Midterm Exam -
Answer all following questions -
Q1. In 2015 the hourly cost to employers per German worker was $40.45. The hourly cost to employer per US industrial worker was $38.65, while the average cost per Korea's worker was $15.32.
1) Give three reasons why firms produce in Germany rather than in a lower-wage country.
2) Germany has just entered into an agreement with other EU member countries that allows people in any EU countries to travel and work in any EU economy, including high wage countries. Would you expect a significant movement of workers from Greece and Italy to Germany right away? Why or Why not?
3) Workers in China are paid significantly less than workers in Taiwan. If you are company CEO, what other information would you want before you decided where to establish new production facility?
Q2. Find and graph the TC, AFC, AVC, AC, and MC from the following Table.
|
units
|
FC
|
VC
|
|
0
|
$100
|
$0
|
|
1
|
$100
|
40
|
|
2
|
$100
|
60
|
|
3
|
$100
|
75
|
|
4
|
$100
|
90
|
|
5
|
$100
|
140
|
Q3. Smith has $5 to spend on two goods: video games and hot dogs. Hot dogs cost $1 a piece while video games cost $0.5 a piece.
1) Draw a graph of Smith's budget constraint, placing videos on the Y axis.
2) Suppose the price of hot dogs falls to $0.50 a piece. Draw the new budget constraint.
3) Suppose Smith now has $8 to spend. Draw the new budget constraint using pirces from 2.
Q4. Suppose Korea's economy has very keen international relationship with China. One day Chinese government announces its increase in import tariffs. In general, import tariff lasts as if fixed costs for the Chinese importers or Korea's exporters. Analyze the effect of Chinese import tariff increase on both Korea's exporters and Chinese importers, respectively, using each country's domestic Demand and Supply curve.