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The Lexus LS 430, the top of the line Lexus sedan, riad a base price in Canada of C$85,700 during the fall of 2005. Restated in US dollars using the exchange rate prevailing then, that price is $71,885. In the US during the fall of 2005, the same car had a base price of $56,525. Thus, the LS 430 was 27 percent more expensive in Canada, a difference that is substantial even after recognizing that Toyota could export cars from Japan to the US duty free but had to pay a 6.1 percent tariff on cars exported to Canada. (The LS 430 is produced only in Japan.) The Canadian government helped to maintain this price difference by making it very costly and administratively difficult for a Canadian to buy a car in the US and then import it for use in Canada. Explain whether the US-Canadian price difference implies that Toyota would have earned greater profit shipping more of the LS 430 models to Canada and less to the US. Construct a diagram to illustrate your answer.
Suppose that there is an "inflation scare," that is, suppose market participants increase their expectations of future inflation.
In each of the cases listed below determine what this consumer needs to do (in terms of purchasing X and Y) to maximizes their utility.
Engineers at national research laboratory built a prototype automobile which could be driven 180 miles on single gallon of unleaded gasoline. They estimated that in the mass production the care would cost 40k for each unit to build.
A monopolist faces the demand curvep =11 - Q , where Q is measured in thousands of units. What is the monopolist profit maximizing price and quantity? What is the profit?
Between your answers to parts b and c, which prices/capacity are best applied from a social welfare perspective? Why?
What is the opportunity cost of going to a doctor to be examined for skin cancer? Would eliminating research reduce or increase the cost of U.S. health care?
Discuss how each of the following developments would affect the supply of the money, the demand for money, and the interest rate. For each case, describe what happens in closed economy and in small open economy. Describe your answers with diagrams.
Use the data in the table to the right to answer the following questions. What is the external cost per unit of production? What level is produced if there is no regulation of the externality?
This problem uses Okun's law to study how the unemployment and inflation rates change when there are demand shocks.
Describe the following statement: "In competitive market the least-cost production methods are revealed by entry and exit, while in public utility regulation they're revealed by commission rate hearings. It is easier to fool commissi..
Dana's Doorsteps (DD) is a monopolist in the doorstep industry. Its cost is C= 10Q and demand is P = 30- Q.
Explain the impacts of an expansionary fiscal policy such as a tax cut on the levels GDP, Consumption, Investment, interest rate and unemployment and price.
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