There are two firms in the market for tires which has demand given by P = 480 ? 0.25Q where Q = q1 + q2 is the total output in the market. Both of the firms have constant marginal cost c = 60 and the two firms compete in quantities (Cournot competition). Assume that this market game is being played infinitely many times by the two firms

a) Suppose that the two firms colluded and agreed to each produce half of the monopoly output. Solve for the value of collusion V C and the value of deviation V D . What is the minimum discount factor ? required to sustain collusion?

b)Now suppose that the government forms an antitrust authority whose job is to prevent the firms from colluding. This authority could detect collusion with probability q = 0.2 but for political reasons, the largest fine they could impose on a firm caught colluding is F = 2500. What is the highest possible discount value ? of firms that they could successfully prevent from colluding.

c)Suppose that the government's antitrust authority only cares about consumer surplus. What is the most the government would be willing to pay in order to prevent collusion?

1. Cost benefit Cost benefit analysis for a hospital buying a PET scan machine Calculate the marginal benefit to society from the purchase of the PET scanner Should it be purchased or not in the decision column Probability that One cancer fatality could be at Prevented By a PET Scan Value of One Estimated Cost of the Scanner Decision Life Benefit 1 in 1.000,000 1 in 1.000 1 In 10 1 in 2 The cost of the scanner is $800,000, The value of one life is elevated to $10,000,000 now. Essay Toolbar navigation This question will be sent to your instructor for grading. 99-(a) The recovery of output after the Financial Crisis was the slowest ever observed in UK history. Many economists believe that this was due to the measures of austerity introduced by the government to reduce debt. George Osborne, the Chancellor of the Exchequer at the time, described the plan with which public debt should be reduced while at the same time stabilising output in the following way: Monetary activism to keep interest rates low and stimulate the economy. Fiscal respon sibility [i.e., fiscal contraction] to restore confidence and rebuild our battered public finances. Use the IS-LM-FX model to explain Osborne's plan. Contrary to Osborne's expectations, the economy was not stabilised, but contracted. Can you explain why? (40 marks) (b) The measures of austerity were primarily introduced because of the government's fear that the high level of government debt could result in a debt crisis akin to Greece. Is this likely to have happened without austerity? Discuss. (30 marks) (c) In the current low-interest rate environment, the Bank of England has implemented a number of unconventional monetary policy measures (e.g., quantitative easing). Is predicting how the exchange rate behaves as the result of unconventional monetary expansion more or less difficult than after a conventional monetary expansion? Discuss. (30 marks)+ 75% High-school dropout rates and performance at graduation by score at entrance exam Grade at entrance exam Percent that dropped out from Score on the final exam at - cutoff score for admission high school end of high school 50 0 0 62 elite schools Admitted in 0.53 0.45 51.0 0.50 4810 0 30 0.20 Not admitted in elite schools 42 5 0.25 0.17 45.0 011 Source: Adapted from the analysis of de lanwry, Dustan, Sadoulet (b) Draw two regression lines (Excel commands: Chart, Add linear trend line in Excel, Display equation on graph) separately for the points above the cutoff score (i.e., for those admitted to the elite schools) and for those below the cutoff score (i.e., not admitted to elite schools). Measure the "discontinuity" that you observe at the limit at the point where students were just admitted, i.e., the vertical difference in the two trend lines evaluated at the cutoff. (c) Explain why this may be a credible measure of the causal impact of attending an elite school on the risk of not graduating from high school. In what sense is it a "local" treatment effect? What are some of the factors that might lead to a different impact for students with entrance exam scores far above the cutoff? (d) Repeat the analysis as in question (1b) using the score on the final exam at the end of high school as the dependent variable. Report the impact of attending an elite school on final exam scores at the end of high school. (e) Discuss the trade-off faced by students upon deciding whether to attend an elite school. (f) What is the condition for the validity of this method, and what does this imply about the characteristics of individuals around the cutoff? Discuss what data would you need to have to test that this condition applies and what analysis would you do to support it. Report your results using two graphs: one for the graduation rate and the other for the score on the final exam at the end of high school.ECO 3703 International Economics Exercise 2-Foreign Exchange Scenario 1: On October 17, 2014, here are some selected foreign exchange rates quoted by a major international bank EUR/USD Spot 1.2774 Forwards 1 month 2.7 Futures Dec 14 1.2781 2 months 5.4 Mar 15 1.2790 3 months 8.2 Jun 15 1.2799 6 months 17.0 Sep 15 1 2814 1 year 44.9 USDIPY Spot 106:68Use the compound interest formula A = Pe\" to answer the following questions. (a) How much will $19700 be worth in 38 years if it is invested at 1.84% interest compounded continuously? (b) How much should you invest initially so you have $88000 in 11 years if you can get 3.46% interest compounded continuously