1. ABC software, a small producer, decides to renovate its premises. Instead of hiring an outside contractor and tradespeople, the firm decides to use its employees---secretaries, programmers, sales staff, and others--to do most of the work. The firm makes all its employees try painting and carpentry and other tasks needed for the renovation and selects the people with the strongest skills in those areas to take time off their regular tasks and work on the renovation. Is the strategy a good one? Why or why not?
2. Suppose that one Euro can be exchanged for 1.3 U.S. dollars and that one U.S. dollar can be exchanged for 80 Japanese yen. If these currencies can be traded freely with low transaction costs, what exchange rate would you expect between the Euro and Japanese yen? Describe the transactions that would occur if the Euto-yen exchange rate is higher than this amount?
3. A government is considering a quota and a tariff, both of which will reduce imports by the same amount. Why might the government prefer one of these policies over the other?
1. ABC software, a small producer, decides to renovate its premises. Instead of hiring an outside contractor and tradespeople, the firm decides to use its employees---secretaries, programmers, sales staff, and others--to do most of the work. The firm makes all its employees try painting and carpentry and other tasks needed for the renovation and selects the people with the strongest skills in those areas to take time off their regular tasks and work on the renovation. Is the strategy a good one? Why or why not?
2. Suppose that one Euro can be exchanged for 1.3 U.S. dollars and that one U.S. dollar can be exchanged for 80 Japanese yen. If these currencies can be traded freely with low transaction costs, what exchange rate would you expect between the Euro and Japanese yen? Describe the transactions that would occur if the Euto-yen exchange rate is higher than this amount?
3. A government is considering a quota and a tariff, both of which will reduce imports by the same amount. Why might the government prefer one of these policies over the other?
