Economics Homework Help


# Description Question

There is no “team element” to this test, each student is to answer the following 5 questions.  All answers must be in a single file in Word.   My suspicion is that each answer is about one page or less, please 12 point font and line spacing at 1.5 or 2.0.   Your submitted exams will be analyzed by turn-it-in dot come to authenticate originality.  


1.       Please review this document prepared by the Congressional Research Service “The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law”  available at    Use the information cited in the reading) and your knowledge of supply and demand to answer the following questions.  You need to put 2 citations from the document in each of a. and b. below justifying some change in the market indicated.  Be sure to cite by page number and by copying and pasting the language from the document when creating your answers.

a.       Other things being equal, what is the impact of the tax reform on the nation’s housing market, i.e. the market for single family homes?

b.      Other things being equal, what is the impact of the tax reform on the financial markets where borrowers and lenders interact?  If you don’t want to use a general “loanable funds model approach” identify one particular lending market or any device that links borrowers to lenders.  You cannot use the mortgage market.


2.       Produce an example from your life or career of a situation where you faced a strategic decision along the lines of a game theoretic environment.  If you are not comfortable doing that then please construct a reasonable example situation.   You must have 2 players in the game you and another entity.   The actions of neither player are known with certainty and there is no way to put a probability statement on either strategy.  Limit your example to 2 players and 2 strategies.  Fully describe the payoffs as you describe your game present your game in a matrix or tabular format such as found in the textbook something like Table 10.2.  You might use as your 2 players you and some “group” of people, firms, or society.   It is very helpful if the payoffs can be expressed as numbers of some form, but don’t let that stop you.  Do not use games of chance with known probabilities or then it isn’t really a game we are talking about.  So please don’t write about “One night at the Horseshoe casino….”  I am not asking to delve into the details of your life to any degree further than you are willing to share with your classmates.   Your example must be different from examples used in class and the payoffs must not be symmetric, i.e. the numbers in the diagonal elements of the matrix should not be equal. 

a.       Present your game in “tabular” or “matrix” format showing the players, their strategies, and the outcomes. 

b.      Identify if your game leads to a prisoners’ dilemma type outcome.  It may, or it may not.

c.       Outline the outcome of the game and the strategies that each player pursued.   You don’t have to say whether you “won” or “lost” the game.  

d.      Was this outcome the “best” for you and the other player combined or was there an outcome where, in some sense, you both collectively would have benefitted more?  Fully explain.


3.       This is a question for which there is unlikely a unique set of answers.   Instead the value of an answer will depend upon its validity and support.    For each of the four reasons you identify below you are required to provide a citation that is not from a textbook, but is from a credible source.  If your reasons are based on a graphical argument, you must include the graph, appropriately cited,  in a graphic in your submitted answer.

a.       Provide two reasons why you would argue that monopolies or firms with market power (i.e. facing downward sloping demand curves) are a positive impact on society and the economy.  

b.      Also provide two reasons why you would argue that monopolies or firms with market power (i.e. facing downward sloping demand curves) are a negative impact on society and the economy.


4.       The current debate about tariffs is certainly prompting a lively debate in the media and in analysts circles around the world.   Please answer each of the components below which center on this issue.   Where indicated provide a citation of sources for facts that you present.

a.       Using a supply and demand approach in the domestic (US) market for steel and aluminum show the price effects of the tariff on steel and aluminum sold in the U.S.  Yes you are required to include a graph and a full explanation of the graph. 

b.      We have heard “one side” in the debate say that a tariff is justified because it protects US workers.   Please “find” those workers in the diagram you made for part a. above. 

c.       It is thought by some that other countries will either raise or create tariffs on US goods sold in those countries or implement some other type of trade barrier.   Find at least 3 examples of goods that face some form of entry barriers or tariffs by other countries – the entry barriers may be a tariff or they may be some non-tariff force that blocks US goods from being imported by those countries. 

Instead of 4b. and 4c. above do the following

Create a game theoretic approach type of analysis of the issue.   The 2 players are the US and the EU.  The strategies are US – no tariffs such as those recently enacted, US – tariffs such as those recently enacted.  The strategies by the EU are to impose no new tariffs or trade barriers in response or for the EU to impose new tariffs or trade barriers in response.  Do the analysis of the outcomes to see if each player has a “best strategy”.  Explain. 


5.       Using the data on international trade identified in class (  create a bar chart or a pie chart showing the % of US exports to its 9 main exporting partners.

Micro Economics ECON 505

In an eight- to 10-page paper, describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, monopoly), provide a real-life example of each market, and respond to the following for each market structure:

  • Indicate how high entry barriers into a market will influence:
    • Long-run profitability of the firms
    • Cost efficiency of the firms in the industry
    • Likelihood that some inefficient firms will survive
    • Incentive of entrepreneurs to develop substitutes for the product supplied by the firms
  • Are competitive pressures present in markets with high barriers to entry? Explain.
  • Describe which market structure you would prefer for selling products. Explain why and support your answer with the characteristics of that market.
  • Describe which market structure you would prefer for buying products. Explain why and support your answer with the characteristics of that market.
  • How does each market structure respond to price changes of the products that they sell? Explain whether each market structure will be selling elastic or inelastic products, and how this will affect the market price charged.
  • How does the role of the government affect each market structure’s ability to price their products?
  • How does international trade affect each market structure?

The Market Structures Final Paper

  • Must be eight to 10 double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.)Links to an external site..
  • Must include a separate title page with the following:
    • Title of paper
    •  Student’s name
    • Course name and number
    • Instructor’s name
    • Date submitted
  • Must use at least five scholarly sources from the Ashford University Library in addition to the course text.
  • Must document all sources in APA style as outlined in the Ashford Writing Center.
  • Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.

Carefully review the Grading Rubric (Links to an external site.)Links to an external site. for the criteria that will be used to evaluate your assignment.

In an eight- to 10-page paper, describe each market structure

Step 1: Summarize the major arguments of Friedman and Freeman et al. on CSR in their respective articles

Step 2: On the basis of the above summary, reflect the relative importance of increasing profits and undertaking BE/CSR in today’s business.

Is the Social Responsibility of Business to Increase its Profits? 

There has been a debate on how far business corporations should go beyond profit-making to be socially responsible. The controversy owes much to what Milton Friedman pinpointed in his well-known but controversial article “The Social Responsibility of Business is to Increase its Profits” published in 1970s. Later, Freeman et al. staged a systematic refutation of his viewpoint on CSR from a stakeholder perspective. In the consideration of the conflicting ideas in Friedman’s and Freeman et al.’s respective articles, write a short essay (double-spaced, no more than 4 pages in total) to reflect the contending issue of profit-making and BE/CSR.


Company Stakeholder Responsibility:

A New Approach to CSR

R.  Edward Freeman

S.Ramakrishna Velamuri Brian Moriarty

Featuring a Thought Leader Commentary™

with Charles O. Holliday, Jr. Chairman and Chief Executive Officer, DuPont


© 2006, Business Roundtable Institute for Corporate Ethics

Distribution Policy: Bridge Papers™ may only be displayed or distributed in electronic or print format for non-commercial educational use on a royalty­free basis. Any royalty-free use of Bridge Papers™ must use the complete document. No partial use or derivative works of Bridge Papers™ may be made without the prior written consent of the Business Roundtable Institute for Corporate Ethics.

A PDF version of this document can be found on the Institute Web site at: pdf/ csr. pdf

BRIDGE PAPERS™ Uniting best thinking with leading business practice.



Foreword .............................................................................................................................. 2

Introduction ........................................................................................................................ 2

Company Stakeholder Responsibility in Practice:

Four Levels of Commitment to the Stakeholder Approach ....................................... 4

Ten Principles of Company Stakeholder Responsibility ............................................. 5

A New CSR - Company Stakeholder Responsibility .................................................... 8

1hought Leader Commentary™ with Charles o. Holliday,Jr .................................. 9

About the Authors ............................................................................................................ 13



The Business Roundtable Institute for Corporate Ethics is an independent entity established in partnership with Business Roundtable-an association

of chief executive officers ofleading corporations with a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues-and leading academics from America's best business schools. The Institute, which

is housed at the Darden Graduate School of Business Administration, brings together leaders from business and academia to fulfill its mission to renew and enhance the link between ethical behavior and business practice through executive education programs, practitioner-focused research and outreach.

Institute Bridge Papers™ put the best thinking of academic and business leaders into the hands of practicing managers. Bridge Papers™ convey concepts from leading edge academic research in the field of business ethics in a format that today's managers

can integrate into their daily business decision making.

Company Stakeholder Responsibility:

A New Approach to CSR is an Institute Bridge Paper™ based on the research of R. Edward Freeman and S. Ramakrishna Velamuri. Based on a stakeholder approach, this paper outlines a new capability for organizations to develop.

The accompanying interview with Charles O. Holliday,]r., Chairman and Chief Executive Officer, DuPont, provides a CEO perspective on how to embed a Company Stakeholder Responsibility mindset across the enterprise and in a firm's overall value proposition.





Assume that the CEO of a well­respected corporation is asked the following: "Your company's products improve consumers'lives. Suppliers want to do business with your company because they benefit from this relationship. Employees really want

to work for your company, and are satisfied with their remuneration and professional development. And, you're a good citizen in the communities where you are located; among other things, you pay taxes on the profits you make. You compete hard but fairly. You also make an attractive return on capital

for shareholders and other financiers. However, are you socially responsible?"

If a company like the aforementioned organization is enriching the lives of its stakeholders, then asking the additional question of whether or not it is "socially responsible" simply makes no sense-it is a meaningless question. If a firm is doing all the things that this company does, then it deserves to be applauded and offered as an example for other firms to emulate. If it is not doing them as satisfactorily as particular stakeholders think it ought, then these stakeholders could perhaps offer to help it do them better, rather than appeal to actions and responsibilities that lie outside its day to day activities.

By talking of business and social responsibility as if they are two separate things, we unintentionally promote the idea that they involve discrete thought processes and activities. The challenge

is to promote a different way of doing business that integrates considerations of business, ethics, and society.

Herein lies the problem with "Corporate Social Responsibility."

Corporate social responsibility (CSR) reinforces the "separation thesis"-the idea that we can separate "business" from "ethics or society." This separation is an idea that reaches very deeply into Western culture. It is reinforced by the disciplines of business, by our major theoretical frameworks in management, and by many executives and business thinkers themselves. At its worst it generates an absolutely destructive idea of capitalism-that capitalism is about "anything goes." After all, the theory says, "it's just business." Viewed in

this way, corporate social responsibility becomes an "add-on" to ameliorate the supposedly harsh consequences of this view of capitalism.

Let us go back to the example of the previously described corporation. By hiring employees, has it done something that is "for the business?" The answer to that question is a resounding and unqualified, "Yes." Has it done something that is "for society?" The answer to that question is also a resounding, "Yes." So, how do matters of employment count-in the social ledger or the business ledger? A similar argument can be made for customers, communities, suppliers and financiers. These individuals and organizations are all full-fledged members of society-if they benefit in their dealings with a company, then society benefits too, directly and indirectly.

Corporate social responsibility is often about seeming to "do good works." And, while there is certainly nothing wrong with doing more good, there can be an implication that companies need

to do good works because the underlying structure of business is not good, or morally neutral. This is a destructive idea-it fails to recognize the central role




business plays globally in improving the well-being and prosperity of hundreds

of millions of people. And, it can cause companies to act in bad faith and get involved in matters where they have little expertise.

This is not Milton Friedman's argument that the only social responsi­bility is to increase profits; rather it is a practical matter-giving money to the opera doesn't make up (in any moral sense) for short-changing customers

or communities.' We need to focus on how value is created in the basic business proposition. How does this company make customers, suppliers, communities, employees, and financiers better off?

Capitalism is a system of social coop­eration-a system of working together to create value for each other, value which none of us could create on our own. In this sense, business is already an enter­prise with moral ramifications. Seeing it any other way can lead to dangerous so­cial policies, and to the tarnishing of the one institution-business-that still has to playa central role in lifting hundreds of millions of more people out of poverty across the globe.

The second problem with corporate social responsibility is that it is focused on "corporate" social responsibility.

Why is it not called "business social responsibility?" The focus on "corporate" implies that corporations, due to their size and success and perhaps their shareholding pattern, have to shoulder responsibilities that smaller and more closely held businesses do not. Why? This view is highly problematic when companies with fewer than 50 employees employ more than three times the number of US. workers (47,347,000) than companies that have 1,000 or more employees (15,138,000).2

In short, if you take a "creating value for stakeholders" approach to business, and if you acknowledge that ethics

and values are as important in these relationships as they are in our other relationships with one another, then the idea of "corporate social responsibility" is superfluous. A conceptual scheme that separates the social responsibilities of a corporation from its business responsibilities has long outlived its usefulness.

It is time to replace "corporate social responsibility" with an idea of "company stakeholder responsibility," assigning a different meaning to CSR.3 This is not just semantics, but a new interpretation

A conceptual scheme that sepa­rates the social responsibilities of a corporation from its busi­ness responsibilities has long outlived its usefulness.

of the very purpose of CSR. "Company" signals that all forms of value creation and trade-all businesses-need to be involved. "Stakeholder" goes back to

the first paragraph of this paper and suggests that the main goal ofCSR is to create value for key stakeholders. And "Responsibility" implies that we cannot separate what we do in the workplace from ethics."






