Chapter I homework 1 Indicate whethor cach ofthe following d

Chapter I homework 1. Indicate whethor cach ofthe following decisions is more characteristic of a primary market-oriented cconomy or ofa primanly command-oriented econoemy a a family decides to start a restaurann h a business decides to lay off workens; c. the govemment announces a plan for the national economy to focus on producing high echnology goods; d the goverment imposes an ste 6xx increase 2 In cach of the following cases, state()whether the action is happening in the poods market, the labor market, or the financial capital market, and (ii) whether it is on the supply side or the demand side of that market a Abe walks to the comer store for a quart of milk b. Betha makes a deposit in a bank savings account c Cory\'s Cab Company opens for business d Druscilla takes a job cutting hair e. Edwardo gets a student loan f Ferdinand borows moncy from the bank to buy a new track for his trash-bauling business E Griselda\'s Grocery decides to hire two moee cashiers Chapter 2 I. Tamara eans 58 an hour and works 60 hours/week. Draw her labor-leisure budgct constraint What detemines its slope? How does the position and slope of her budget constrant change ifher wage ncreases to $16 per hour? 2 Adrienne wins a lotery prize of $3,000. The current interest rate is 3% She could spend the money now or .nvest it fr 10 years and spend then. Draw her intertempoal budget constraint and illustrate some of her choices. Also creake a table for some of her choices. How would a higher interest rate ater her budget constrain? 3 ProduceCom and MakdtCom are two companies of idantical size in two different countries, one with a high inflation rate and one with a low inflation rate. ProduceCom is in a country where the indlation rate is 12% and it needs to pay an interest rate of 1 7% when it bortoves. MakelConn is a country where the inflation rate is 3%, but it needs to pay a rate of9% when it borrows If6e time value of mony is the same in both economies, which compamy is being charged a higher risk premium 4 Use the ideas of opportunity cost, marginal analysis, and sunk cost to give advice to the following people a When Usula goes to an all-you-can-eat buffiet, she eats so moch that she is sick for two days. But she says it\'s OK, because it didn\'t cost har anything extra. Yor advice? b. Victor is thinking about starting a small business selling baseball caps in the shopping mall He tells you that if he makes a financial investment of $10,000 and works full-time for a year, be can cam $20,000 per yar. Since the gain of $20,000 exoeeds the $10,000 he invests, this seems like a good idca to him Your advice? c Xavier works at a U.S. post office in a large city, which is located in a lovely old building in a prime downtown location. He says that it\'s a great deal, because the building was bought and paid for many years apo and so it now has zro cost. Your comment? d Yolanda works for a company that spends S20,000 on surveys to decide whether to launch a new product. Then i decides that it needs to lunch the peoduct to earn back the money it spent on the surveys Your advice? e. Zachariah decides that his faverite food is grapes, therefore, he decides that he will cat nothing but grapes from now on Your advice?

Solution

Answer 1

a) decision of a family to start a restaurant is there pure personal choice so it is command oriented.

b ) laying of workes by a firm is purely market bared as equilibrium quantity of labour must be less , so lay off was required.

c ) Command based because its government\'s decision without anything related to market, rather its government\'s discretionary decision.

d) imposing of sleep tax has nothing to do with market, so ut is command based.