Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
19th Edition
ISBN: 9780134478760
Author: Roger LeRoy Miller
Publisher: PEARSON
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Question
Chapter 7, Problem 2CTQ
To determine
Why the Russian “core inflation” is lower than the annual rate of change in the Russian CPI that includes food prices, despite the Russian government economists following the U.S example of publishing a measure of “core inflation” in which food and energy prices are stripped from the
Concept introduction:
Consumer Price Index: Measures the change in the prices of the goods and services consumed by the households in the economy.
Core Inflation Index: Core inflation index measures the changes in the prices of the goods and services by excluding extreme volatile variables such as energy and food prices.
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Exercise 6
Imagine that you head production of a multinational food processing company. The ongoing uncer-
tainty about costs means that you are unsure of the future cost of one of your inputs, x2. Your firm's
production function is
y = f(x1, x2) = x²x²²
The output price p is 1000, x1 = 27, and wx₁ = 60.
1. Suppose the current input price is Wx2
=
50. Solve for the optimal choice of x2.
2. Now suppose that the probability the input price remains 50 is 0.65 and the probability that
Wx2
60 is 0.35. Solve for the optimal choice of x2. Round down to the nearest integer.
=
3. Finally, suppose the costs do actually rise, i.e., Wx2 = 60. Calculate the difference in profit from
the uncertainty in (2) vs. the certainty in (1).
Chapter 7 Solutions
Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
Ch. 7 - Prob. 7.1LOCh. 7 - Prob. 7.2LOCh. 7 - Prob. 7.3LOCh. 7 - Prob. 7.4LOCh. 7 - Prob. 7.5LOCh. 7 - Prob. aFCTCh. 7 - Prob. bFCTCh. 7 - Prob. cFCTCh. 7 - Prob. dFCTCh. 7 - Prob. eFCT
Ch. 7 - Prob. 1CTQCh. 7 - Prob. 2CTQCh. 7 - Prob. 1FCTCh. 7 - Prob. 2FCTCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 21PCh. 7 - Prob. 22P
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