Four Levels of Commitment to the Stakeholder Approach5

Company stakeholder responsibility requires that companies be committed to a stakeholder approach to management on the following four levels.

Levell- Basic Value Proposition

At this most basic level, the entrepreneur or manager needs to understand how the firm can make the customer better off, and simultaneously offer an attractive value proposition to employees, suppliers, communities, and financiers.

·   How do we make our stakeholders better off?

·   What do we stand for?

Level 2 - Sustained stakeholder cooperation

The competitive, macro-economic, regulatory, and political environments

are so dynamic they necessitate constant revision of the initial stakeholder arrangements. Each revision upsets

the delicate balance struck in the

basic value propositions to various stakeholders. Managers must have a deep understanding of how these trade-offs affect each stakeholder, the amount of sacrifice a given stakeholder will accept, and how these current sacrifices can be compensated.

·   What are the principles or values on which we base our everyday engagement with stakeholders?

Level 3 - An understanding of broader societal issues

Today's managers must recognize

and respond to a rising number of international issues, without the moral compass of the nation, state or religion as a guide. Managers may need to take positions on issues that apparently are not purely business related. A pro-

active attitude is necessary towards all stakeholder groups, both primary, i.e., those that have direct business dealings with the company, and secondary, such as NGOs and political activists, who can affect the operations of the company.

·   Do we understand how our basic value proposition and principles fit or contradict key trends and opinions in society?

Level 4 - Ethical leadership

Recent research points to a strong connection between ethical values and positive firm outcomes such as sustained profitability and high innovation." Proactive ethical leadership is possible only if there exists a deep understanding of the interests, priorities, and concerns of the stakeholders.

·   What are the values and principles that inform my leadership?

·   What is my sense of purpose? What

do I stand for as a leader?

There are 10 general principles that collectively develop a "mindset"

necessary for entrepreneurs and managers to understand and practice all four levels of Company Stakeholder Responsibility.





(1) Bring stakeholder interests together overtime.

The very idea of managing for stake­holders is that the process of value creation is a joint process. Companies need to show returns to its shareholders, meet obligations to debt holders, banks, and others. Profits don't conflict with other stakeholders-they are a scorecard indicating how well the company is managing the whole set of stakeholder relationships. Managers must keep these stakeholder interests in balance, hopefully mutually reinforcing each other.

The online auction firm eBay constantly updates its user interface

and back office processes to meet the expectations and desires of multiple stakeholder groups-in particular, people who use the site to buy and

sell goods. The company's ability to consistently meet the needs of a broad range of consumers and sellers-from small startups to leading national retail operations-has also been of great benefit to the firrn's shareholders, with the stock price increasing roughly 400 from 1999 to 2006.

(2) Recognize that stakeholders are real and complex people with names, faces and values.

We often make assumptions that business people are only in it for their own narrowly defined self-interest. Most human beings are more complicated. Most of us do what we do because we are both self-interested and interested in others. Business works in part because of the urge to create things with others and for others.

Employees are far more motivated

to give their time, energy and creativity when they believe in their firrn's overall mission and goals. The firm in turn needs to live its values.

For example, Merck's stated mission is "to provide society with superior products and services by developing innovations and solutions that improve the quality oflife and satisfy customer needs, and to provide employees with meaningful work and advancement opportunities, and investors with a superior rate of return." 8

Led by CEO Roy Vagelos, in 1987 Merck decided to develop, produce and distribute millions of doses of a medicine to treat river blindness-a terrible fly­borne parasitic illness affecting tens of millions of the world's poorest people

in the African and Asiatic tropics.f 'Ihis was an extraordinary action, because Merck did it free-of-charge-the people in need of the drug could not afford it. In so doing, Merck lived its value of "preserving and improving human life," and showed all of its stakeholders that the core purpose of the company was alive in practice.

(3) Seek solutions to issues that satisfy multiple stakeholders simultaneously.

Issues and problems come at managers from many sources, in many forms. Managers need to find ways to develop programs, policies, strategies, even products and services that satisfy multiple stakeholders simultaneously. The first step in that process is to actually recognize the need to look for simultaneous solutions.

In developing new products, Sun Microsystems focuses on both customer needs and environmental impact. When the company launched its Sun Fire x64 servers, the product consumed about one third the energy and cost half as much




as comparably configured servers-while providing one-and-a- half times the performance. Sun was able to offer its customers great value-with the bonus of cheaper energy costs-by having a sustainability mindset in their product development. 10

(4) Engage in intensive communication and dialogue with stakeholders-not just those who are friendly.

Obviously we need intensive

dialogue through multiple methods

with customers, suppliers, employees,

and shareholders, but communities,

the media, critics, and other secondary stakeholders count as well. Critics are especially important dialogue members­they represent unmet market needs.

After declining to issue a corporate responsibility report for three years, Nike decided to issue a comprehensive report in 2005. As part of this process,

1he very idea of managing for stake-holders is that the process of value creation is a joint process.

Nike invited experts from academia, trade unions, NGOs and the investment community to help them shape a report that for the first time not only listed the company's 700 active contract factories, but also graded each of these factories in terms of safety and labor conditions. 11 Within a span of months, Nike trans­formed itself from being a routine

target of these secondary stakeholder groups to a leading model of corporate transparency.

(5) Commit to a philosophy of voluntarism-manage stakeholder relationships yourself, rather than leaving it to government.

The challenge for managers is to reorient their thinking and managerial processes voluntarily to be more responsive to stakeholders. A situation where a solution to a stakeholder problem is imposed by a government agency or the courts must almost invariably be seen as a managerial failure.

Spurred on by Warren Buffett, the widely-admired Chief Executive of Berkshire Hathaway and corporate investor, the Coca-Cola Company and The Washington Post Company have been leaders in the movement to count stock option grants to employees as compensation. Both companies began reporting these awards as compensation in 2002, well before the U.S. Securities and Exchange Commission began to consider requiring similar reporting measures in January, 2006.12

(6) Generalize the marketing approach.

We need to "over-invest" on understanding stakeholder needs,

using marketing techniques to segment stakeholders to develop a better understanding of their individual needs and using marketing research tools to understand the multi-attribute nature

of most stakeholder groups. "Investing" may be in terms of more time, more energy, or whatever the relevant resource that is required by a given stakeholder group.

Johnson & Johnson (J &J) is one

of the biggest investors in terms of proactively assessing stakeholders' needs and taking the pulse of their firm's reputation among various groups. By

all accounts this investment has shown




In today's world no one ''gets it right" all the time. Whatever your interactions and strategies are with stakeholders, they can always be improved.

great dividends in the company's brand strength, with J&J garnering the top ranking in Harris Interactive National Corporate Reputation Survey for seven consecutive years.P

(7) Never trade off the interests of one stakeholder versus another continuously over time.

Just as many successful companies think in terms of "how to serve the customer" or "how to serve the employees," it is possible to generalize this philosophy to "how to serve our stakeholders."

Consider the example of a company that trades off the interests of customers in order to maintain its stock value

for shareholders. In August of 2000, Firestone recalled millions of their

tires deemed to be defective. Firestone managers had been aware of the problems associated with this product for years before they became public, but they had chosen "to settle cases confidentially, one at a time, making it difficult for consumer watchdogs or government regulators to discern a pattern that

could have pointed to a broad public safety issue."!' When these settlements became public, the Firestone brand was essentially destroyed.

(8) Negotiate with primary and secondary stakeholders.

If a group or individual can affect a company or be affected by a company

then there needs to be some interaction and some strategic thinking. In our relatively free and open society, the consequences of not negotiating with a broad range of stakeholders is that they use the political process to "negotiate" indirectly by pressuring government to enact a set of rules that is not likely to be optimal to company interests.

(9) Constantly monitor and redesign processes to make them better serve stakeholders.

In today's world no one "gets it right" all the time. Whatever your interactions and strategies are with stakeholders, they can always be improved.

Penske Truck Leasing owns 216,000 trucks in 750 locations. Because

Penske's back office processes were not centralized, customers would receive accounts payable calls from 10 or more different agents and often the calls would continue well after payment had been received. This process was not only highly inefficient for Penske, it was terribly annoying for their customers. After the company outsourced and centralized several of its back office processes, customers with payments 38 days past due receive a single phone call about their invoice, delinquent payments have been reduced and the staffing for this area has been cut by 30.15

(10) Act with purpose that fulfills commitments to stakeholders. Act with aspiration towards fulfilling your dreams and theirs.

Businesses can have a purpose.

Purpose is inspirational. The Grameen Bank wants to eliminate poverty. Fannie Mae seeks to make housing affordable to people at every income level. ITT Industries tries to make products that improve people's lives. All of these




organizations have to generate profits, or else they cannot pursue their purposes. And, they cannot generate profits or fulfill their purpose without intense engagement with their stakeholders.


Corporate Social Responsibility has outlived its usefulness, because it is flawed in two respects. First, it promotes the "separation thesis," the idea that business issues and social issues can be dealt with separately. This endorses the destructive idea that the underlying structure of business is either not good

or is morally neutral. A stakeholder approach acknowledges the intertwined nature of economic, political, social,

and ethical issues. Centered in the practice of management, it provides the manager with a pragmatic framework for action. The second flaw with Corporate Social Responsibility is its focus on corporations. Social responsibility does not only apply to corporations-it applies to all organizational forms. A stakeholder approach applies as much

to an entrepreneurial start-up and to a mid-sized closely-held firm as it does to a corporation with diffuse ownership.

Based on a stakeholder approach,

a distinct CSR-Company Stakeholder Responsibilityoutlines a new capability for organizations to develop.

A stakeholder approach applies as much to an entrepreneurial start-up and to a mid-sized closely-held firm as it does to

a corporation with diffuse ownership.




Ten Principles for Company Stakeholder Responsibility 1. Bring stakeholder interests together over time.

2.      Recognize that stakeholders are real and complex people with names, faces and values.

3.      Seek solutions to issues that satisfy multiple stakeholders simultaneously.

4.      Engage in intensive communication and dialogue with stakeholders not just those who are "friendly".

5.      Commit to a philosophy of voluntarism-manage stakeholder relationships yourself, rather than leaving it to government.

6. Generalize the marketing approach.

7.     Never trade off the interests of one stakeholder versus another continuously over time.

8. Negotiate with primary and secondary stakeholders.

9.      Constantly monitor and redesign processes to better serve stakeholders.

10.     Act with purpose that fulfills commitments to stakeholders.

Act with aspiration toward your dreams and theirs.





Charles O. Holliday, Jr., Chairman and Chief Executive Officer, DuPont

Q How do you identify your stakeholders and balance their interests in today's rapidly changing environment? How can business leaders best engage stakeholders who may be critics of their firm or industry?

Charles O. Holliday, Jr.: We have traditionally identified four stakeholder groups important to DuPont­shareholders, customers, employees

and society. We fully understand the shareholders are the owners. Their best interest is served by the other three. At different times in our history, emphasis has shifted among those stakeholders. But that set provides us with an enduring template for identifying and engaging the people and groups who are vital to the continued success of our enterprise. We balance their various interests by listening and through dialog. We regularly poll our employees to find out how they see the company and how they feel about their ability to contribute to its growth. Our public affairs and issue scans enable us to maintain a good sense of the trends and developments important to stakeholder groups.

I personally participate in conferences and other events where I am able to

state our company's position relative to public issues and to talk with others who

'Ibere is really no substitute for some first-hand interaction with leaders in other sectors, whether friends or critics.

Charles o. Holliday,fr.

approach the same issues from different points of view. So while we rely to a great extent on information that we gather, there is really no substitute for some first­hand interaction with leaders in other sectors, whether friends or critics.

Q How else does the company embed the Company Stakeholder Responsibility mindset, discussed in this Bridge Paper, across the enterprise in its overall value proposition?

Holliday: First, DuPont is a leader

in terms of Company Stakeholder Responsibility through safety. For more than 200 years, DuPont has placed a concern for safety above all others. We have the most stringent and effective safety policies in our industry, which

our trading partners, suppliers, and even competitors use as a benchmark. In 2000, we created a safety consulting business now worth over $100 million annually

to provide training, certification and development around safety issues.




Second, the shift of DuPont's products from a chemical basis to

a biological basis has allowed our products to have a substantially

smaller footprint on the environment. Having a diversity of disciplines as the foundation of our science allows us to invent and manufacture products that

are both innovative and socially and environmentally responsible. Our regard for the environment is what will allow DuPont to thrive and survive in our third century.

QDuPont has an over-200 year-old legacy supporting its core values of safety and health, environmental stewardship, ethics, and respect for people. In particular, DuPont is well- known for

its "safety moments" that are deeply engrained in all DuPont employees. How would you advise corporate leaders whose companies don't have such a long legacy and want to build similar lasting core values?

Holliday: Because our core values have been part of our company's culture for so long, it's hard for us to imagine operating without being able to consistently refer back to the values that drive us. As we moved through a historic transformation of the company in the past eight years, we indicated that everything was open

to change except our core values. What's more we measure and gauge our progress opposite those values with a lively set

of metrics that employees have access

to. For example, any employee can see our statistics on year-to-date safety

and environmental performance every day by clicking on a link accessible through our daily electronic newsletter. In every written letter or video message to employees I make some mention of

core value performance - and in those rare few instances when I didn't, I heard about it! Our core values work for us. They make us a more desirable company to do business with or have operating

in your back yard. They give us a set of standards that make good and capable people want to work for DuPont. They give real backbone to interaction with our stakeholders.

