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Problem
Consider the same economy as in exercise 7, but suppose that we now have y = $380, δ = 0.75, and K = $150. Assume that the bank is perfectly competitive, that the borrowers are protected by limited liability, and that the production technology has constant returns to scale (if the loan increases by a factor λ, the borrower's return will increase by a factor λ).
a. Will the bank be willing to extend loans in this case?
b. Now suppose that instead of extending the same loan at date 2, the bank can increase the size of the loan by a factor λ = 1.5 in period 2. Would you expect the bank to actually offer this contract? Briefly explain your answer.
Assume the ratio of deposits that banks hold in the form of reserves is 7 percent. Assume further that people want to hold 8 percent of their deposits in the form of cash.
A monopoly with a more elastic demand curve will have more market power and monopolist can earn positive profits in the long run because it has market power
Apply the theories, models, and practices of economic theory to create value for the firm. Analyze solutions with support from relevant data, resources, references, and economic principles.
V-Tek Systems is a manufacturer of vertical compactors, and it is examining its cash flow requirements for the next five years. The company expects to replace office machines and computer equipment at various times over the 5-year planning period.
Briefly explain why as output increases total cost eventually rises faster than total revenue for a perfectly competitive firm.
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In the former Soviet economy, the supreme planning board that transmitted economic decisions down to producing and consuming units was called the
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relationship of the international business firm with the local government
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If they sell at the same price, should they accept this order? Analyze this by figuring out the total relevant cost and compare this to the retail price.
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