ECON501 Economics for Decision Makers | Free Samples

Assess this policy measure and its likely outcomes.  What, if any, are the broader implications?

3.Two years ago, Jack Quack bought 1000 shares of ZMQ stock at $1,000 per share.  This morning when he checked he found that ZMQ stock was selling for $62.00 per share.  Advise Jack on what he should do—dump his shares, hold, buy more, what???  (Notes:  There have been no stock splits over the past two years.  Also ignore tax considerations.  And, if it matters, Jack is 15 years from retirement.)

4. “Except for the law of diminishing returns we could feed the world from a single flower pot.”  Evaluate/explain the quote—starting with True or False.

5.The work force of Corporation XYZ is fully unionized.  Assume that the union demands and wins a xx% wage increase.  Under what circumstances will the union induced wage increase lead to an increase in the total wage bill?  (Def.:  total wage bill is the total dollars spent on wages)  Note:  I don’t need help with elementary arithmetic.  I am interested in the economics of the issue.

2.The policy of paying bonus for each dead rat which will be brought to the town pound will have a profitable outcome. In order to save people from rats, the council have decided to kill rats as it used to make the life of the people unpleasant. The proposed policy of paying money for each of the dead rat is a good policy. As when people will be provided money for bringing dead rats in the ton pound, they will be motivated in bringing dead rats and in this way the population of rats will start decreasing. The level of bonus can also be increased with the increase in number of dead rats brought by the people of the town (Pigou, A. 2017). The rats used to create havoc in the lives of the people which used to bit people and eat crops. In order to cut down the population of the rats paying bonuses will be helpful as it will motivate the people to kill rats and bring them to the town pound. Bonus in the terms of money should be paid to people for brining dead rats in the town pound. Paying bonus will increase the motivation of the citizens for bringing the dead rats and therefore the work of killing rats will become easy. The government will not have to employ other staffs for doing the work. Bonuses will also implement competition in the work. It can also offer bonuses based on the hours of doing works. The method of offering bonus to the individuals will have a positive outcome as more and more people will be motivated in bringing dead rats in the town pound. If on the other hand the government had fixed his staffs for killing rats, they might not have worked effectively. However, when the citizens are given the responsibility of bringing the dead rats to the town pound, they will perform the job in much more responsible way as they have been provided bonuses.

3.Jack Quack should dump the share as the purchase price for the stock was around $1000 and the current price for the share was around $62, which shows that the stock price has fallen about 93.8% and this sharp fall does not define normality in the volatility in the share price. However, it is crucial to consider that the retirement age or the holding period for the Investor Jack Quack is around 15 years is a long-term time for the investment but the sharp volatility in the share price ignores normality in the price and return distribution of the share price. The sharp fall may be due to high valuation multiple and due to internal problems in the company. The expectation that Jack Quack would be able to further make profit from the same is quite low as the share price for the company now needs to break through and above 1000 which will then make a profit opportunity for the company (

Baumol & Blinder, 2015). However, it is advisable to dump the stock and realize the loss arriving from the same because holding the stock and the expectation of return and value creation from the company is very less.

Jack Quack should further asses the volatility of the same and he should do an internal analysis and the same should be also conducted through a proper research on the aspect of stock both from fundamental and technical perspective. Jack Quack as an investor should always asses the market perspective for investment and conduct a proper analytical research on the company so that the investor is aware of the company fundamental and important news and information. The investment perspective is always considered from the investors risk and return profile and the same should be reflected by the amount invested in the assets.

4.The above line states that if the law of diminishing marginal product of labour did not hold, the food supply of the world could be easily growing in the flower pot. The law of diminishing returns states that when large units of variable inputs are usually on a given quantity of fixed inputs, the output might initially increase at an increasing rate although it will eventually increase at a diminishing rate. The law states that the marginal product of a variable factor will diminish after sometime even if it increases in the beginning (Layson,  2015).  It also states that when some of the factors are constant while the other factors changes while the technology is same, diminishing factors will take place eventually both in industries as well as in agriculture. The quoted line states that the food production of the world can be grown in a flower pot, however in the real world this will not take place as all kinds of production will face diminishing marginal product of labour someday. So the quoted line will hold true if the diminishing law of marginal products was not present. It states that as more and more variable input is usually included in the fixed input, the output will be going to fall. The success of the unions mainly depends on the bargaining strength which also depends upon the ability of the unions to restrict the supply of labour. As the work force of the XYZ Corporation is huge, therefore the union demands and wins a wage increase. Unions also have indirect impacts on the wages.  Union wages are generally attached to jobs instead of the attributes. One of the main aim of the trade unions is maintain the terms and condition of the workers. The success of the unions mainly depends upon the bargaining strength of the workers.

5.Unions are those organizations which negotiate with the business and other types of organizations. One of the significant aim of the trade unions is to maintain the workers condition and term. Union induced wage can increase the total wage bill when the bargaining strength is more. The strength of the union bargaining is will increase and will therefore lead to higher union wage premium.  The union induced wage will rise the total wage only when the number of people representing the union have a high percentage. The success of the unions for raising wages will also get affected when the price elasticity of demand for the commodities in the industry will be low in case of oligopolistic competition. From the point of view of microeconomics, it is known that the success of unions will take place when there will be presence of bargaining strength. Therefore, it can be said as the full work force of the XYZ Corporation is unionized, the demand of the unions were met (Blanchflower, 2014).  However, evidences also suggested that the impact of union wages usually differs across workplaces and the workers. However, union membership will not always increase the overall standard of wages of the workers. Sometimes strong unions also set benefits and pay which the employers of the non-unions follow. It can also be said that the unions sometimes help workers as well as hurt them. The [power of the unions basically rests on two major things one is the restriction of labour supply and the other is the increase in the labour demand. Unions will only work at that time when the strength of the particular union is large and then it helps in raising the wages of the workers. The increase in the wages of the union also comes at the expense of the workers of non-unionized group who does not have the equal level of representation with management. Therefore, in order to conclude it can be said that the unions of the XYZ Corporation will help in increasing the wages of employers as the whole work force is unionized.

6.The question is simply based on the basis of the cost benefit analysis. The cost benefit analysis states that it is a process in the business which is mainly used to analyse any kind of decisions. The analyst in this case will find the benefits of the situation and then find the costs associated with it. The cost benefit analysis is mainly used to determine which options will provide the best approach for comparing the potential courses of action (Blanchflower, 2014). The cost benefit analysis will also determine whether the benefit is outweighing the cos or not and it also calculates by how much. This cost benefit analysis is also used for comparing the total cost against the expected benefits. The stated question shows that the total benefits is outweighing the total cost.by the amount of $76,300. As it has been seen that the total benefits of building then dam is outweighing the cost, it can be said that a much larger dam can be easily built. At each stage, it can bee seen that total benefits outweighs total cost, there is no question of not building the dam. From the data provided in the question it can be seen that the benefit earned at the stage 3 the difference between the benefit and the cost is huge followed by the stage 2. If building a larger dam provides different kinds of benefits along with recreation along with flood control, then it is advisable to build the dam as the benefit which will be achieved from building the dam is much more compared to the cost. The analysis of cost and benefit will only be successful when the total benefit will outweigh the cost. Therefore, from the cost benefit analysis it can be found out that the project of constructing a dam will be successful as the benefit achieved from building the dam is lot more than cost of constructing it.

Reference list

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