For us, core values are central to our identity of who we are as DuPont, and they are the link through the generations of DuPont employees over our 204

year history. For companies that don't have a set of values that can help them accomplish that, I would recommend

As we moved through a historic transformation of the company in the past eight years, we indicated that everything was open to change except our core values.

that they take the time to understand and identify what values inform their behaviors and underlie their operating principles and the way they do business. Once those values have been identified you have to drive them everyday in what you say and what you do. You have to act in a way that proves beyond a doubt that they are true non-negotiables. You have to measure your performance against them, and where you don't measure up, your stakeholders have to see you make the necessary adjustments to get on track and stay there.

Q You have been at DuPont for 36 years. During that career progression,




what are some defining moments that have contributed to both your own and DuPont's current approach to sustainability?

Holliday: As a company, we have learned from scientific insights into the safety

of our products and from changes

in environmental laws. In the 1970s, DuPont was the world's largest producer of CFCs. As CFCs became more closely linked to environmental change, we started the process of eliminating CFCs from our product offerings.

As a global leader in sustainable business practices, DuPont now works

to direct the chemical industry toward developing more environmentally and socially friendly products. We influence the chemical industry most by constantly setting the bar higher on what is expected of a chemical company, by creating more biology-based products, and by considering the needs of the communities our business affects. For example, DuPont is the world's leading producer of soy protein, which is now being used in various products that were traditionally chemically-based, such as printers ink.

Personally, I have learned more from interacting with our many talented employees - engineers, scientists, manag­ers, front-line plant workers, and others - based in over seventy countries. Inter­action with leaders of other companies and with U.S. and international govern­ment leaders has also taught me a great deal. There are various trade and develop­ment organizations DuPont is part of Recently, I represented DuPont at meet­ings of the World Business Council for Sustainable Development and the World Economic Forum.

Q You are the Chairman of Business Roundtable's Environment, Technology and the Economy Task Force, you have served on other leadership groups like President Bush's National Infrastructure Advisory Council, and you have co­authored the book Walking the Talk, which outlines the business case for sustainability-what drives you to lead change in this broader arena outside of your own company?

Holliday: DuPont's long history has demonstrated to us that no company, however strong and competitive, can

go it alone. Involvement in outside organizations and endeavors is a way oflearning and leading. Working with other companies, we can learn from

the rich variety of experiences that

they share. I never walk away from a Business Roundtable meeting without

a new insight that affirms something we're doing or challenges me to think

in a very different way. The S.E.E. Change initiative we kicked off a year ago was aimed at precisely that-dozens of companies visibly doing creative things to work more sustainably so their successes might trigger equally good but different ideas among their peers. The whole idea of sustainability as a realistic goal for industry came about because organizations like the World Business Council for Sustainable Development kept hammering away at it and offering up real life examples.

We can lead in those areas where our experience positions us to effect positive change. Ultimately, all this is good for our company and makes a lasting impression on our stakeholders.

Q This paper argues that business leadership involves setting industry




standards, not just following them. Why is it important for firms to manage stakeholder relationships themselves rather than leaving it to regulatory agencies? How can government and business work together most effectively to set standards that create value for multiple stakeholders?

Holliday: The complexities and opportunities of modern business and industry are too great to assume that regulation alone can get us where we have to go. Regulation, as we have seen historically, is not a precision tool for change. But it can overcome inertia

and gets things going. The landmark environmental legislation of the 1970s and 1980s set in motion the kind of change that in the U.S. has led to cleaner air and water. No one doubts that. But how would you go about regulating sustainability? We can expect that government will identify some pressure points where regulatory instruments can advance the cause. But real progress in sustainability will come from what we build into products and services, in the way we design and operate our plants and distribution networks, in the way

we think about the ultimate disposition of the things we make, even - and especially - in the way we direct our research and development. It's hard to imagine regulatory protocols that can encompass all of that.

Industry has to be imaginative

and proactive and show that we can accomplish the things our stakeholders expect of us, especially those things that go beyond the letter of the law. We reduced our greenhouse gas emissions by 72 percent since 1990 because our stakeholders expected us to be proactive and lead in this area. Right now one

Industry has to be imaginative and proactive and show that we can accomplish the things our stakeholders expect of us, especially those things that go beyond the letter of the law.

of the most exciting things we're doing at DuPont in sustainability is the construction of a plant for a bio-based route to a key ingredient for our Sorona® polymer. It will be on stream this year. To be sure, work we did in bio-refinery development funded by the Department of Energy helped us understand the potential of such processes. But no one told us we had to do it. We worked

with a business partner to make this happen because we think this is the way profitable businesses will operate in the future. Our stakeholders understand this and they expect it of DuPont.





Developing Ethical Leadership

R. EDWARD FREEMAN is the Academic Director of the Business Roundtable Institute for Corporate Ethics. He is the Elis and Signe Olsson Professor of Business Administration

at The University of Virginia Darden Graduate School of Business Administration and co-Chair of Darden's Olsson Center for Applied Ethics, one of the world's leading academic centers for the study of ethics.


is an Assistant Professor of Entrepreneurship at the lESE

Business School. He has a PhD in Entrepreneurship, Business Ethics,

and Strategy from the Darden School of Business and an MBA from lESE Business School, Spain. Professor Velamuri is also a visiting professor at the University of Saarland in Germany, Nile University in Egypt, and the University ofPiura in Peru. He has previously taught at the University of Virginia, Boston University and the Ecole Nationale des Ponts et Chaussees.

BRIAN MORIARTY is Associate Director for Communications at the Business Roundtable Institute for Corporate Ethics.

Thought Leadership Commentary CHARLES o. HOLLIDAY,JR. is

the chairman of the board and chief executive officer of DuPont. Holliday is the 18th executive to lead the company in more than 200 years of DuPont history. He became CEO on February 1, 1998 and Chairman on January 1, 1999.

Holliday has been with DuPont

for more than 30 years. He started

at DuPont in the summer of 1970

at DuPont's Old Hickory site

after receiving a B.S. in Industrial Engineering from the University of Tennessee. He is a licensed Professional Engineer.

In 2004, he was elected a

member of the National Academy of Engineering. He became chairman

of Business Roundtable's Task Force for Environment, Technology and Economy the same year. Holliday

is also past chairman of the World Business Council for Sustainable Development (WBCSD), The Business Council and the Society of Chemical Industry - American Section. While chairman of the WBCSD, he co­authored a book Walking the Talk

which details the business case for sustainable development and corporate responsibility.

Holliday also serves on the board of directors ofHCA and is Chair of the Board of Directors of Catalyst. In addition, he is chairman of the U.S. Council on Competitiveness and is a founding member of the International Business Council.

Under Holliday's direction, DuPont established the mission to achieve sustainable growth - increasing shareholder and societal value while decreasing the company's environmental footprint.





1 Milton Friedman, "The Social Responsibility of Business is to Increase its Profits," The New York Times Magazine, September 13, 1970.

2 US Census Bureau, County Business Patterns 2003, (Washington: DC, 2005), p.3.

3 The ideas in this paper have been developed with a number of co-authors over the years in several places. In particular see Wicks, Freeman and Parmar (2005); Freeman and McVea (2001); Freeman et al (2004); and Freeman et al (2005). We are grateful to a number of people for helpful conversations, in particular Professors Gianfranco Rusconi, Dr. Lorenzo Saccone, Dr. Valeria Fazio, Dr. Mette Morsing, doctoral students at the Copenhagen Business School doctoral consortium on Corporate Responsibility, numerous participants in the EABIS conference in Gent, Professors Jeff Harrison, Robert Phillips, and Andrew Wicks.

4 Here "ethics" is used its broadest sense to encompass obligations to employees, and other stakeholders. This is sometimes referred to as an "American" usage, whereby the "European" usage is much narrower.

5 The first three levels of commitment are explored in greater detail in Wicks, Freeman, and Parmar (2005). The origins of these ideas can be found in part in Freeman (1984) in the idea of "enterprise strategy."

6 Haaland-Matlary,J. 2005. Kjernekar: Ethical Integrity in a Chaotic World. lESE Business SchoolAlumni Magazine, 96(Jan-March): 12-15.

7 Damon, W. 2002. The Moral Advantage. Optimize. Available on the Internet at: http:// www.optimizemag.comlissue/003/ethics.htm.

8 From the Merck Web site:

9 Michael Waldholz, "Merck, in Unusual Gesture, Will Donate Drug to Fight Leading Cause of Blindness," Wal! Street Journal, Oct 22,1987, pg. 1

10 "Sun Microsystems Sustainable Growth Initiative" in S.E.E. Change: Examples if How Business Roundtable Companies Are Embracing Strategies That Promote Social Responsibility, Improve the Environment and Grow the Economy, Business Roundtable, 2005. This document is available on Business Roundtables Web site at: http://www.

11 "Nike Issues FY04 Corporate Responsibility Report Highlighting Multi-Stakeholder Engagement and New Levels of Transparency, April 13, 2005. This news release is available from Nike's Web site at:

12 "US SEC's Cox details executive pay disclosure plan," Reuters,Jan 10,2006. "Pros: Coke and Others Step Up to the Challenge," American Management Association, http:// / edi to rial/ coca_ cola_pros .htm.

13 Ronald J. Alsop, The 18 Immutable Laws if Corporate Reputation: Creating, Protecting and Repairing Your Most Valuable Asset, Wall Street Journal Books, 2004, pp. 28-29; 52-58.

14 Penni Crabtree, "Court Orders Often Keep Companies'Darkest Secrets Hidden," The San Diego Union-Tribune, September 8,2002.

15 Pete Engardio, "Penske's Offshore Partner in India: The Truck- Leasing Outfit Works with Genpact in India and Mexico to Improve Efficiency and Customer Service," Business Week Special Report: Outsourcing/Online Extra,January 30, 2006.




For more information on the Business Roundtable Institute for Corporate Ethics please visit or call

Business Roundtable Institute for Corporate Ethics 100 Darden Boulevard

Charlottesville, Virginia 22903

(434) 982.2323


The Social Responsibility of Business is to Increase its Profits

by Milton Friedman

The New York Times Magazine, September 13,1970. Copyright @ 1970 by The New York Times Company.

When I hear businessmen speak eloquently about the "social responsibilities of business

in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they areDor would be if they or anyone else took them seriously Dpreaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.

The discussions of the "social responsibilities of business" are notable for their analytical looseness and lack of rigor. What does it mean to say that "business" has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but "business" as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.

Presumably, the individuals who are to be responsible are businessmen, which means individual proprietors or corporate executives. Most of the discussion of social responsibility is directed at corporations, so in what follows I shall mostly neglect the individual proprietors and speak of corporate executives.

In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose D for example, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.

In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.



Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward, and the persons among whom a voluntary contractual arrangement exists are clearly defined.

Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he recognizes or assumes voluntarilyDto his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He ma}. feel impelled by these responsibilities to devote part of his income to causes he regards as worthy, to refuse to work for particular corporations, even to leave his job, for example,

to join his countryDs armed forces. Ifwevish, we may refer to some of these responsibilities as "social responsibilities." But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are "social responsibilities," they are the social responsibilities of individuals, not of business.

What does it mean to say that the corporate executive has a "social responsibility" in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire "hardcore" unemployed instead of better qualified available workmen to contribute to the social objective of reducing poverty.

In each of these cases, the corporate execttive would be spending someone elseDs money for a general social interest. Insofar as his actions in accord with his "social responsibility" reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customersD money. Insofar as his actions lower the wages of some employees, he is spending their money.

The stockholders or the customers or the employees could separately spend their own money on the particular action if they wished to do so. The executive is exercising a distinct "social responsibility," rather than serving as an agent of the stockholders or the customers or the employees, only if he spends the money in a different way than they would have spent it.

But ifhe does this, he is in effect imposing taxes, on the one hand, and deciding how the tax proceeds shall be spent, on the other.

This process raises political questions on two levels: principle and consequences. On the level of political principle, the imposition of taxes and the expenditure of tax proceeds are governmental functions. We have established elaborate constitutional, parliamentary and judicial provisions to control these functions, to assure that taxes are imposed so far as possible in accordance with the preferences and desires of the publicDafter all, "taxation



without representation" was one of the battle cries of the American Revolution. We have a system of checks and balances to separate the legislative function of imposing taxes and enacting expenditures from the executive function of collecting taxes and administering expenditure programs and from the judicial function of mediating disputes and interpreting the law.

Here the businessmanDself-selected or appointed directly or indirectly by stockholdersDis to be simultaneously legislator, executive and, jurist. He is to decide whom to tax by how much and for what purpose, and he is to spend the proceeds D all this guided only by general exhortations from on high to restrain inflation, improve the environment, fight poverty and so on and on.

The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This jusfification disappears when the corporate executive imposes taxes and spends the proceeds for "social" purposes. He becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise. On grounds of political principle, it is intolerable that such civil servants D insofar as their actions in the name of social responsibility are real and not just window-dressing D should be selected as they are now. If they are to be civil servants, then they must be elected through a political process. If they are to impose taxes and make expenditures to foster "social" objectives, then political machinery must be set up to make the assessment of taxes and to determine through a political process the objectives to be served.

