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Eco Assignment 2

The document outlines an economics assignment with various tasks, including calculations of average revenue, marginal revenue, and profit for a firm, as well as GDP inclusion criteria and issues related to the Consumer Price Index. It also involves calculating GDP deflators and inflation rates, assessing contributions to GDP and other income measures from a landscaping service, and evaluating the GDP and value added in a corn production scenario. Additionally, it requests a discussion on the importance of monetary policy.

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Nahins
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13 views3 pages

Eco Assignment 2

The document outlines an economics assignment with various tasks, including calculations of average revenue, marginal revenue, and profit for a firm, as well as GDP inclusion criteria and issues related to the Consumer Price Index. It also involves calculating GDP deflators and inflation rates, assessing contributions to GDP and other income measures from a landscaping service, and evaluating the GDP and value added in a corn production scenario. Additionally, it requests a discussion on the importance of monetary policy.

Uploaded by

Nahins
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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TaA

United International University

Department of Economics

Assignment 2

1. Table: Consider the following information for a firm


Quantity Total Marginal Total Margina Profit
Revenu l cost
e Revenue cost

0 0 8

1 8 9

2 16 10

3 24 11

4 32 13

5 40 19

6 48 27

7 56 37

a. Calculate AR, MR and profit for each quantity? Which type of firm is it? How much should
the firm produce to maximize profit?
2. Which of the following Items to be Included or Excluded in GDP? Explain with reasons.[3]
a. Food purchased by a foreign tourist at a hotel in Cox’s bazar.
b. Construction of a new house.
c. Services rendered by family members to each other
d. The Jackson family buys an old Victorian house from the Walker family
e. Ford sells a Mustang from its inventory to the Martinez family
3. Which of the problems in the construction of the CPI might be illustrated by each of the
following situations? Explain [6]

a. A sudden surge in demand for electric scooters following a substantial increase in gasoline
prices.

b. The perceived improvement in the taste of a popular snack, like potato chips, without any
change in its price over time.

c. The introduction of a new line of affordable smartphones by a leading tech company


TaA

4. You are given the prices and quantities of three final commodities:
Year Price Quantity Price of Quantity Price Quantity
of of Computer of Pizza
Compute
Coffee Coffee Chips Pizza
r Chips

2020 2 20 3 10 2 30

2021 4 50 5 20 4 40

2022 5 80 10 40 6 50

a. Now Calculate the GDP deflator for each year and find the inflation rate for the year
2021 and 2022. [Use 2020 as the base year]

7. On a busy Saturday, Leo’s Landscaping Services earns $1,200 from various landscaping
projects. Over the course of the day:

 $150 is spent on fuel and supplies, which is subject to a 10% sales tax.
 Leo’s equipment depreciates by $200.
 After covering costs, Leo takes home $500 as wages.
 He reinvests $250 into his business for new tools and equipment.
 From his $500 wages, he pays $150 in income taxes.

Based on this information, compute Leo’s contribution to the following measures of income:

a. Gross Domestic Product (GDP)


b. Net National Product (NNP)
c. National Income (NI)
d. Personal Income (PI)
e. Disposable Personal Income (DPI)

8. A farmer grows corn and sells it to a food processor for $200. The food processor grinds the
corn into cornmeal and sells it to a bakery for $350. The bakery uses the cornmeal to bake
cornbread, which it sells to consumers for $500. Consumers purchase and eat the cornbread.

a. What is the Gross Domestic Product (GDP) in this economy? Explain how it is determined.

b. Using the concept of value added; calculate the contribution of each producer:

 The farmer
 The food processor
 The bakery
TaA

c. Compute the total value added for the economy. How does this compare to the economy’s
GDP?

d. This example suggests an alternative way to calculate GDP. What is this method called, and
why does it prevent double counting?

9. Write the importance of Monetary Policy .

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