Question:
You are the Economic Advisor to the President of the United States. Your task is to develop a framework for economic policy and issues. During one of your briefing sessions in the White House, the President asks you the following questions:
Please answer 4 out of 6 questions.
1. The business cycle is the economist's metric for describing the current state of the economy: Ranging from economic boom to recession. How would you describe the U.S. economy's current position in the business cycle? What does some of the data suggest? Please give a detailed answer.
2. The United States has run a trade deficit over the past two decades. Has this deficit been good or bad for the economy? Be sure to discuss several different aspects of this issue.
3. Corporate Social Responsibility is a growing issue for US and multinational companies. How does this fit in with the business motivation of maximizing profit? Isn't there a contradiction?
4. Pollution is a severe problem for the United States and the rest of the world. What are some economic mechanisms that would allow pollution to be reduces successfully? What kind of economic policies could you suggest?
5. Suppose you are the majority shareholder of a major corporation. What suggestions would you make regarding the compensation plans for top management? Please base your answer on economic principles.
6. Industry A is made up of only 4 firms. Each firm has a 25% market share. Industry B is made up of 10 firms. One firm has a 70% market share and the other 9 firms evenly share the rest of the market. In which industry is monopoly power or market concentration likely to be greater? Please explain.