This is the basic reason why the doctrine of "social responsibility" involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scarce resources to alternative uses.

On the grounds of consequences, can the corporate executive in fact discharge his alleged "social responsibilities?" On the other hand, suppose he could get away with spending the stockholders D or customers D or employees D money. How is he to know how to spend it? He is told that he must contribute to fighting inflation. How is he to know what action of his

will contribute to that end? He is presumably an expert in running his companyDin

producing a product or selling it or financing it. But nothing about his selection makes

him an expert on inflation. Will his hold?ing down the price of his product reduce

inflationary pressure? Or, by leaving more spending power in the hands of his customers, simply divert it elsewhere? Or, by forcing him to produce less because of the lower price,

will it simply contribute to shortages? Even ifhe could answer these questions, how

much cost is he justified in imposing on his stockholders, customers and employees for

this social purpose? What is his appropriate share and what is the appropriate share of


And, whether he wants to or not, can he get away with spending his stockholders D, customers D or employees D money? Will noetstockholders fire him? (Either the present ones or those who take over when his actions in the name of social responsibility have reduced the corporationDs profits and the price of its stock.) His customers and his



employees can desert him for other producers and employers less scrupulous in exercising their social responsibilities.

This facet of "social responsibility" doctrine is brought into sharp relief when the doctrine is used to justify wage restraint by trade unions. The conflict of interest is naked and clear when union officials are asked to subordinate the interest of their members to some more general purpose. If the union officials try to enforce wage restraint, the consequence is likely to be wildcat strikes, rank? and- file revolts and the emergence of strong competitors for their jobs. We thus have the ironic phenomenon that union leadersDat least in the

U.S. Dhave objected to Government interference with the market far more consistently and courageously than have business leaders.

The difficulty of exercising "social responsibility" illustrates, of course, the great virtue of private competitive enterprise D it forces people to be responsible for their own actions and makes it difficult for them to "exploit" other people for either selfish or unselfish purposes. They can do goodDbut only at their own expense.

Many a reader who has followed the argument this far may be tempted to remonstrate that it is all well and good to speak of Government D s having the isponsibility to impose taxes and determine expenditures for such "social" purposes as controlling pollution or training the hard-core unemployed, but that the problems are too urgent to wait on the slow course of political processes, that the exercise of social responsibility by businessmen is a quicker and surer way to solve pressing current problems.

Aside from the question offactDI share Adam SmithDs skepticism about the benefits that can be expected from "those who affected to trade for the public good" Dthis argument must be rejected on grounds of principle. What it amounts to is an assertion that those who favor the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic proced ures. In a free society, it is hard for "evil" people to do "evil," especially since one manDs good is anotherDs evil.

I have, for simplicity, concentrated on the special case of the corporate executive, except only for the brief digression on trade unions. But precisely the same argument applies to the newer phenomenon of calling upon stockholders to require corporations to exercise social responsibility (the recent G.M crusade for example). In most of these cases, what is in effect involved is some stockholders trying to get other stockholders (or customers or employees) to contribute against their will to "social" causes favored by the activists. Insofar as they succeed, they are again imposing taxes and spending the proceeds.

The situation of the individual proprietor is somewhat different. Ifhe acts to reduce the returns of his enterprise in order to exercise his "social responsibility," he is spending his own money, not someone elseDs. Ifhe wishes to spend his money on such purposes, that is his right, and I cannot see that there is any objction to his doing so. In the process, he, too, may impose costs on employees and customers. However, because he is far less



likely than a large corporation or union to have monopolistic power, any such side effects will tend to be minor.

Of course, in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.

To illustrate, it may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be that, given the laws about the deductibility of corporate charitable contributions, the stockholders can contribute more to charities they favor by having the corporation make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes.

In each oftheseDand many sirrilarDcases, there isa strong temptation to rationalize these actions as an exercise of "social responsibility." In the present climate of opinion, with its wide spread aversion to "capitalism," "profits," the "soulless corporation" and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest.

It would be inconsistent of me to call on corporate executives to refrain from this hypocritical window-dressing because it harms the foundations of a free society. That would be to call on them to exercise a "social responsibility"! If our institutions, and the attitudes of the public make it in their self-interest to cloak their actions in this way, I cannot summon much indignation to denounce them. At the same time, I can express admiration for those individual proprietors or owners of closely held corporations or stockholders of more broadly held corporations who disdain such tactics as approaching fraud.

Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense spoken in its name by influential and prestigious businessmen, does clearly harm the foundations of a free society. I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely farsighted and clearheaded in matters that are internal to their businesses. They are incredibly shortsighted and muddleheaded in matters that are outside their businesses but affect the possible survival of business in general. This shortsightedness is strikingly exemplified in the calls from many businessmen for wage and price guidelines or controls or income policies. There is nothing that could do more in a brief period to destroy a market system and replace it by a centrally controlled system than effective governmental control of prices and wages.

The shortsightedness is also exemplified in speeches by businessmen on social responsibility. This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces



that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of Government bureaucrats. Here, as with price and wage controls, businessmen seem to me to reveal a suicidal impulse.

The political principle that underlies the market mechanism is unanimity. In an ideal free market resting on private property, no individual can coerce any other, all cooperation is voluntary, all parties to such cooperation benefit or they need not participate. There are no values, no "social" responsibilities in any sense other than the shared values and responsibilities of individuals. Society is a collection of individuals and of the various groups they voluntarily form.

The political principle that underlies the political mechanism is conformity. The individual must serve a more general social interestDwhether that be determined by a church or a dictator or a majority. The individual may have a vote and say in what is to be done, but ifhe is overruled, he must conform. It is appropriate for some to require others to contribute to a general social purpose whether they wish to or not.

Unfortunately, unanimity is not always feasible. There are some respects in which conformity appears unavoidable, so I do not see how one can avoid the use of the political mechanism altogether.

But the doctrine of "social responsibility" taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business 010 useit resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."




Step 1: Summarize the major arguments of Friedman and Freeman et al.

Business decisions are based on the time value of money. Bonds, stocks, loans, and other business investments are valued by determining the present value of an expected cash flow, which is also called discounting the cash flow. The time value of money finds considerable application in the decision-making processes of a business.

In this assignment, you will apply the basic principles of the time value of money to business decisions.


Part 1:

You are the chief financial officer of a firm. The firm has an expected liability (cash outflow) of $2 million in ten years at a discount rate of 5%.

  • Calculate the amount the firm would need on the present date as savings to cover the expected liability.
  • Calculate the amount the firm would need to set aside at the end of each year for the next ten years to cover the expected liability.

Part 2:

Using the Argosy University online library resources, identify an article that demonstrates the application of time value of money principles to a business decision.

  • Explain the specific business decision that management made after computing this value. Analyze how management used the concept of the time value of money principles to make this decision.
  • Analyze factors other than the time value of money that management considered or should have considered in reaching the business decision.




Part 1:

You are the chief financial officer of a firm. The firm has an expected liability (cash outflow) of $2 million in ten years at a discount rate of 5%.

  • Calculate the amount the firm would need on the present date as savings to cover the expected liability.

Future Value









Therefore, the amount of $325,800,000.00 is what is needed on the present date as savings to cover the expected liability.

  • Calculate the amount the firm would need to set aside at the end of each year for the next ten years to cover the expected liability.

Present Value









Therefore, $122,800,000.00 would have to be set aside at the end of each year for the next ten years to cover the expected liability.

Part 2:

  • Explain the specific business decision that management made after computing this value. Analyze how management used the concept of the time value of money principles to make this decision.

Time value of money (TVM) refers to the idea that the same amount of money is worth different amounts at different time periods. Why? First, money tends to have differing degrees of purchasing power at different times, (Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers, 2017).

Example 1:

Imagine in 1940 you had $1. Because the cost of living was extremely lower in 1940 as compared to today, you could have purchased a ticket to the latest movie in the theater (24¢), a loaf of bread (10¢), a gallon of gas (11¢), and still would not have spent half of your money (Box Office Mojo, n.d.; People History, n.d.). Today, $1 doesn’t get you a pack of gum. This erosion of purchasing power is known as inflation and is a natural outcome within relatively free market economic systems (Brayley & McClean, 2008). (Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers, 2017).

Second, money loses its value because of opportunity cost.

Example 2:

If a woman sticks $10,000 under her mattress for five years, at the end of five years she will still have $10,000. But, if she were put that money into a savings account that pays a 2% return, she would have $11,041. Thus, her decision to put the money under her mattress carries an opportunity cost of $1,041, (Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers, 2017).

The manager for a major baseball athlete, chose to use the TVM Decision Tree method. On one side are the PV formulas and the other side has the FV formulas. If the manager is discounting payments, the PV side would be used; if manager is compounding payments, the page would be flipped to show the FV side; however, before evaluating any offers from a major team, the manager must first master the TVM Decision Tree by working through a few practice problems, such as asking pertinent questions, while taking in to account, delayed annuity for PV, growing annuity for FV, and deferred compensation to know exactly what formula to use to calculate the PV and FV, (Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers, 2017). 

  • Analyze factors other than the time value of money that management considered or should have considered in reaching the business decision.

In the baseball world, there are many reasons why a team would want to structure deals using deferred money. One such reason might be that the owner has other ways to earn a return on his/her money. In the case of the Mets and Bonilla, the Mets owners (the Wilpon family) were receiving 12–15% returns through their investments with Bernie Madoff (Rovell, 2016), so investing the $5.9m with Madoff would cover the future Bonilla payments while still providing a multimillion dollar return for the Wilpons. Of course, in hindsight this approach failed since Madoff’s returns were the result of a Ponzi scheme, but at the time it seemed like a smart financial decision. More often, the owner has other [legitimate] businesses where the owner feels he/she could earn a better return on the money.


If the discount rate is 4% and the owner can invest potential salary money in a different venture that will get a 7% return, the owner may want to defer payments to the player and net 3% from the investment in the alternative venture, (Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers, 2017).


Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers. (2017). Retrieved from Case Studies Sport Management:



Assignment 1: Discussion—Value of Money


Overall Requirements:


1.    The assignment is worth 15% of your final grade.

2.    Your assignment must be in your own words.  As noted in the course outline, plagiarism is a serious academic offence.  If you are found guilty of plagiarism, the maximum allowable sanctions will be brought to bear against you.

3.    Due Date: March 18 by the end of class.  Assignments must be submitted in hard copy.  There is an assignment drop box for this class located outside the Economics department office. 



1.    Your assignment must be presented in prose form. 

2.    Style does count.  If I cannot understand what you are trying to communicate to me, I cannot accurately assess how well you understand the material.


Instructions:  Please select from one question from part A and one question from part B .


Part A

Answer one question from the topics below. Answers should not exceed two typewritten pages.    For each topic, you must first provide a theoretical description of both the problem and your solution (i.e., use diagrams to explain the problem and your solution).  You must choose one of the following topics.  This question is worth 1/3 of the total assignment grade or 5% of your total final grade. 


  1. You have decided to do a Masters degree despite deriving absolutely no utility from the material you study in your classes. Why? Given the changing nature of the labour market with respect to the number of jobs you may reasonably expect to have over your working life, do you think getting that one more degree will mean you don’t have to undertake any more formal education? Why or why not?


  1. Women still make less than men when all differences in education, experience and job similarities are accounted for. Has the wage gap changed over time? How would you go about closing the wage gap? 


3.      There is a union certification drive on at your highly dangerous and risky job which is at the only major employer in town. You are in rural BC; flights out are infrequent and the highway is sometimes closed in winter.   Are you in favour of forming a union? Why or why not?  Which factor is more important to you in your opinion, the degree of danger or the location of your job.



Part B.  Please answer one of the following three questions. Part B is worth 2/3 of this assignment or 10%of your final grade.  Answers should be roughly five typewritten pages and should include graphs as appropriate. 


1.      Provide an analysis of the labour market implications of either the latest provincial (BC) or federal budget. Overall, do you think that the budget you chose has positive or negative labour market impacts.  Why?


2.      Suppose Canada is not successful in renegotiating NAFTA. What are the implications for the Canadian labour market? Will the effects be uniformly distributed across the country?


3.      Canada’s immigration policy allows for a mix of humanitarian and economic immigrants as well as family reunification.  Should the balance between humanitarian and economic migrants be adjusted? Why? Does American immigration policy have positive or negative implications for Canada?  Why?





Need help in writing 7 pages assignment on labor economics

In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Respond to the following points in your paper on the actions the government would take to address expansionary fiscal and monetary policies:

Expansionary Fiscal Policy:

Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:

  • The necessary change in taxes and government spending,
  • The effect on aggregate demand, GDP, and employment.

Expansionary Monetary Policy:

The three tools the Federal Reserve Bank (The Fed) uses when conducting monetary policy are the required reserve ratio, the discount rate, and open market operations. 

Explain the actions of the Fed in regard to the three tools.

  • When the required reserve ratio is increased or decreased
  • When the discount rate is increased or decreased
  • Buying or selling government securities when conducting expansionary monetary policy 

Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment. 

