Solve

An investment company has a constant population. Everyone's demand for chequing deposits is

5,000 goods in total in every period. The economy has a total endowment of 10,000

goods per period. There is a total stock of unintermediated capital of 1,000 goods in

each period. Bank deposits are the only form of money in the economy. Deposits of

banks are subject to a 20 percent reserve requirement. The net real rate of return on

capital is 10 percent per period. After meeting the reserve requirement, banks invest the

remainder of all deposits into capital. Individuals do not hold capital. The fiat money

stock is $2,000 per period. Capital takes two periods to generate final returns.

21. What is this economy's price level?

(A) 0.2.

(B) 0.3.

(C) 0.4.

(D) 0.5.

22. What is the total nominal money stock, M1t?

(A) $20,000.

(B) $10,000.

(C) $2,500.

(D) $1,500.

23. What is the money multiplier?

(A) 20.

(B) 10.

(C) 5.

(D) 2.

24. What is the total (nal) capital output after two periods?

(A) 6,050.

(B) 4,840.

(C) 1,210.

(D) 1,000.

25. What is this economy's real GDP?

(A) 16,050.

(B) 14,840.

(C) 11,560.

(D) 10,000.

The next four questions involve the following situation.

An economy has 200 young people born each period. Each young person receives an

endowment of 200 goods, but nothing when middle-aged or old. There is a storage

technology and a bank. For each good put into storage in the current period, the person

receives a single unit of consumption next period (a real return of zero). In addition,

capital is available, which pays X = 1:25 two periods after it is acquired. If a person

liquidates capital after one period, then only 0.8 units of the consumption good can be

obtained. Assume that 10 percent of people want to consume only when middle-aged,

and the remainder only want to consume when old; however, people only realize their

preferences with regards to consumption when they reach middle-age.

26. How many goods does the bank hold in storage?

(A) 0.

(B) 4,000.

(C) 36,000.

(D) 40,000.

27. How many goods does the bank hold in capital?

(A) 0.

(B) 4,000.

(C) 36,000.

(D) 40,000.

28. If there is no bank run, how many goods will middle-aged people consume?

(A) 0.

(B) 4,000.

(C) 36,000.

(D) 40,000.

29. If there is no bank run, how many goods will old people consume?

(A) 0.

(B) 4,000.

(C) 36,000.

(D) 40,000.

2. Complete Table 1 and show calculations for each answer. Table 1: Output, Fixed Cost, Variable Cost, Total Cost and Marginal Cost Output (q) Fixed cost Variable Cost Total Cost Marginal Cost 48 25 N 46 ( c) (d) 66 (e) 4 (a) (b) 130The table shows the marginal cost for a company's product at various production levels. Marginal cost Marginal cost Units ($/unit) Units ($/unit) 0 3.24 7000 2.19 1000 2.87 8000 2.18 2000 2.77 9000 2.20 3000 2.74 10,000 2.24 4000 2.55 11,000 2.38 5000 2.47 12,000 2.62 6000 2.27 13,000 2.83 (a) Estimate the cost (not including fixed costs) to produce the first 12,000 units by considering batches of 2000 units. Use the initial marginal cost for each batch in your calculations. $ (b) Use batches of 1000 units and the ending marginal cost for each batch to estimate the cost of raising the production level from 4000 to 11,000 units. $plia Homework: Monopolistic Competition, Oligopoly, and Game Theory 4. Understanding excess capacity The following table shows the daily cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run. Fill in the values in the Marginal Cost, Total Revenue, and Marginal Revenue columns in the following table and then answer the questions that follow. Quantity Price Total Cost Marginal Cost Total Revenue Marginal Revenue Average Total Cost (Board games) (Dollars per game) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) 1 12.00 10 10.00 16 W N 7.00 18 6.00 20 5.00 35 YYYYV 4.00 48 2.00 70 VV 1.00 Under monopolistic competition, a typical firm will produce board games at a price of per board game in the short run. Based on your calculations, the firm will Fill in the Average Total Cost column in the previous table. Based on your calculations, the level of excess capacity in this monopolistically competitive market isNimbus Ltd, makes brooms and then sells them door to door. Here is the relationship between the number of workers and Nimbus's output in a given day: Average Workers Output Marginal Product Total Cost Total Cost Marginal Cost 1 30 2 70 3 120 4 160 190 210 7 220 a. Calculate and fill in the column of marginal products. What pattern do you see? How might you explain it? Hints: show your calculations. (5 marks) b. A worker costs $150 per day, and the firm has fixed costs of $300. Use this information to calculate and fill in the column for total cost. Hints: show your calculations. (5 marks) c. Calculate and fill in the column for average total cost, (Recall that ATC=TC/Q.) What pattern do you see? Hints: show your calculations, (5 marks) d. Now calculate and fill in the column for marginal cost. (Recall that ATC/4Q.) What pattern do you see? Hints: show your calculations. (5 marks) e. Compare the column for marginal product and the column for marginal cost. Explain the relationship. (5 marks) f. Compare the column for average total cost and the column for marginal cost. Explain the relationship