Assignment

1. You are discussing with your friends about the virtues of the market. During your exchanges you have told your friends that you believe that "markets left to their own devices always lead to socially beneficial outcomes". Some of your friends did not agree with your statement. For them "you are talking utter nonsense". Do you agree with your friend statement? Defend your position. Provide many examples and arguments to support your position.

2. A Bank in your home State has been complaining about loan defaults for many years. After analyses and investigations, the CEO and the board of directors came to a conclusion that the bank has been facing a problem called "Asymmetric information". However, some of the branch managers don't really understand what asymmetric information means and how it can lead to loan defaults. Many of these managers think that this problem is unique to the banking system.

You have been chosen to give a talk in order to explain these folks what the term means, what problems are created by asymmetric information, how it can lead to loan defaults and how the bank can solve this problem. In addition, you have to provide some examples to show that asymmetric information is not unique to the baking system. It may happen in other institutions (you have mention at least one and talk about the mechanisms put in place by that institution to solve this problem). What will be the content of your talk? How can Asymmetric information lead to loans defaults, how can the bank solve this problem and so on.

3. It is said that the current generation of workers will have a very small probability of being employed by the same firm throughout their work life. In previous generations it was common for people to have just one employer. Is a more rapid turnover among employees beneficial to the firm? To the employee? Explain

4. Over the past years, Starbucks has been considered the main representative of "second wave coffee", initially distinguishing itself from other coffee-serving venues in the US by taste, quality, and customer experience, while popularizing darkly roasted coffee.

Please use the Porter's Five Forces to analyze the potential that Starbucks and other firms in coffee serving industry will have to earn positive economic profits. For example, one of the forces is Threat of Substitutes - you should briefly list any substitute products for Starbucks coffee and describe whether this situation may lead to high profits (if there are few substitutes) or low profits (if there are many potential substitutes). After analyzing each of the five forces, please provide a brief summary of the overall potential for economies profits in the market.