Writing the Final Paper

The Final Paper:

  1. Must be eight to ten double-spaced pages in length and formatted according to APA style as outlined in your approved styled guide.
  2. Must include a title page that includes: 
    1. Title of paper
    2. Student’s name
    3. Course name and number
    4. Instructor’s name
    5. Date submitted
  3. Must include an introductory paragraph with a succinct thesis statement.
  4. Must address the topic of the paper with critical thought.
  5. Must conclude with a restatement of the thesis and a conclusion paragraph.
  6. Must use at least four scholarly resources, including the textbook. 
  7. Must use APA style as outlined in your approved style guide to document all sources.
  8. Must include, on the final page, a reference List that is completed according to APA style as outlined in your approved style guide.
Focus of the Final Paper

Problem 1 - Market clearing curves (16 points)

Consider the markets for ice cream (good 1) and pie (good 2). Let the market demand for ice cream be given by QP(PI,P2) = 200 - 2PI - 4P2 and market demand for pie is given by Q? (PI,P2) = 100 - 4P2 - 2pI. The supply of is ice cream is given by Qr (PI) = 4PI - 6 and supply of pie is given by Q~ (P2) = 2P2 - 6.

1.      Determine the market clearing curve for ice cream. Illustrate it in a diagram with the price of pie (P2) on the x-axis and the price of ice cream (PI) on the y-axis. You obtain the market clearing curve by the ice cream market clearing equation Qp (PI,P2) = Qr (PI) and rearrange this equation to state PI as a function of P2.

2.      Determine the market clearing curve for pie. Illustrate it in a diagram with the price of pie (P2) on the x-axis and the price of ice cream (PI) on the y-axis. In this case use the market clearing equation for the pie market, Q? (PI, P2) = Q~ (P2) and rearrange this equation to state PI as a function of P2.

3.     Find the general equilibrium for the two markets as the intersection of the two curves. Also solve for (pi, P2) using the two curves (you have two equations and two unknowns. Numbers are not designed to be nice and round.). What are the quantities consumed of ice cream and pie?

4.     Suppose the supply of ice cream increases and is expressed by, Qr (PI) = 9PI - 6. What are the new equilibrium prices and quantities in the two markets?

Problem 2 - Contract curve (5 points)

Kate and Humphrey have initial endowments of goods 1 and 2, eL = (8,2) and eH = (2,8). Kate's preferences are represented by utility function UL(XI, X2) = XIX2 and Humphrey's preferences are represented by utility function UH(XI, X2) = XIX2. Denote by xL = (xf, x:f) Lauren's equilibrium consumption bundle. Humprey's consumption bundle is xH = (x{l,x~). In equilibrium it must that xf + x{l = ef + e{l = 10 and x:f + x~ = e:f + e~ = 2 + 8 = 10. Determine all equlibrium allocations, (xL, xH) that are on the contract curve.

Problem 3 - Firm Upstream and firm Downstream (24 point) Following the example in class, consider two firms, U and D. Both firms have cost functions C (Q) = 0.5Q2. Firm U's product sells at price vu = 6 whereas firm D's product sells at price PD = 10. Firm U's production pollutes the river that both firm's are situated by. The pollution is



heavier, the more U produces. Firm D is downstream and is negatively affected by the pollution. To capture this negative impact, say firm D faces unavoidable fixed cost of Fe (Qu) = 0.5Qb, where Qu is firm U's quantity choice.

1. Suppose firm U is given the right to freely pollute.

(a) In the absence of any negotiation between the firms, what are their optimal output levels?

What are their profits?

(b) Now, introduce the possibility of a negotiation between the firms. Suppose they will split the net joint profit gains from a negotiated deal evenly. Define a contract between the two firms by output levels Q'U, Qb, and a transfer between them, T (specifically, say that T is the transfer from D to U). Determine the optimal contract.

2.    Suppose firm D is given the right to a clean river (no pollution). Thus, firm U will be forced to not pollute in the absence of any agreement otherwise.

(a) In the absence of any negotiation between the firms, what are their optimal output levels?

What are their profits?

(b) As in question 1.b, introduce the possibility of a negotiation between the firms. Again, assume the net joint profit gains are split evenly. Determine the optimal contract.

Problem 4 - Endowment equilibrium (20 points)

Suppose an economy consists of 11 people: 10 farmers and one miner. All individuals have identical preferences, u (j, g) = In(j) + 2ln(g), where f is a kilo of food, and 9 is a gram of gold. Each farmer is endowed with a 50 kilos of food and no gold. The miner is endowed with no food and one gram of gold. The farmers and the miner can trade food and gold at prices Pi and Pg. In the following, normalize the price of food to one, Pi = 1.

1.    For given prices (Pi = 1 and Pg), solve for a farmer's optimal demand for food and gold given that the farmer has an endowment that has value 50.

2.     For given prices (Pi = 1 and Pg), solve for the miner's optimal demand for food and gold given that the miner has an endowment that has value 1 x Pg.

3.    Determine the equilibrium price of gold, p;. How does the value of the miner's endowment compare to that of the farmers altogether.

4.    Suppose instead of 10 farmers, there are 100 farmers. In equilibrium, how valuable is the miner's 1 gram of gold in terms of food, then?

Problem 5 - Production economy general equilibrium (35 points) Robert has utility function u (c, e) = c£ over consumption, c, and leisure, £. Robert is endowed with 16 hours of leisure. Let the price of consumption be P = 1. Robert can sell his time in the labor market at hourly wage, w. The equilibrium we will consider implies zero firm profits, so labor income is the only source of income for consumers. Thus, Robert's budget line can be written by c + we = 16w. Production of the consumption good is done by the Acme corporation according to production function Q = F (L) = AL, where A > 0 is some constant that captures firm productivity. There are no fixed costs. The acme corporation sells the output in the consumption market at the price p, and hires labor at wage w. We will in the following work out the general equilibrium.



1.     For given wage wand consumption good price p, work out Robert's optimal consumption and leisure choice (c", £*). (Hint: Combine the budget line equation with MRS = p/w). What is Robert's supply of hours to the labor market, h* = 16 - r . State the expressions as functions of the real wage, W = w/p.

2.     For a given wage and productivity A, determine Acme's cost function, C (Q), and the associ­ated input level for a given output requirement, L (Q).

3.    Verify that Acme Corp's marginal cost curve is fiat. That is, Acme's supply curve is fiat. At what price level? Notice that Acme is willing to supply any level of output at this price level and that its profits are exactly zero regardless of what output level it chooses.

4.    There are a total of 100 individuals in the economy all identical to Robert. State the market demand for consumption, QD as a function of p and w. Combine with the fiat supply curve to determine the equilibrium price that equates market consumption demand with supply (it will be a function of w). This equilibrium price equation is effectively also an equilibrium condition on the real wage, W = w [p. What is the equilibrium level of the real wage?

5.    Set A = 2. State the equilibrium market demand of the consumption good, QD. Acme will be supplying exactly the same quantity. Verify that the labor market is also clearing.

6.     In equilibrium, how much labor is Robert supplying to the market? How much is he consum­ing?

Acme has come up with a brilliant new production process which has increased the produc­tivity parameter to A = 3. Determine the new general equilibrium. What is the equilibrium wage? How much labor is Robert supplying? How much is he consuming? 

5 intermediate microeconomics calculus questions


Southern New Hampslilfe University

ECO 500 Milestone Two Guidelines and Rubric

Overview: In this second milestone assignment for the final project, you will continue your analysis of the economic problem presented in the case study on your selected company (Microsoft, Heinz, or American Airlines). Using the information gathered in the problem statement, you must now frame your company's problem within the context of the appropriate market structure, conducting mathematical and/or statistical calculations that will identify significant trends and relationships to facilitate demand forecasting and potential impacts on profits. Keeping in mind that your audience of corporate decision makers may not be experts in economic theory and data analysis, you must seek to present your information in an easily accessible and understandable way.

Prompt: To complete the second step of this final project, you will submit a theoretical and quantitative analysis that links the problem statement to the relevant economic factors at play. Depending on your company's unique problem, you may look to answer questions such as the following:

·         Are customer preferences changing?

·         Is there a shift in demand?

·         Is there a change in technology?

To answer these questions, include a discussion of demand and its likely elasticity, an application of marginal analysis, and costs in your statement.

Identify and illustrate these trends and relationships using mathematical principles. This will involve use of the proper algebraic, regression, and other quantitative methods to generate scatterplots of your data, highlighting trend lines and outliers as appropriate. You may find it useful to review these mathematical techniques using the following tutorials:

·         Describing Relationships in Quantitative Data (Khan Academy)

·         Video: Regression Line Example (9:26) (Khan Academy)

To help you accurately perform these calculations, you must use Microsoft Excel and the Excel Analysis TookPak. There is an excellent section in the course textbook on how to perform regression analyses in Excel, but you may find these tutorials also helpful:

·         Load the Analysis ToolPak (Microsoft)

·         Perform Regression Analysis in Excel 2007 (Microsoft)

Use the knowledge you have gained so far in this course to interpret the data. How might this information be used to make predictions and generate recommendations for action?

To complete your submission, categorize which market structure (pure competition, monopolistic competition, oligopoly, or pure monopoly) applies to your company. Describe this market structure. How does it affect the problem you are researching?


Southern New Hampslilfe University

Remember that these tasks draw not only upon your quantitative and data analysis/interpretation skills, but also upon your communication skills. How might you go about presenting your findings to the company's decision makers? Describe how you will present your information in a way that will be understandable to laypeople and will convince them of the merit of your processes (and ultimately, your recommendations).

As a managerial economics student and professional, you are encouraged to use your own experience, understanding, and knowledge of business and industry structure to drive your analysis. Specifically, the following critical elements must be addressed:

    I.      Research: In this section, you will apply economic theory and quantitative analysis to your research topic.

A.      Describe the relationship between the economic factors you identified and the presented issue.

B.      Using mathematical concepts, illustrate the relationships between economic factors and the issue.

C.      Describe the market structure of your organization's industry.

D.      Determine how the market structure of the industry influences the issue. Support your response with relevant examples from the case.

This theoretical and quantitative analysis assignment will be incorporated into the final economic analysis recommendation paper.


Guidelines for Submission: This milestone assignment should be written in essay format and submitted as a Microsoft Word document. The submission should be 6 to 8 pages in length (including the initial problem statement) with double spacing, 12-point Times New Roman font, and one-inch margins. You should use current APA style guidelines for your citations and reference list. Note that at least five outside information sources are required overall for this project, although you might find that more are necessary to satisfy the requirements of the final presentation.

As necessary, copy and paste any data analysis and/or graphics from Excel into your Word document for submission. You may include your original Excel documents as supplementary material if you believe this will strengthen your contribution.


Southern New Hampslilfe University

Note that the grading rubric for the milestone submissions is not identical to that of the final project. The Final Project Rubric will include an additional "Exemplary" category that provides guidance as to how you can go above and beyond "Proficient" in your final submission.

Critical Elements

Proficient (100)

Needs Improvement (80)

Not Evident (0)



Describes the relationship between the

Describes the relationship between the

Does not describe the relationship between



identified economic factors and the

identified economic factors and the

the identified economic factors and the



presented issue

presented issue but description is cursory or

presented issue








Illustrates the relationships between

Illustrates the relationships between

Does not illustrate the relationships between



economic factors and the issue, using

economic factors and the issue but does not

economic factors and the issue



mathematical concepts

use mathematical concepts or the illustration





is incomplete or contains inaccuracies




Describes the market structure of the

Describes the market structure of the

Does not describe the market structure of the



organization's industry

organization's industry but description is

organization's industry




cursory or contains inaccuracies




Determines how the market structure of the

Determines how the market structure of the

Does not determine how the market structure



industry influences the issue and provides

industry influences the issue but the

of the industry influences the issue



relevant examples to support response

explanation is cursory or contains





inaccuracies or response is not supported





with relevant examples



Articulation of

Submission has no major errors related to

Submission has major errors related to

Submission has critical errors related to



citations, grammar, spelling, syntax, or

citations, grammar, spelling, syntax, or

citations, grammar, spelling, syntax, or




organization that negatively impact

organization that prevent understanding of




readability and articulation of main ideas









ECO 500 Milestone Two Guidelines and Rubric

Next, develop a formal outline for your Final Paper writing in full sentences (12 point font, Times New Roman font, double spaced). The outline must contain an introduction section with thesis statement, a body section that identifies the five conflict topics that you will use in your Final Paper and includes supporting material for each topic, and a conclusion section which reinforces the thesis statement established in the introduction. Be sure to include a bibliography with at least two of the sources that you will use for your Final Paper. Please make sure that the sources that you use are listed in the APA format. 

Final Paper

Focus of the Final Paper
This course focuses on identifying types of conflicts and resolving conflicts through effective communication techniques. Your Final Paper will be an eight-to ten-page paper (excluding the APA title and reference pages) that will showcase what you learned about conflict and conflict resolution. 

Identify a recent interpersonal, group, or organizational conflict that you were involved in and was later resolved. Select five of the topics listed below and discuss how they apply to your chosen conflict.  You must use a minimum of five resources to help support your discussion of these topics. Be sure to focus on communication techniques that were used during the conflict management process. Argue whether the resolution to this conflict was a “best practices” approach to resolving this conflict.  

