Question 1 : If a policy change causes a Pareto improvement, is the outcome necessarily Pareto efficient? If a situation is Pareto efficient, are Pareto improvements possible? If a change occurs that causes a Pareto efficient outcome, is the change necessarily a Pareto improvement? Please explain.
Question 2 : The price of wholesale milk dropped by 30.3%, when the Pennsylvania Milk Marketing Board lowered the regulated price. The price to consumers fell by less than 30% in Philadelphia. Why?
Question 3 :A maker of specialty soaps supplies a unique soap made from cactus extract to the only two retailers in a small town. The producer sells the soap to the retailers at the marginal cost of production of the soap, $1.00 per bar, and receives 20% of the profit earned when the retailers sell the soap to customers. Would the producer prefer that the retailers compete with each other on price or to specify the retail selling price of the soap to both retailers?
Question 4 :Suppose that the only way to reduce pollution from paper production is to reduce output. The government imposes a tax equal to the marginal harm from the pollution on the monopoly producer. Show that the tax may or may not raise welfare?
Question 5 :Do publishers sell the socially optimal number of managerial economics textbooks? Discuss in terms of public goods, rivalry, and exclusion. You and your roommate have a stack of dirty dishes in the sink. Either of you would wash the dishes if the decision were up to you; however, neither will do it in the expectation that the other will deal with the mess. Explain how this examples illustrates the problem with public goods and free riding?
Question 6 : ABC Software, a small producer, decides to renovate its premises. Instead of hiring an outside contractor and tradespeople, the firm decides to use its employees---secretaries, programmers, sales staff, and others--to do most of the work. The firm makes all its employees try painting and carpentry and other tasks needed for the renovation and selects the people with the strongest skills in those areas to take time off their regular tasks and work on the renovation. Is the strategy a good one? Why or why not?
Question 7 : Suppose that one Euro can be exchanged for 1.3 U.S. dollars and that one U.S. dollar can be exchanged for 80 Japanese yen. If these currencies can be traded freely with low transaction costs, what exchange rate would you expect between the Euro and Japanese yen? Describe the transactions that would occur if the Euro-yen exchange rate is higher than this amount?
Question 8 : A government is considering a quota and a tariff, both of which will reduce imports by the same amount. Why might the government prefer one of these policies over the other?
Question 9 : As a result of the North American Free Trade Agreement, many ionic "American" cars are not assembled in the United States. Please explain why? Provide some examples of U.S. cars that are assembled outside of the United States?
Outsourcing of services by American firms has contributed significantly to wage growth in India. Explain why using a graph of the Indian labor market?
Question 10 : Chanel perfume is sold in France and in the United States. Assume initially that one Euro is worth $1.30 and that a 100ml bottle of perfume sells for $80 in the United States. If Chanel does not price discriminate internationally, what is the price that would be paid for this perfume in France?
Now suppose that Chanel decides to price discriminate and finds that it would maximize its profits by lowering its price in the United States to $70 and raising its price by 25% in France. Explain why? Next, explain what happens if the value of the Euro rises by 25% in terms of the dollar?