EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 21, Problem 2.4P
To determine
Identify the difference-in-difference method to estimation.
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Suppose the cost of purchasing euros (EUR) and Canadian dollars (CAD) at the airport are given by the following bid / ask price:
EUR 1 = USD 1.32 / 1.47
CAD 1 = USD 0.85 / 0.97
How much USD is required to purchase EUR 2,000?
How much USD is required to purchase CAD 1,500?
How much USD will you get if you’d like to sell EUR 500 to the airport’s currency exchange store?
How much USD will you get if you’d like to sell CAD 500 to the airport’s currency exchange store?
Calculate the percent spread or margin for USDEUR.
Calculate the percent spread or margin for USDCAD.
Paccar Winch makes winch components for its different product lines. The firm operates its production facility three hundred and five days per year. It has orders for about twelve thousand winch components per year and has the capability of producing one hundred and five per day. Setting up the winch production costs fifty five dollars. The cost of each winch component is one dollar and ten cents. The holding cost is fifteen cents per winch component per year.
a) What is the optimal size of the production run?
b) What is the average holding cost per year?
c) What is the average setup cost per year?
d) What is the total cost per year, including the cost of the winch components?
Q). Shown below are two alternative Cobb-Douglas production functions where Q is output per day, L is labor hours per day, and K is machine hours per day.
Q = 2LK Production Method 1
Q = 10(L1/2K1/2) Production Method 2
A firm must adopt one of the two production methods in order to produce 200 units of output per day while paying employees $12 per hour and renting machinery for $48 per hour.
(a) Determine the cost minimizing combination of labor and capital if the firm decides to adopt production method 1.
(b) Determine the cost minimizing combination of labor and capital if the firm decides to adopt production method 2.
(c) Based on your solution in part (a) and (b), which production method would you recommend to the firm? Support your recommendation with calculations.
Chapter 21 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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