Your paper must include an introduction paragraph that provides a high-level overview of your paper. In addition, your paper must include a strong conclusion paragraph that brings together the topics discussed. Remember not to introduce any new topics in your conclusion.

Conflict Topics for the Final Paper (select five)

· Why does conflict occur?

· Conflict management

· The positive and negative effects of conflict

· Role of personality types in conflict management

· Communication techniques

· Ethics and workplace conflicts

· Climate in a conflict situation

· Stress and anger

· Facework

· Forgiveness

· Mediation and arbitration

Read the assignment instructions for the Final Paper.

It is highly recommended that you review the Seminar presentation located in the Seminar area before beginning the Discussion.

The law of demand states that a fall in the price of a product raises the quantity demanded for the product, whereas an increase in price leads to a decrease in quantity demanded for the product. The price elasticity of demand measures the extent of the responsiveness of the quantity demanded to a change in price. Demand for a product is elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded for a certain product.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a product by buying more of the substitute the product and less of the relatively more expensive product. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demand.

Explain why the demand for the good or service provided by a firm is elastic or inelastic. How does the elastic or inelastic demand influence pricing decisions by the firm to maximize profit? What are the impacts of elastic demand and inelastic demand on total revenue?

Provide examples on how the availability of close substitutes affects price elasticity of demand for a good or service.

Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.


It need to be 300 words . 

Price Elasticity of Demand

Assignment: Price Elasticity of Demand and Total Revenue It is highly recommended that you review the Seminar presentation located in the Seminar area before beginning the Assignment.  


According to the law of demand, if price increases, quantity demanded of a good or service will decrease or vice versa. Price elasticity of demand tells us how much quantity demanded will decrease when price increases or how much quantity demanded will increase if price decreases.  


On the other hand, according to the law of supply, if the price increases, quantity supplied of a good or service will increase. Similarly, if price decreases, quantity supplied will decrease. The degree of sensitivity (responsiveness) of production/supply to a change in price is measured by the concept of price elasticity of supply.  


Total revenue is calculated as the quantity of a good or service sold multiplied by its market price. Thus, it is a measure of how much money a company makes from selling its product. The core objective of a firm is maximizing profit. One of the ways to maximize profit is increasing total revenue. The firm can increase its total revenue by selling more items or by raising the price. Among others, this depends on the nature of the price elasticity of demand. Moreover, the length of time is an important factor in determining price elasticity of demand and supply. 


Course outcome(s) practiced and assessed in this Assignment: GB540-2: Examine microeconomic tools for purposes of problem solving, analysis, and decisionmaking.    Directions  


● Explain the relationship between the price elasticity of demand and total revenue. What are the impacts of various forms of elasticities (elastic, inelastic, unit elastic, etc.) on business decisions and strategies to maximize profit? Explain your responses using empirical examples, formulas, and graphs.  


● Is the price elasticity of demand or supply more elastic over a shorter or a longer period of time? Why? Give examples.  


● What are the impacts of government and market imperfections (failures) on the price elasticities of demand and supply?  




● Your Assignment should have a cover sheet with the following information: Title of the paper, Your Name, Course Number and Section Number, and Date ● It must be a minimum of 5-pages long (excluding title page, references, etc.)  ● Be sure to include the criteria located in the rubric below within your paper. 



Unit 3 [GB540: Economics for Global Decision Makers]    


2 of 2 


● It must be APA formatted with citations to your sources and your last page should list all references used. Review the APA formats found in the Writing Center. ● You must use a variety of two objective, high quality, and current sources. Peer reviewed articles, articles published in journals, textbooks, and library resources found in the Library are examples of high quality resources. ● Note that Wikipedia, Investopedia, etc. are not considered as reliable resources for this research. 

Assignment: Price Elasticity of Demand and Total Revenue

Print Last Name: _______________________          Print First Name: _____________________


Points Earned: _________


ECON121 Homework Problem Set #2 – Spring 2018


For multiple choice questions, circle the letter of the ONE best answer.


1.         (6 points) When we examined interest rate behavior in the United States, it was shown that interest rates decreased significantly from 2008 to 2009.  In terms of the loanable funds market, which combination of changes in the supply of and demand for loanable funds could best explain this?

A. A decrease in supply of and a decrease in demand for loanable funds.

B. A decrease in supply of and an increase in demand for loanable funds.

C. An increase in supply of and an increase in demand for loanable funds.

            D. An increase in supply of and a decrease in demand for loanable funds


2.         (6 points) If the Federal Reserve wanted to use its monetary policy tools to decrease the money supply, it could:


A.    buy bonds, reduce the discount rate, or reduce reserve requirements.

B.     sell bonds, reduce the discount rate, or reduce reserve requirements.

C.     sell bonds, increase the discount rate, or increase reserve requirements.

D.    buy bonds, increase the discount rate, or increase reserve requirements.


3.         (6 points) When the Federal Reserve sells U.S. Treasury securities (i.e. bonds) to the public, it directly:

A.    increases the M1 money supply, and increases the reserves in the banking system.

B.     increases the M1 money supply, while reducing the reserves in the banking system.

C.     reduces the M1 money supply, while increasing the reserves in the banking system.

D.    reduces the M1 money supply, and reduces the reserves in the banking system.


4.         (8 points) In recent years, the Social Security Administration has increased the retirement age from age 65 to age 67.  Based on the concept of consumption smoothing, what impact is this change in the retirement age likely to have on the supply of loanable funds?  Provide support for your answer.


Print Last Name: _______________________          Print First Name: _____________________


ECON121 Homework Problem Set #2 – Spring 2018

Page 2


5.         (8 points) Suppose you buy a bond on March 8, 2018 for $1,000 that pays you interest at 8% annually ($80 per year).  The bond you purchased matures on March 8, 2028.  Next year, on March 8, 2019, you decide you want to travel during Spring Break and choose to sell the bond you purchased last March to pay for your trip.  You’re pleasantly surprised that you were able to sell your bond in March 2019 for $1,200.  The fact that you were able to sell your bond for $200 more than you paid for it means interest rates must have increased from March 2018 to March 2019.  Indicate whether the last statement is TRUE or FALSE; and then provide support for your answer.













6.         (8 points – parts A, B, C, and D) Assume you invest your money in a portfolio of stocks known as the S&P 500 (i.e. a portfolio of 500 stocks).  Consider three different investment horizons (i.e. periods of time that you own the stock portfolio): (1) year, (5) years, and (20) years.  For each part below, choose the investment horizon that answers the question.  Write 1 year, 5 years, or 20 years in the space below the question.


            6A. (2 points) Based on historical performance, in which investment horizon would you have earned the largest annualized gain (i.e. percentage gain per year or years)?



            6B. (2 points) Based on historical performance, in which investment horizon would you have earned the lowest annualized gain (i.e. percentage gain per year or years)?



            6C. (2 points) Based on historical performance, in which investment horizon would you have experienced the smallest annualized loss (i.e. percentage loss per year or years)?



            6D. (2 points) Based on historical performance, in which investment horizon would you have experienced the largest annualized loss (i.e. percentage loss per year or years)?

Print Last Name: _______________________          Print First Name: _____________________


ECON121 Homework Problem Set #2 – Spring 2018

Page 3


7.         (8 points) The actual or real world money multiplier is generally less than the simple money multiplier.  Indicate whether the statement is TRUE or FALSE; and then provide support for your answer.








8.         (6 points) Which of the following is not a component of the M1 money supply?

A.    Demand deposits (i.e. checking accounts).

B.     Large denomination Federal Reserve Notes (e.g., $100 bills).

C.     Coins.

D.    Outstanding balances on credit cards.

E.     Answer choices A→D are all components of M1


9.         (6 points) The term open market operations refers to the

A. loan-making activities by banks with households and businesses.

B. banks borrowing money from each other.

C. the buying and selling of U.S Treasury securities by the U.S. Treasury Department.

D. none of the answer choices A→C are correct.


10.       (6 points) A bank finds itself short of required reserves and decides to borrow from the Federal Reserve.  The interest rate on this loan is called:

A. the real interest rate.

B. the discount rate.

C. the federal funds rate.

D. the nominal interest rate.


11.       (8 points) An Open Market Operations purchase will likely lead to an increase in aggregate demand. Indicate whether the statement is TRUE or FALSE; and then provide support for your answer.



Print Last Name: _______________________          Print First Name: _____________________


ECON121 Homework Problem Set #2 – Spring 2018

Page 4


12.       (8 points) Assume a minimum reserve requirement of 6 ¼%.  Also assume there is an Open Market Operations purchase of U.S. Treasury securities in the amount of $1,000,000.  The seller of the U.S. Treasury securities deposits the $1,000,000 into her account at Chase.  By what dollar amount could the money supply potentially grow as a result of this Open Market Operations purchase?  Show your work.













13.       (8 points) By increasing the minimum reserve requirement, the Federal Reserve increases the value of the simple money multiplier. Indicate whether the statement is TRUE or FALSE; and then provide support for your answer.










14.       (8 points) A consumer deposits of $1,000 in currency into her checking account.  The bank sets aside $200 aside as required reserves (i.e. assume a 20% minimum reserve requirement), and then makes a loan of $800 to a new borrower.  This set of transactions increases the money supply by $1,800. Indicate whether the last statement is TRUE or FALSE; and then provide support for your answer.






ECON121 Homework Problem Set #2 – Spring 2018

Intermediate Macroeconomic Theory

Economics 317: Section B

Pre-Midterm Exam: Spring 2015




Directions:  Please answer all questions.   Your answers should be as thorough and as precise as possible.  If necessary you may continue your answer to any question at the back of the page.


This exam is based on the following description of 317land.  317land is a monetary economy in which  the  typical  household  has  production  opportunities  summarized  by  the  production function yt  = f(lt).  In addition, households have access to a competitive commodity or goods market and to a perfect credit or bond market.  The bonds in 317land are one period bonds that pay real interest at rate R.   Assume that the typical household in 317land has an infinite planning horizon and seeks to maximize horizon long utility given by U = u(c1, l1) + 1/(1+r) u(c2, l2) +  1/(1+r)2 u(c3, l3) +. . . . , where c and l represent consumption and work effort and r is the subjective rate of time preference.  Finally, assume that households in 317land behave in accordance with the permanent income hypothesis.




1.      In class we noted that in order to maximize horizon-long utility households in an economy like 317land will have to allocate resources optimally along three dimensions.  These are: intratemporal allocation (i.e. the choice of (c, l) in any period t, intertemporal allocation of consumption, and intertemporal allocation of work effort.  Fundamental economic principles instruct that optimizing households’ allocation of resources along these dimensions will be guided by the fundamental principle that the optimal level of a good service or activity is the level at which marginal benefit is equal to marginal costs.


(a)    Write an essay that thoroughly proves that the representative optimizing household’s intertemporal allocation of work effort will be consistent with this principle. (20 points)
















(b)    Thoroughly evaluate the accuracy of the following statement.


“Holding all else constant, a reduction in the intertemporal relative price of current consumption will induce optimizing households to intertemporally reallocate work effort from the future (or future periods) to the current period.” (10 points)  


















(c)     Suppose 317land is hit by a natural disaster.  Use whatever combination of written and graphical exposition you deem appropriate to explain how this change in the economic environment is likely to affect the representative household’s intertemporal allocation of work effort. (10 points)











2.      Prove that the (c1, c2) combination that is consistent with maximization of the representative optimizing household’s lifetime utility is the (c1, c2) combination at which the marginal benefit is equal to marginal costs by doing the following.


(a)    Use whatever combination of written and graphical exposition you deem necessary to demonstrate that the representative optimizing household in 317land will pick the (c1, c2) combination for which the marginal rate of substitution of consumption in period 2 for consumption in period one is equal to the intertemporal relative price of period one consumption. (15 points)

















(b)        Thoroughly demonstrate/explain the exact sense in which the behavior you described in your answer to question 2(a) is consistent with the fundamental principle that the optimal level of a good service or activity is the level at which marginal benefit is equal to marginal costs. (15 points)


3.     The president of 317land believes that it is important to stimulate current economic activity in 317land and is considering a stimulus package that includes tax cuts.  His advisors have provided him with two alternative policies.  Under policy A, the representative household will receive a permanent tax cut that will reduce their tax liability in the current period and in every subsequent period by $100.  Under policy B, the representative household will receive a one-time tax rebate of $1000.00 dollars.    Under that assumption that the government’s primary goal is to encourage current consumption and that the real interest rate is 3 percent, evaluate which of these policies is most consistent with the government’s objective by doing the following.


(a)  Thoroughly derive the marginal propensity to consume that is applicable for policy A and use it to predict the effect of policy A on per capita consumption.  (state your final result as a dollar figure. (15 points)




(b)   Thoroughly derive the marginal propensity to consume that is applicable for policy B and use it to predict the effect of policy B on per capita consumption.  (state your final result as a dollar figure).  Identify the policy you would recommend and explain why. (15 points)




















(c)    Bonus Question:  Will these policies affect work effort?  Explain briefly. (10 points)

Intermediate Macroeconomic Theory Economics 317: Section B

The objective of discussion is to engage with your fellow classmates on topics revolving around the themes in the readings and lectures. Your first assignment is to post an initial answer to a discussion question (1 of 3, listed below) of your choosing. You must do this by Tuesday, March 13


You should keep all of your work on this discussion civil, articulate, and well-informed by the readings. You will be graded on the quality of your work and its relevance to the topic and readings. Each response should be 1 paragraph at most. The online discussions are worth 6 points: 3 points for your initial answer and 3 points for your critical response.

