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copperarmadillo784Lv1

29 Sep 2019

After graduating from PenU and working full time for three years, James decided to pursue further study for a postgraduate degree. He has received offers from three postgraduate programs with details as follows:

(1) Part-time program A: The tuition fee is $0.3 million and James will receive a benefit of $0.9 million from the program. He can keep his job and work full time when studying for this program.

(2) Full-time program B: The tuition fee is $0.4 million and James will receive a benefit of $1.5 million from the program. However, he has to forgo the income of $0.6 million when studying for this program. In addition, the program gives James a scholarship that equals 50% of the tuition fee.

(3) Full-time program C: The tuition fee is $0.3 million and James will receive a benefit of $1.5 million from the program. However, he has to forgo the income of $0.6 million when studying for this program. In addition, the program gives James a scholarship that equals 40% of the tuition fee.

For simplicity, assume there are no additional benefits and costs other than those mentioned above.

a) Calculate the economic surplus received from each programme. Which is the first-best programme for James based on your calculation?

b) What is the minimum scholarship (in dollar term) offered by program A such that James finds it indifferent between program A and his first-best program that you answer in part (a) above? Please show your calculation.

c) After James has paid a non-refundable deposit of $0.1 million to the first-best program that you answered in part (a) above, he receives the notification from program A that the program will give him a scholarship of $0.2 million. Explain whether James should shift to study for program A.

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YouAreAGoldFishHelpLv10

20 Mar 2023

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Kristelle BalandoLv10

29 Sep 2019

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Related questions

1) For each of the following goods, state whether it is a normal good, a luxury, a necessity, or an inferior good. (Sugar)<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

a) Inferior. Increases in income lead to less use of sugar. However, rich people do not use much less sugar than poor people, so elasticity is positive but greater than 1.

b) Inferior. Increases in income lead to slightly more use of sugar. However, rich people do not use much more sugar than poor people, so elasticity is positive but less than 1.

c) Normal and necessity. Increases in income lead to slightly more use of sugar. However, rich people do not use much more sugar than poor people, so elasticity is positive and greater than 1.

d) Normal and necessity. Increases in income lead to slightly more use of sugar. However, rich people do not use much more sugar than poor people, so elasticity is positive but less than 1.

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2) A perfectly competitive firm sells its good for $24. If marginal cost is three times the quantity produced, how much does the firm produce? Why?

a) Assuming perfect competition, the firm is producing where MR = MC. If the price is $24, and MC is three times the quantity, it is producing 72 units.

b) Assuming perfect competition, the firm is producing where MC is twice MR. If the price is $24, then MC = $48. This means that the firm is producing 12 units.

c) Assuming perfect competition, we do not have enough information to determine how much the firm is producing.

d) Assuming perfect competition, the firm is producing where MR = MC=P. Since price is $24, MR also is $24. If MC is three times the quantity, it is producing 8 units

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3) State the law of supply.

a) Quantity supplied rises as price increases, other things constant. Quantity supplied falls as price decreases, other things constant.

b) Supply increases as price falls. Supply decreases as price rises.

c) Quantity supplied rises as price falls, other things constant. Quantity supplied falls as price increases, other things constant.

d) Supply increases as price increases. Supply decreases as price decreases

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4) If marginal cost is increasing, what do we know about average cost?

a) If marginal cost is increasing, average costs could be rising, falling, or constant. The direction of average costs depends upon whether marginal cost is higher or lower than average cost.

b) If marginal cost is increasing, average costs are rising. As the cost of the next item produced is rising, the average cost of all the items produced must also be rising.

c) If marginal cost is increasing, average costs are falling. Marginal costs only increase at very high levels of production. When items are mass-produced (because of economies of scale) their average costs always fall, even when marginal costs begin to increase.

d) Average cost is constant and always lower than marginal cost because of the law of decreasing marginal productivity. As more items are produced marginal costs increase (the same as productivity decreasing), but average costs remain constant because the total number of items produced is also increasing

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5) (The president of Lebanon Valley College proposed the following tuition program: provide a 50 percent tuition reduction for those graduating in the top 10 percent of their high school class, 33 percent reduction for those in the top 20 percent, and 25 percent reduction for those in the top 30 percent. All scholarship recipients were also required to maintain a minimum GPA. The comptroller estimated that the elasticity of demand for these students was greater than 1.)

Why did the program distinguish among top-performing students?

