Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Chapter 17, Problem 17.7P
To determine
To find:Current price of crude oil and implication on actual pricing in the crude oil.
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Bob lives in Toronto and runs a business that sells guitars. In an average year, he receives $701,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $420,000; he also pays wages and utility bills totalling $247,000. He owns his show room; if he chooses to rent it out, he will receive $9,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Bob does not operate this guitar business, he can work as a financial advisor, receive an annual salary of $32,000 with no additional monetary costs, and rent out his show room at the $9,000 per year rate. No other costs are incurred in running this guitar business.
write a Microeconomic Analysis Report based on this questions using appropriate foundational microeconomics theories and techniques; what is the impact of Covid- 19 on real estate final prices? what is the impact of Covid- 19 on real estate input prices? what is the impact of Covid- 19 on real estate completion rates?
What is the impact of covid driven interest rates on real estate?
What is the Confident rate for people wanting to buy a home or invest?
Consider a person who will live for two years (1 and 2). The real interest rate between the two periods is r. In period 1 any income
they have to use, Y1, must be earned by working at wage w, denoted in period 1 dollars, for hours H1, which they can choose. In
period 2 they cannot work, but they will be paid a stipend of Y2. Their intertemporal utility is defined over consumption of a
composite in each period, q1 and q2, and leisure in each period, L1 and L2. You can assume that the price of consumption in each
period is $1, denoted in that period's dollars. Given this information, state the person's utility maximization problem in full, and
derive the first order conditions for an optimal solution. Give an economic interpretation of the conditions you derive (i.e., carefully
describe the nature of the optimal choice).
Chapter 17 Solutions
Microeconomic Theory
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- Hubert lives in Denver and runs a business that sells boats. In an average year, he receives $842,000 from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $452,000; he also pays wages and utility bills totaling $301,000. He owns his showroom; if he chooses to rent it out, he will receive $38,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Hubert does not operate this boat business, he can work as an accountant and receive an annual salary of $48,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Hubert's costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The wholesale cost for the boats that Hubert pays the manufacturer The salary Hubert could earn if he worked as an accountant The wages and utility bills that Hubert pays The rental income Hubert could…arrow_forwardConsider a perpetuity with a coupon of 100. Imagine that the perpetuity is purchased at time t when the market interest rate is equal to 5%. Furthermore, imagine that the coupon income is taxed at 40% and that capital gains are taxed at 20%. What is the after tax rate of return if the perpetuity is sold at time t+1 when the market interest rate continues to be equal to 5%?arrow_forwardPaolo lives in New York City and runs a business that sells boats. In an average year, he receives $723,000 in revenue from selling boats. Of this sales revenue, he must pay the manufacturer a wholesale cost of $423.000; he also pays wages and utility bills totaling $267.000. He owns his showroom; if he chooses to rent it out, he will receive $2.000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Paolo does not operate this boat business, he can work as a financial advisor and receive an annual salary of $20,000 with no additional monetary costs. No other costs are incurred in running this boat business. Identify each of Paolo's costs in the following table as either an implicit cost or an explicit cost of selling boats. Implicit Cost Explicit Cost The rental income Paolo could receive if he chose to rent out his showroom The wholesale cost for the boats that Paolo pays the manufacturer The salary Paolo could earn if he worked as a…arrow_forward
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- Based on the Following Equations Saving (S) = 0.2Y - 60 Investment (1) = -30R + 740 Money Supply (MS) = 4000, Transaction Demand For Money (L1) = 0.15Y, Speculative Demand For Money (L2) = -20R + 3825. The Equilibrium Interest Rate R isarrow_forwardAssume you define your permanent income as the average of your income from this and the past four years. Your earnings record over these five years has been: Yt = 40,000, Yt-1 = 38,000, Yt-2 = 34,000, Yt-3 = 32,000, Yt-4 = 31,000. If your income increases next year to Yt+1 = 46,000, by how much will your consumption change if you always consume 90 percent of your permanent income?arrow_forwardFor several years, a large U.S. gift retailer has been purchasing a pen-and-pencil set from an overseas manufacturer for $27 per set. The retailer’s policy is to use a 120 percent markup on such stationery-related gifts. (a) Recently, a currency exchange-rate change has enabled the retailer to buy the pen-and-pencil set for only $21 per set. The retailer is considering passing along this cost decrease to his customers. If the retailer uses his usual markup for stationery-related gifts, calculate the new price the retailer would charge for this pen-and-pencil set. (b) A buyer in the retailer’s organization has taken the initiative to examine the historical data on this pen-and-pencil set. She obtained data for each of the past 18 years concerning the number of units sold during the year, the price during the year, and an index of economic activity in the retailer’s market area during the year, and then carried out a regression analysis on these data. The means for each…arrow_forward
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