Question 1: Do you agree with Gerald Friedman that the labor movement needs to become more radical (through the use of strikes) in order to stay relevant, or is there something else needed to "reignite" it?


Question 2: We talked about many of the problems of egalitarian communities and workplaces - free riding, brain drain, and negative selection. Do egalitarian societies also fail because they are forced to exist in an economic system that is predominantly capitalist? Why or why not?


Question 3: We talked about how American families are working more hours today than they did 30 years ago. Will this trend continue over the next 10 years? Why or why not?


The objective of discussion

This is a written assignment that you must conduct an exploratory research on how the government internalizes negative externality (you only need one market or one product). Recall negative externalities occur in many markets; for example, oil production, manufacturing, transportation, and smoking etc. You are to submit a two-page summary of the policy implemented in the market or product of your choice and upload your summary in a word document or pdf file as an attachment on Canvas.  Please check the rubric regarding an expectation for this paper.

This is a written assignment

While the need to understand total cost is important whether we are dealing with a domestic or foreign supplier, the complexity that surrounds worldwide sourcing underscores the need to understand an expansive set of cost elements. This wider set of elements is what widens the gap between a price paid and a total cost realized. While total cost information is out there, with so many cost elements to consider, the job of consolidating this information into a useful analysis can be intimidating.  Discuss the four A’s of Total Cost Data and if this type of information would be helpful in your organization.

Instructions:  Your initial post should be at least 250 words. 

Assignment Instructions

To help you retain the information found in this course, each week you are required to submit your "Cornell Notes" for each article required for the week. An MS Word template is attached for your use. Please submit all notes for the week in ONE MS Word document.

Please click here to review information on Cornell Note Taking.

Complete Cornell Notes on three of the four articles.

Article #1 - The Impact of Supplier Innovativeness, Information Sharing and Strategic Sourcing On Improving Supply Chain Agility

Article #2 - Production and Pricing Policies in Dual Sourcing Supply Chains 

Article #3 - Global Sourcing Decision-Making Processes: Politics, Intuition, and Procedural Rationality

Article #4 - Integrating Global and Local Procurement For Superior Supplier Working Relations 

Cornell Notes Template

Cornell Notes Rubric

Supporting Materials

· Week 6 - The Impact of Supplier Innovativeness, Information Sharing and Strategic Sourcing - 10 pages.pdf (340 KB)

· Week 6 - Integrating Global and Local Procurement For Superior Supplier Working Relations - 11 pages.pdf (287 KB)

· Week 6 - Production and Pricing Policies in Dual Sourcing Supply Chains - 8 pages.pdf (430 KB)

Week 6 Worldwide Sourcing forums

For this assignment, you are required to complete Individual Problems 17-2 and 17-6 at the end of Chapter 17 in Managerial Economics: A Problem Solving Approach. In addition, you are required to complete Group Problem G17-1: Uncertainty. As you are evaluating your current company, address the following decisions in your response (500-750 words):

  1. What environmental factors and risks must be considered in the company's decision-making process?
  2. Evaluate costs factors influencing the company's decision.
  3. Determine strategies that would provide value to the outcome your company is seeking relating to this decision.

Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is not required.

17 -2 Game Show Uncertainty

In the final round of a TV game show, contestants have a chance to increase their current winnings of $1million to $2million. If they are wrong, their prize is decreased to $500,000. A contestant thinks his guess will be right 50% of the time. Should he play? What is the lowest probability of a correct guess that would make playing profitable?


17-6 Hiring

The HR department is trying to fill a vacant position for a job with a small talent pool. Valid applications arrive every week or so, and the applicants all seem to bring different levels of expertise. For each applicant, the HR manager gathers information by trying to verify various claims on resumes, but some doubt about fit always lingers when a decision to hire or not is to be made. What are the Type I and II decision error costs? Which decision error is more likely to be discovered by the CEO? How does this affect the HR manager’s hiring decisions?


G17-1 Uncertainty

Describe a decision your company has made when facing uncertainty. Compute the expected costs and benefits of the decision. Offer advice on how to proceed. Compute the profit consequences of the advice.

(Security changing their promotion system where each person has the opportunity to move up in position but has to be in a certain position a little longer than they are used to. It builds moral for the personnel and the cost would be around the same give or take. Change the promotion system in the middle of the year but let the personnel know months ahead in case they were wondering if they should leave the company and venture elsewhere).

For this assignment, you are required to complete Individual Problems

Assume that you have decided to start your own Internet business to sell cookbooks online ( You estimate that the annual cost of this business in the first year will be as follows:


Fixed explicit costs (annually):


Technology (Web design and maintenance)   $5,000

Postage and handling                                   $1,000

Miscellaneous                                              $5,000

Equipment                                                  $4,000

Overhead                                                    $1,000

TOTAL Explicit Fixed Costs (annual)                         $16,000


Fixed implicit costs (annually):


Lost wages from job given up (annual)           $50,000

Variable cost = $20 per book.


Part 1:

Assume that the equation for demand is Q = 40,000 – 500P, where


Q = the number of cookbooks sold per year

P = the retail price of books


Using the information above, fill in the attached chart (note that quantity is just the solution of the demand curve above; the first two lines of the table have been completed for you – you need to complete all other lines in the table):


Indicate the maximum profit price and quantity by highlighting those particular values with red font. 


Part 2:

After you complete the chart (either fill in the empty boxes in the table above or create an Excel file), copy and paste the table into a Word file. This table should be at the top of your assignment. Then answer the following questions (based on the chart and your understanding of this material) in 600-800 words:


1.  Why, according to an economist, should implicit costs (i.e., lost wages from job given up) be included in the total cost of your product to compute economic profit? 


2.  Why does price elasticity of demand change as you move up the demand curve (more specifically, as the price of the product increases)?

Explain in your own words why MR = MC produces maximum profit for a company. 



You may use the following two resources to assist in this assignment as well:


Algebra tutorial website


Excel tutorial website


Assume that you have decided to start your own Internet business

This assignment will give you the opportunity to choose a case study, and then write about the ethical implications and the impact of the events that are described. Each case study includes a set of questions that you should answer. You can choose any Case Study.

You will be graded on the following criteria:

Write a four to six (4-6) page paper in which you:

Analyze the questions associated with your chosen case study and discuss them using concepts you learned in this course.

Explain your rationale for each of your answers to your chosen case study.

Format your assignment according to the following formatting requirements:

Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page is not included in the required page length.

Cite your textbook as a reference.

Include a reference page. Citations and references must follow APA format. The reference page is not included in the required page length.


The specific course learning outcomes associated with this assignment are:

Determine the considerations for and process of ethical business decision making to balance corporate and social responsibilities and address moral, economic, and legal concerns.

Analyze selected business situations using the predominant ethical theories, such as utilitarian, Kantian, and virtue ethics to guide ethical business decision making.

Determine the implications and impact of various civil liberty laws in the workplace, such as hiring, promotion, discipline, discharge, and wage discrimination.

Use technology and information resources to research issues in business ethics.

Write clearly and concisely about business ethics using proper writing mechanics.                                 


Hacking into Harvard

everyone WHo Has ever appLied for admission

to a selective college or who has been interviewed for a highly desired job knows the feeling of waiting impatiently to learn the result of one’s application. So it’s not hard to identify with those applicants to some of the nation’s most prestigious MBA programs who thought they had a chance to get an early glimpse at whether their ambition was to be

ful lled. While visiting a Businessweek Online message board, they found instructions, posted by an anonymous hacker, explaining how to  nd out what admission decision the business schools had made in their case. Doing so wasn’t hard. The universities in question—Harvard, Dartmouth, Duke, Carnegie Mellon, MIT, and Stanford—used the same application software 


  one had to do was change the very end of the applicant- speci c URL to get to the supposedly restricted page contain- ing the verdict on one’s application. In the nine hours it took Apply Yourself programmers to patch the security  aw after it was posted, curiosity got the better of about two hundred applicants, who couldn’t resist the temptation to discover whether they had been admitted.19

their MBA programs, it’s a safe bet that few, if any, offending applicants were sitting in classrooms the following semester. Forty-two applicants attempted to learn their results early at Stanford, which took a different tack. It invited the accused hackers to explain themselves in writing. “In the best case, what has been demonstrated here is a lack of judgment; in the worst case, a lack of integrity,” said Derrick Bolton, Stanford’s director of MBA admissions. “One of the things we try to teach at business schools is making good decisions and taking responsibility for your actions.” Six weeks later, however, the dean of Stanford Business School, Robert Joss, reported, “None of those who gained unauthorized access was able to explain his or her actions to our satisfaction.” He added that he hoped the applicants “might learn from their experience.”

 Some of them got only blank screens. But others learned

that they had been tentatively accepted or tentatively

rejected. What they didn’t count on, however, were two

things:  rst, that it wouldn’t take the business schools long to

learn what had happened and who had done it and, second,

that the schools in question were going to be very unhappy

about it. Harvard was perhaps the most outspoken. Kim B.

Clark, dean of the business school, said, “This behavior is

unethical at best—a serious breach of trust that cannot be

countered by rationalization.” In a similar vein, Steve Nelson,

the executive director of Harvard’s MBA program, stated,

“Hacking into a system in this manner is unethical and also

contrary to the behavior we expect of leaders we aspire to

develop.”         claiming that Harvard and the other business schools had

Given the public’s concern over the wave of corporate scandals in recent years and its growing interest in corporate social responsibility, business writers and other media com- mentators warmly welcomed Harvard’s decisive response. But soon there was some sniping at the decision by those

                        It didn’t take Harvard long to make up its mind what to do overreacted. Although 70 percent of Harvard’s MBA students about it. It rejected all 119 applicants who had attempted to   approved the decision, the undergraduate student newspa-

access the information. In an of cial statement, Dean Clark wrote that the mission of the Harvard Business School “is to educate principled leaders who make a difference in the world. To achieve that, a person must have many skills and qualities, including the highest standards of integrity, sound judgment and a strong moral compass—an intuitive sense of what is right and wrong. Those who have hacked into this web site have failed to pass that test.” Carnegie Mellon and MIT quickly followed suit. By rejecting the ethically chal- lenged, said Richard L. Schmalensee, dean of MIT’s Sloan School of Management, the schools are trying to “send a message to society as a whole that we are attempting to produce people that when they go out into the world, they will behave ethically.”

Duke and Dartmouth, where only a handful of students gained access to their  les, said they would take a case-by- case approach and didn’t publicly announce their individual- ized determinations. But, given the competition for places in

per, The Crimson, was skeptical. “HBS [Harvard Business School] has scored a media victory with its hard-line stance,” it said in an editorial. “Americans have been looking for a sign from the business community, particularly its leading educa- tional institutions, that business ethics are a priority. HBS’s false bravado has given them one, leaving 119 victims in angry hands.”

As some critics pointed out, Harvard’s stance overlooked the possibility that the hacker might have been a spouse or a parent who had access to the applicant’s password and per- sonal identi cation number. In fact, one applicant said that this had happened to him. His wife found the instructions at Businessweek Online and tried to check on the success of his application. “I’m really distraught over this,” he said. “My wife is tearing her hair out.” To this, Harvard’s Dean Clark responds, “We expect applicants to be personally responsible for the access to the website, and for the identi cation and passwords they receive.”




Dean Schmalensee of MIT, however, defends Harvard and MIT’s automatically rejecting everyone who peeked “because it wasn’t an impulsive mistake.” “The instructions are reason- ably elaborate,” he said. “You didn’t need a degree in compu- ter science, but this clearly involved effort. You couldn’t do this casually without knowing that you were doing something wrong. We’ve always taken ethics seriously, and this is a seri- ous matter.” To those applicants who say that they didn’t do any harm, Schmalensee replies, “Is there nothing wrong with going through  les just because you can?”

To him and others, seeking unauthorized access to restricted pages is as wrong as snooping through your boss’s desk to see whether you’ve been recommended for a raise. Some commentators, however, suggest there

6. One of the applicants admits that he used poor judg- ment but believes that his ethics should not be ques- tioned. What do you think he means? If he exercised poor judgment on a question of right and wrong, isn’t that a matter of his ethics? Stanford’s Derrick Bolton distinguishes between a lapse of judgment and a lack of integrity. What do you see as the difference? Based on this episode, what, if anything, can we say about the ethics and the character of the curious applicants?

Write a four to six (4-6) page paper in which you:

For this assignment, students should draft and revise a critical analysis that makes meaningful and significant use of at least ONE of our course readings below AND at least TWO outside sources (scholarly/ professional, peer-reviewed) discovered through research. Students should focus on applying theoretical perspectives from one of the assigned readings in an effort to understand, explain, and analyze an issue.

please include sources link with locations.

Please note: The readings used for Essay 1 should not be the focus of Essay 2. FYI: An exception may apply for those electing prompt 4 under “TOPIC OPTIONS,” below. In this case, a student may address an earlier reading in conjunction with a more recently studied one (see list of recent texts under “COURSE READING CHOICES”), provided that the student explores the earlier reading in a fresh and comparative fashion.



