Economics Homework Eleven - Model
1. If you were to loan someone money, why would you want him to pay you something extra (interest) when he pays back the loan? Give at least one reason.
2. Suppose I loaned you $1000 today, and interest rates are 5% per year (compounded annually), and you repaid the loan plus interest in 2 years, then what is the total you would pay to satisfy this debt?
3. Review: is the cost of the bus for a trip to D.C. a "fixed cost" or a "variable cost"? Explain, assuming for the purpose of this question that one and only one bus can be used (in reality, we may have several buses).
4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?
5. Suppose I will pay you $1000 in two years, and the interest rate is 10% per year, compounded annually. How much should you pay me today to receive $1000 in two years? Show your work.
6. Pick another question from the midterm exam that you answered incorrectly, and explain the correct answer.
7. Explain what âeconomic rentâ is in your own words, using your own example.
8. An agreement by different firms with each other to reduce output is illegal. Why should that be illegal?
9. What is your favorite concept in Economics, and why?
10. Nash equilibrium, revisited: What is the Nash equilibrium for two gas stations (an oligopoly) that are situation immediately across the street from each other? In other words, what price do they sell at, expressed in terms of one of their cost measures? Explain the process that reaches that "equilibrium".