The marketing of the Summers Company must formulate a recommendation concerning
the price to be charged for a new product. According to the best available estimates, the
marginal cost of the new product will be 18 and the price elasticity of demand for this
product will be -3.0.
(1) What recommendation should she make if Summers wants to maximize profit?
(5%)
(2) If her recommendation is accepted, what will be the new product's marginal value?
(5%)
Richard Miller, a Wall Street trader, says he is a risk neutral. Suppose we let 0 be the
utility he attaches to $100,000 and 1 be the utility he attaches to $200,000, If what he
says is true, what is the utility he attaches to
(1) $40,000? (5%)
(2) $−20,000? (5%)
A tiny fishing village has 3 residents. Ann has a utility of 10, Bruce has a utility of 6,
and Charlie has a utility of 7. If the mayor uses a Rawlsian social welfare function,
what would be the social welfare of this tiny village? (5%)
Please distinguish between inflation and a one-time rise in the price level.
You have to take an example to explain what you claim. (15%)
Please explain how demand-pull inflation and cost-push inflation are generated.
Taking examples to confirm your statement is preferred.
Explain how the Taiwanese central Bank’s interest rate and monetary policies influence
real GDP, the price level in the last ten years in Taiwan. (20%)
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