QUESTION ONE

a. What is the Hick's theory of business cycle.

b. Using the information obtained from a monopolist firm:

P=520 - 2Q

MC=100 + 2Q

TC = 100Q+Q²+50

i.Determine the profitmaximizing price and output.

ii. Calculate the total revenue and total profit for the firm.

Iii At the profit maximizing quantity,what is the monopolists average total cost?

iv. At the profit maximizing quantity, what is the profit per unit?

c. A firm isin the process of performing a cost-benefit analysis, before purchasing robots for the warehouse.Currently the firm has 20 ware houses, employees, who earn $ 30 000 per year each.Each robot can do the work of five human workers.The robots cost $ 150 000 each.The price includes ten years of free maintenance. The company must also employ a roboticist whose salary is $ 50 000 per year.What is the cost-benefit analysis and advice the directions on whether the firm shouldgo ahead with the project.

QUESTION TWO

a.On the basis of appropriate assumptions, explain how the law of demand can be established when a consumer has multiple commodities using the cardinalist utility approach. What are the limitations of this approach?

b .Advising on desirability of certain economic model.Which characteristics can one look for

QUESTION THREE

Two students, Joseph and Mary are taking their exams in their Economic analysis

class.They are both independently, trying to decide whether they will conceal

their answers or reveal their answers. Joseph knows that if he conceals hi answers,

he will get a 60on the exam and if he does not conceal his answers, he will get

56 provided that Mary conceals her answers.Joseph knows that he will make

75 on the exam if both Joseph and Mary do not conceal their answers.Mary

believes she will make a 80 on the exam if both students conceal their answers,

85 on the exam if she conceals her answers while Joseph reveals his answers, a 85

on the exam if she reveals her answers while Joseph does not reveal his answer

and a 87 on the exam if both students do not conceal their answers.

a. Construct a pay off matrix for Joseph and mary.In the pay off matrix identify the two strategies that both students face and then enter their pay offs with Joseph's pay off the fiers number and Mary's pay off the second number.Label this pay off matrix fully and completely.[6 marks]

b. Does Mary have a dominant strategy with regard to concealing or revealing her answers?Explain your answer.[4 marks]

QUESTION FOUR

A country's publicdebt stands at approximately 4.884 trillion dollars and

the government shows no signs of stopping further borrowing.

b.What are the impact of this debt burdento the economy both in the shortand long run.

c.how can the government get out of this trap.

QUESTION FIVE

(a)What are thefour types of models used in economic analysis and their benefits, process and limitations.