have to be spent on either good. D. cannot be inferior because an increase in income must be spent on one of the two goods. E. cannot be inferior if they are complementary goods. 16. A Giffen good A. has a downward sloping demand curve. B. has an upward sloping demand curve. C. will experience an increase in demand as consumer's income increases. D. will never be purchased. 17. When the price of good X increases and all goods (including X) are normal goods, the income effect leads consumers to buy A. more of good X and less of other goods. B. less of all goods. C. more of all goods. D. less of good X and more of other goods. 18. A monopolist maximizes profits at a quantity where A. Total Revenue equals Total Cost B. Marginal Revenue equals Marginal Cost C. Price equals Marginal Cost D. Price equals Average Cost 19. Isocost lines are straight because the slope of such lines A. equals the ratio of the marginal products of the inputs, which is fixed. B. equals the marginal rate of technical substitution, which is fixed. C. equals the ratio of input prices, and these prices are fixed.Q1. Suppose, at a given federal funds rate, there is an excess demand for reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level, then it should undertake an open market of bonds, everything else held constant. If the Fed does nothing, however, the federal funds rate will . Fill the blanks and show your argument on the graph of the federal funds market. Q2. The Fed reduces reserve requirements. Explain using graphs for the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant. You need to consider all 3 cases. In addition, briefly mention about changes in monetary base and money supply.Q1. Suppose, at a given federal funds rate, there is an excess demand for reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level, then it should undertake an open market of bonds, everything else held constant. If the Fed does nothing, however, the federal funds rate will . Fill the blanks and show your argument on the graph of the federal funds market. Q2. The Fed reduces reserve requirements. Explain using graphs for the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant. You need to consider all 3 cases. In addition, briefly mention about changes in monetary base and money supply.A medical study was carried out between 1 January 2001 and 1 January 2006, to assess the survival rates of cancer patients. The patients all underwent surgery during 2001 and then attended 3-monthly check-ups throughout the study. The following data were collected: For those patients who died during the study exact dates of death were recorded as follows: Patient Date of surgery Date of death 1 April 2001 1 August 2005 1 April 2001 1 October 2001 1 May 2001 1 March 2002 1 September 2001 1 August 2003 E 1 October 2001 1 August 2002 For those patients who survived to the end of the study: Patient Date of surgery 1 February 2001 1 March 2001 1 April 2001 1 June 2001 1 September 2001 1 September 2001 1 November 2001 For those patients with whom the hospital lost contact before the end of the investigation: Patient Date of surgery Date of last check-up M 1 February 2001 1 August 2003 N 1 June 2001 1 March 2002 1 September 2001 1 September 2005A medical study was carried out between 1 January 2001 and 1 January 2006, to assess the survival rates of cancer patients. The patients all underwent surgery during 2001 and then attended 3-monthly check-ups throughout the study. The following data were collected: For those patients who died during the study exact dates of death were recorded as follows: Patient Date of surgery Date of death 1 April 2001 1 August 2005 1 April 2001 1 October 2001 1 May 2001 1 March 2002 1 September 2001 1 August 2003 E 1 October 2001 1 August 2002 For those patients who survived to the end of the study: Patient Date of surgery 1 February 2001 1 March 2001 1 April 2001 1 June 2001 1 September 2001 1 September 2001 1 November 2001 For those patients with whom the hospital lost contact before the end of the investigation: Patient Date of surgery Date of last check-up M 1 February 2001 1 August 2003 N 1 June 2001 1 March 2002 1 September 2001 1 September 20057. The next 2 parts to this question give changes that have occurred in the broiler chicken market. For each change in a determinant given, draw in the change that would occur on the supply/demand graph for chicken that is provided. Be sure and review what causes the curve to shift and what causes a movement along the curve as well as what determinants affect supply and what affect demand. Once you have drawn in your change, write a short explanation for each question discussing what would be the new equilibrium price and quantity levels due to the change. In other words, has equilibrium price or quantity increased, decreased or stayed the same, etc. (To draw in changes on the graph in Microsoft Word, you will go to the Insert menu and select Shapes and then choose lines or arrows to draw in your shifts or show movement along the supply or demand curves.) A. In the chicken market, assume there have been substantial technological advancements made in the production processes for producing chicken. At the same time, consumer income has decreased (assume chicken is a normal good). Chicken Market B. Chicken and beef are substitute products. Assume the price of beef has increased considerably. What happens in the chicken market? D Chicken Market7. The next 2 parts to this question give changes that have occurred in the broiler chicken market. For each change in a determinant given, draw in the change that would occur on the supply/demand graph for chicken that is provided. Be sure and review what causes the curve to shift and what causes a movement along the curve as well as what determinants affect supply and what affect demand. Once you have drawn in your change, write a short explanation for each question discussing what would be the new equilibrium price and quantity levels due to the change. In other words, has equilibrium price or quantity increased, decreased or stayed the same, etc. (To draw in changes on the graph in Microsoft Word, you will go to the Insert menu and select Shapes and then choose lines or arrows to draw in your shifts or show movement along the supply or demand curves.) A. In the chicken market, assume there have been substantial technological advancements made in the production processes for producing chicken. At the same time, consumer income has decreased (assume chicken is a normal good). Chicken Market B. Chicken and beef are substitute products. Assume the price of beef has increased considerably. What happens in the chicken market? D Chicken Market