A) The program distinguished among top students because they were the least likely to respond to scholarships, keeping expenses related to scholarships down.

B) The program distinguished among top students because the top students demanded greater scholarships. The only way to achieve equilibrium was to supply more scholarships to these students.

C) The program distinguished among top students because their elasticities likely differed. The top 10 percent were likely being offered scholarships at other academic institutions, giving them greater choices, which made their elasticities greater.

D) The program distinguished among top students because their elasticities likely differed. The top 10 percent were likely being offered scholarships at other academic institutions, giving them greater choices, which made their elasticities lower.

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6) Say that equilibrium price fell and quantity remained constant. What would you say was the most likely cause?

a) The supply curve shifted left and the demand curve shifted left.

b) The supply curve shifted right and the demand curve shifted right.

c) The supply curve shifted right and the demand curve shifted left.

d) The supply curve shifted left and the demand curve shifted right.

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7) A firm has just decreased its price by 10 percent over last year's price, and it found that quantity sold decreased 20%. What The firm comes to you and wants to know its price elasticity of demand ?

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8) Name two advantages of the behavioral model.

Select all that apply.

a) They better match observed behavior.

b) Each model depends on a specific context and they are not easily generalized to other contexts.

c) Broader building blocks free researchers to look for more patterns in the data.

d) Irrational behavior results in complicated models that are often difficult to solve.

e) They assume people are rational, which better matches reality.

f) All economists agree the assumptions of the behavioral model are realistic.

viridianweasel299

Read the closing case and post a substantive answer to question below

When the former World Bank economist Bingu wa Mutharika became president of the East African nation of Malawi in 2004, it seemed to be the beginning of a new age for one of the worldâs poorest countries. In land-locked Malawi, most of the population subsists on less than a dollar a day. Mutharika was their champion. He introduced a subsidy program for fertilizer to help poor farmers and gave them seeds. Agricultural output expanded, and the economy boomed, growing by 7 percent per year between 2005 and 2010. International donors loved him, and aid money started to pour in from the United Kingdom and the United States. By 2011, foreign aid was accounting for more than half of Malawiâs annual budget.In 2009, to no oneâs surprise, Mutharika was reelected president. Then things started to fall apart. Mutharika became increasingly dictatorial. He pushed aside the countryâs central bankers and ministers to take full con-trol of economic policy. He called himself âEconomist in Chief.â Critics at home were harassed and jailed. Independent newspapers were threat-ened. When a cable from the British ambassador describing Mutharika as âautocratic and intolerant of criticismâ was leaked, he expelled the British ambassador. Britain responded by freezing aid worth $550 million over four years. When police in mid-2011 killed 20 antigovernment protestors, other aid donors withdrew their support, including most significantly the United States. Mutharika told the donors they could go to hell. To com-pound matters, tobacco sales, which usually accounted for 60 percent of foreign currency revenues, plunged on diminishing international demand and the decreasing quality of the local product, which had been hurt by a persistive drought.By late 2011, Malawi was experiencing a full-blown foreign currency crisis. The International Monetary Fund urged Mutharika to devalue the kwacha, Malawiâs currency, to spur tobacco and tea exports. The kwacha was pegged to the U.S. dollar at 170 kwacha to the dollar. The IMF wanted Malawi to adopt an exchange rate of 280 kwacha to the dollar, which was closer to the black market exchange rate. Mutharika refused, arguing that this would cause price inflation and hurt Malawiâs poor. He also refused to meet with an IMF delegation, saying that the delegates were âtoo junior.â The IMF put a $79 million loan program it had with Malawi on hold, further exacerbating the foreign currency crisis. Malawi was in a tailspin.In early April 2012, Mutharika had a massive heart attack. He was rushed to the hospital in the capital Lilongwe, but ironically, the medicines that he needed were out of stockâthe hospital lacked the foreign cur-rency to buy them! Mutharika died. Despite considerable opposition from Mutharika supporters who wanted his brother to succeed him, Joyce Banda, the vice president, was sworn in as president. Although no one has stated this publicly, it seems clear that intense diplomatic pressure from the United Kingdom and United States persuaded Mutharikaâs supporters to relent. Once in power, Banda announced that Malawi would devalue the kwacha by 40 percent. For its part, the IMF unblocked its loan program, while foreign donors, including the UK and United States, stated that they would resume their programs.

1. Now that Malawiâs currency has been devalued, what do you think the economic consequences will be? Is this good for the economy?