Course Project – Part 1

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Exercise 1
Choose one of the following two microeconomics issues:
1.Everyone?s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. Be sure to cite any references used.
2.Ethical Issues in Business. It seems that every day lately we are confronted with a new company that has acted at least unethically and possibly illegally in the operation and financial reporting of their company?s business dealings? Briefly discuss one of these issues and then see if you can relate the issue to ANY of our TCOs. That is, are there any effects on demand or on supply related to this topic? How would you expect this to affect the equilibrium price and equilibrium quantity for this company?s products and services? Is the elasticity of demand or supply affected? What about the effect on production levels and costs? Are ethical issues more likely to occur in one market type rather than another market type? You don?t have to cover all of these topics. I?ve just suggested some possible connections to our TCOs. Any connection to our TCOs is fine here.
Exercises 2 and 3 From Question below I have posted
Select any two out of the following questions from the text:
? Chapter 3, Question 14
? Chapter 3, Question 15
? Chapter 5, Question 17
? Chapter 5, Question 18
? Chapter 7, Question 15
? Chapter 8, Question 11
? Chapter 8, Question 14
Exercises 2 and 3:(For each Chapters Question above are below I have posted).
Chapter 3,
14. Assume initially that the demand and supply for premium coffees (one-pound bags) are in equilibrium. Now assume Starbucks introduces the world to pre- mium blends, and so demand rises substantially. Describe what will happen in this market as it moves to a new equilibrium. If a hard freeze eliminates Brazil?s premium coffee crop, what will happen to the price of premium coffee?
15. In late 2006 and early 2007, orange crops in Florida were smaller than expected, and the crop in California was put in a deep freeze by an Arctic cold front. As a result, the production of oranges was severely reduced. In addition, in early 2007, President George W. Bush called for the United States to reduce its gaso- line consumption by 20% in the next decade. He proposed an increase in ethanol produced from corn and the stalks and leaves from corn and other grasses. What is the likely impact of these two events on food prices in the United States?
Chapter 5,
17. Consider chip plants: potato and computer. Assume there is a large rise in the demand for computer chips and potato chips. a. How responsive to demand is each in the market period? b. Describe what a manufacturer of each product might do in the short run to increase production. c. How does the long run differ for these products?
18. Coca-Cola in dispensers located on a golf course sells for $1.25 a can, and golfers buy 1,000 cans. Assume the course raises the price to $1.26 (assume a penny raise is possible) and sales fall to 992 cans. a. Using the midpoint formula, what is the price elasticity of demand for Coke at these prices? b. Assume the demand for Coke is a linear line. Would the elasticity of demand be elastic or inelastic at 75 cents a can? C. At $2.00 a can?
Chapter 7
15. After the Enron and other business scandals in the early 2000s, the United States passed the Sarbanes-Oxley Act, adding a number of rules and report- ing requirements for U.S. corporations. The business community argues that these reporting requirements are extremely costly and cumbersome with only minimal benefit. Most companies, they argue, were not engaged in illegal or unethical behavior, and they are being punished because of a few. One appar- ent impact of this law is that in 2005, ?of the top 25 global initial public offer- ings (when companies first offer their stock to the general market for pur- chase), only one was in the United States.?6 This is business lost to the New York Stock Exchange (NYSE) and NASDAQ. Are these kinds of compliance costs established by Sarbanes-Oxley fixed or variable costs? Why would firms care so much about these regulations? Can we expect to see the NYSE and NASDAQ try to buy or merge with other foreign stock exchanges in the near future?
Chapter 8
11. Michelle Slatalla (New York Times, February 3, 2005) stated, ?The conven- tional wisdom a few years back was that the Internet would erase price differ- ences among retailers by giving customers instant access to the best deals. Mer- chants who charged more would be driven out of business.? She further quoted Professor Michael Baye, who noted, ?The prediction was price-comparison sites would create perfectly competitive environments in which all firms would have to charge the same price.? These forecasts for the Internet creating ?perfectly competitive? markets were based on the competitive model we have presented in this chapter. Do you think the Internet has helped create more competitive markets or less?
14. Assume a competitive industry is in long-run equilibrium and firms in the indus- try are earning normal profits. Now assume that production technology improves such that average total costs decline by $5 a unit. Describe the process this industry will go through as it moves to a new long-run equilibrium

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