Length: 3-5 typed pages of text for final draft


Format: Typed, double-spaced, standard font (i.e., Times New Roman or Ariel), APA style





Milton and Rose Friedman, “Created Equal”


Analyze how one of the above texts works rhetorically. For this approach, you may want to consider the text in

relationship to the following questions:

*What pattern(s) do you begin to notice by studying the details of the text?

*What assumptions does the writer make?

*What images does he or she employ?

*What strategies does the writer use to communicate his or her point?

*How does the writer attempt to convince the reader that his or her argument is valid?

A good analysis for this assignment will achieve the following:


  • It demonstrates a keen understanding of each of the texts being analyzed (including the outside source);
  • it explains clearly how the outside source relates to the central text being analyzed and your argument:
  • it explores assumptions, consequences, or the significance of a concept in the central text or the argument it presents; and
  • it focuses on a point/claim that you make about the central text being analyzed.

Purpose of Assignment 

Week 3 will help students develop an understanding of what money is, what forms money takes, how the banking system helps create money, and how the Federal Reserve controls the quantity of money. Students will learn how the quantity of money affects inflation and interest rates in the long run, and production and employment in the short run. Students will find that, in the long run, there is a strong relationship between the growth rate of money and inflation. Students will review the basic concepts macroeconomists use to study open economies and will address why a nation's net exports must equal its net capital outflow. Students will demonstrate the relationship between the prices and quantities in the market for loanable funds and the prices and quantities in the market for foreign-currency exchange. Student will learn to analyze the impact of a variety of government policies on an economy's exchange rate and trade balance. 

Assignment Steps 

Resources: National Bureau of Economic Research 

Develop a 2,100-word economic outlook forecast that includes the following:

-Analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.

-Discuss how government policies can influence economic growth.

-Analyze how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.

-Describe how trade deficits or surpluses can influence the growth of productivity and GDP.

-Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.

-Recommend, based on your above findings, whether the strategic plan can be achieved and provide support. 

Use a minimum of three peer-reviewed sources from the University Library. 

Format your paper consistent with APA guidelines.


1. What are the uses of money? Describe how rapid inflation can undermine money's ability to perform its three basic functions. 

2. Will current Fed's policy hinder money's ability to perform its three basic functions? Explain your rational.

3. Explain what distinguishes money from other assets in the economy.

4. Explain the costs of inflation. Which of these costs do you think are most important for the U.S. economy?

5. Who benefits from a tariff or quota? Who loses? 

6. What are the positives and negatives of protectionist trade policies? Which policy is best right now?

7. Define net exports and net capital outflow.

8. Why are budget deficits and trade deficits sometimes called the twin deficits?


As a manager, you have to continually evaluate the organization and its strategy and consistently adapt the business model to ensure that the overall business plan is one step ahead of the competition.

In this assignment, you will get an opportunity to learn, from actual experiences, how an informed manager would assess the current overall health of an organization and make decisions regarding future opportunities and performance.


Select an industry relevant to your career (Healthcare). If you lack work experience, you can base your selection on real-life market situations or business areas that you may have knowledge about. You can also consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and the Argosy University online library resources.

  • Research the growth opportunities in the industry, competitive strategies that were employed, typical customers, and other relevant information related to the industry. Specific opportunities will differ depending on the industry selected, but be sure to consider current economic events and news relating to the industry that may influence the future direction of your industry.
  • Within this industry, select a midrange-performing company that provides goods or services. Then, address the following:
    • Analyze why this company maintains the level of success it does from an economic and financial perspective. Develop at least two visual aids (e.g., charts, graphs, or tables) to support your argument.
    • Evaluate whether the company's pricing and positioning decisions contribute to or hinder that success.
  • Evaluate whether the strategy currently used by your industry, as discussed in previous sections, appears to be sustainable over time.

Create a 4- to 5-page research paper. At the end your paper, include a reference page and cite scholarly sources in APA style.

Submission Details:

  • By the due date assigned, save your paper as M3_A2_lastname_firstinitial.doc and submit your document to the Submissions Area.

This assignment is worth 200 points.


Assignment 2 Grading CriteriaMaximum PointsThe assignment showed in-depth research into the growth opportunities in the industry, competitive strategies that were employed, typical customers, and other relevant information related to the industry.16Selected a midrange-performing company that provides goods or services within the industry.16Analyzed why this company maintains the level of success it does from an economic and financial perspective, and developed two visual aids to support your argument.68Evaluated whether the company's pricing and positioning decisions contribute to or hinder that success.60Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.40Total:200

Assignment 2: Required Assignment 1—Organizational Assessment

Professor Victoria Prowse


Homework 2


Total points available: 18 (credit is equal to points scored divided by 3)



Question 1. Consider the population model y =  0 +  1x + u. Suppose that you have a


sample of size n. The OLS estimator of  1 is given by:



^ =

in=1(xi    x)yi
















is an unbiased esti-


a)  Clearly stating any assumptions that you make, show that  1


mator of  1. [4 points]



b)  Write down the formula for the variance of  1. [1 point]



c)  List and discuss three factors that a ect the variance of  1. [3 points]










Question 2. Consider the  tted multiple regression model wagei =  0

+ 1educi + 2expi,




is the hourly wage (in dollars),


schooling, and exp is year of




is years of d




experience in employment. Suppose that educi and expi are negatively correlated.


^               ^

a)     Do you expect  1 and  2 to be positive or negative? Why? [2 points]



b)  Interpret  2. [1 point]


c)   Suggest a reason for the negative correlation between experience and education. [1 point]


d)  What is the sign of e1 in the following regression? Why? [2 point]

~       ~


expgi =  0 + 1educi:


^            ~ ~

e)     Write down an equation that links  1  to  1, where  1  is de ned by  tted simple

~      ~

regression wagei =  0 +  1educi. [1 point]


f)  Using your answer to the previous question, explain whether  1  will overestimate


or underestimate  1. [3 points].




ECON 360 - Econometrics

ECN 445 SPRING 2018




Answers due by the 5pm on Thursday March 1.


Leave off in with me class, or with Toi Betts-Miller in CPCOM 455J, or submit them electronically via Blackboard



[Lectures: Welfare evaluation]


1.(a) If the government imposes a tax on cupcakes, raising their price by 20%, what is the measure of the economic loss suffered by consumers who buy cupcakes? Operationally, how would you measure the amount of this loss? Might firms that make cupcakes suffer a loss, too? What is the measure of their loss? (b) Draw the appropriate diagram that depicts these losses qualitatively.


2 (a) What is the indirect function? What does it show? (b) A consumer has an indirect utility function u 8 y p1 0.6 p2 0.4 . His income is y=$3000; the price of good 1 changes from p1 = $4 to


p1 = $2, while p2 = $3. Is the consumer better off as a result of this price change, worse off, or equally well off as before? Explain the reason for your answer.


(c)  The maximum amount that the consumer would have been willing to pay for this price reduction is given by the compensating variation measure. Write down the algebraic equation which defines the compensating variation in this case.


(d)  Now solve that equation – calculate the numerical value of the WTP for the price reduction in this case.


(e) The minimum amount of compensation that the consumer would have wanted to forego the price decrease is given by the equivalent variation – this is the WTA value of the price reduction. Write down the algebraic equation which defines the WTA value in this case (you don’t need to solve the equation).


(f)  If you solved the equation in (e) – you are not asked to solve it – do you expect that the WTA value would turn out to be the same as the WTP value in part (d), larger, or smaller? Explain your reason.


[Lecture: Demand and Welfare When Attributes Matter]


3. In this community in Yugoslavia there are two commodities; x1 is consumed especially by families with children and also, to a lesser extent, by families without children. x2 appeals the same to families with and without children. All families have the same utility function, which is given by




U(x1,x2) = 0.3ln(x1 – C0.75) + 0.7 ln x2


where C is the number of children in the family. This is an example of what is known as a Stone-Geary utility function.


(a)  Explain how having more children (i.e., a higher value of C) changes a family’s preferences for x1. Does this effect scale linearly with the number of children?


The corresponding indirect utility function is given by u   y   p1C 0.75

p10.30 p20.7


(b) Suppose there are two types of families in this community: families with no children and families with 4 children. This is an egalitarian country and all families have the same income, $25,000. Prices are p1 = $4 and p2 = $10. The national government introduces a type of child support payment program. It wants to give an income supplement to families with children so as to make them as well as off as other families with the same income but no children. How much should it give per child? [HINT: Use the indirect utility function to set up something like the equation for WTA]


4. A study of people’s choice of transportation mode for commuting to work develops the following empirical estimate of the indirect utility function for using a given mode of transportation: u = 20 - 4 T – 12C


where u is the utility associated with travelling by that mode, T is the total time required for the trip, in minutes, and C is the total cost of the trip in dollars.


(a) Suppose that a particular consumer who has this indirect utility function faces a choice between two alternative travel modes: taking the bus to work takes 60 minutes and costs $1; driving to work takes 40 minutes but (with gas and tolls) costs $10. Which mode will that person choose? Explain the reasoning underlying your answer.


(b)  What is the value of travel time for this consumer (the rate at which he would be willing to trade-off an extra minute of travel time for a reduced travel cost)?


(c)  Suppose this indirect utility function represents the preferences of all commuters in the area. The city is considering a proposal to install a new light-rail transit system, similar in appearance to the existing bus transportation but with more capacity. It estimates that, overall, the new light-right would save 3 billion minutes of commuting time per year. The cost to construct the system, when put on an annual basis, would amount to $1.2 billion. Should the city go ahead and build the light-rail system? Explain your reason..


For the next question, lecture 2-22 Travel Cost.







5. The table below gives information on the distance from various nearby towns to the famous Cupcake Town Lake (distance is in miles). There is no admission fee. The only cost of visiting Cupcake Lake is the travel cost, which costs $1/mile. The researcher estimates the relationship between the number of visits per capita (per person), x, and the one-way travel cost from the town in which people live, p. He finds this demand function to be: x = 5 – 0.2*p .













(a) What is the cutoff price (the price at which demand falls to zero) with this demand function?


(b)  Add columns to the table above identifying the cost of a visit to Cupcake Lake from each town, the predicted number of visits per capita from that town, and the total number of visits from the town (i.e., the visits per capita multiplied by the population).


(c) Why doesn’t the researcher observe anyone coming from Delight to Cupcake Lake?


(d)  Because of management costs, park managers are considering charging for admission to Cupcake Lake. They are considering an admission charge of $10/visit. Figure out (i) the new cost of visiting Cupcake from each town, (ii) the new number of visits per capita from each town, and (iii) the new total number of visits from each town (remember that negative visits count as zero).


(e)  Suppose the authorities make improvements at Cupcake Lake (they build a boathouse), which only residents of Alabaster are allowed to use. In consequence, Alabaster resident’s demand function for Cupcake lake changes to x = 8 - 0.2p. The demand functions of residents of the other towns do not change. What is the value of this improvement to Alabaster residents?


(f)  Assume there is a $5 admission charge at Cupcake Lake. The County authorities are planning to open a new park at South Bend. South Bend is located 12 miles from Alabaster, 18 miles from Beautiful, 12 miles from Cornucopia, and 40 miles from Delight. For now, there will be no admission charge at South Bend Park. Which people will benefit from the opening of South


Bend? How many visits will it attract annually? What is the aggregate gain in consumer’s surplus associated with the opening of South Bend Park?




[Lecture on Firm Profit Maximization]




6. All-Leather is a tanning company in Chicago. Its total cost function is


C(QA) = 25 + 10QA + 4QA2, where QA is leather production per week in thousands of pounds.


a) What is the formula for All-Leather’s marginal cost function?


b)  If leather sells for $1190 per thousand pounds, how much leather will All-Leather produce?


c) How much profit will All-Leather make?




[Based on BH pp 201-215; see also Lecture:Industry equilibrium and supply]


7. Slovak-Steel is the only steel factory in Slovakia. It burns coal in to produce steel. But, it is now required to abate the emissions from its use of coal.


(a)  Suppose this emissions reduction raises (i) only Slovak-Steel’s fixed costs of production, or


(ii)   only Slovak-Steel’s variable costs of production, or (iii) both Slovak-Steel’s fixed and variable costs of production. In each case, using both words and the appropriate diagrams, explain how emission reduction affects Slovak’s supply curve of steel.


(b)  The Slovakian steel industry grows over time as the economy expands, the demand for steel increases, and new firms have entered the steel industry in Slovakia. Pollution control regulations also change over time, and become more stringent. In its planning for a new round of tighter air pollution control regulations on its steel industry, the Slovakian government is considering grandfathering Slovak-Steel. How would grandfathering affect (i) Slovak-Steel, and


(ii)  firms that are thinking of entering the steel industry? How would grandfathering affect consumers of steel?


Lecture Market allocation and welfare.


8. (a) Suppose two different individuals finds themselves on a deserted island in the Pacific. Without knowing anything about the island, one person occupies the west end of the island, and the other occupies the east end. It subsequently turns out that there are certain stocks of fruits and vegetables lying around each end of the island. Is this a Pareto efficient allocation of those resources among the two individuals? Explain your reasoning. (b) Suppose that, having become aware of the fruits and vegetables on the island, the two individuals get together and exchange certain amounts of the fruits and vegetables among themselves; is that a Pareto efficient allocation of those resources? Explain your reasoning.










Answers due by the 5pm on Thursday March 1.