The graph in Figure 3P-4 shows supply and demand in the market for automobiles. For each of the following events, draw the new market outcome and say whether the equilibrium price and quantity will increase or decrease.

b. A steel tariff increases the price of steel.

A permanent increase in demand ________ economic profit in the short run and some firms will ________ in the long run.

A. does not change; exit the market

B. increases; enter the market

C. increases; raise their price

D. does not change; advertise their good

Each of the six firms in the table below is expected to pay the listed dividend payment every year in perpetuity.

$$\begin{array}{ccc} \text{Firm} & \text{Dividend (\$ million)} & \text{Cost of Capital (\\\%/Year)} \\ \hline S1 & 9.8 & 8.3 \\ S2 & 9.8 & 12.2 \\ S3 & 9.8 & 13.2 \\ B1 & 98.0 & 8.3 \\ B2 & 98.0 & 12.2 \\ B3 & 98.0 & 13.2 \\ \hline \end{array}$$

a. Using the cost of capital in the table, calculate the market value of each firm.

b. Rank the three S firms by their market values and look at how their cost of capital is ordered. What would be the expected return for a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value? (The expected return of a self-financing portfolio is the weighted average return of the constituent securities.) Repeat using the B firms.

c. Rank all six firms by their market values. How does this ranking order the cost of capital? What would be the expected return for a self-financing portfolio that went long on the firm with the largest market value and shorted the firm with the lowest market value?

d. Repeat part (c ) but rank the firms by the dividend yield instead of the market value. What can you conclude about the dividend yield ranking compared to the market value ranking?

Suppose you had to market yourself as a student. What are your strengths?

Why do governments switching to a market economy need new laws?

Answer the question to help you recall what you have read. If you cannot answer a question, read the related section again.

Explain the purpose of a market timing plan, and list three market timing plans.

Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?

a) More consumers will purchase products in the community with the price ceiling.

b) The black market in his community will be larger than the black market in the community with the binding price ceiling.

c) Prices in the legal market in the community with a binding price ceiling will fall

d) Prices in the legal market in the community with a binding price ceiling will rise

e) There will be shortages in the community with a binding price ceiling.

A permanent increase in demand ________ economic profit in the short run and some firms will ________ in the long run. A. does not change; exit the market B. increases; enter the market C. increases; raise their price D. does not change; advertise their good

What are the main characteristics of traditional, market, and command economies?

In the following sentences, a group of students remembers events that happened once \lparenpreteriterparen and how they felt or were when things took place \lparenimperfect\rparen. Complete each sentence with the correct preterite or imperfect verb form.

Martin _________ \lparenobtener\rparen un premio porque ______ \lparentener\rparen mucho talento.

For the sentence below, draw a line beneath the verb in the imperfect progressive tense that identifies what was happening. Then, identify the interrupted action by circling the verb in the preterite tense. The first one is done for you.

Cuando Teresa llegó a la sala de emergencia le estaba doliendo mucho el brazo.

When Crocs, the shoe company, reported in early 2007 that its first-quarter earnings had increased from the previous year, its stock price jumped to over $80 per share. At the same time, the company announced a 2-for-1 stock split.19 What is a stock split and what effect does it have on the company’s stockholders’ equity? What effect will it likely have on the market value of the company’s stock? In light of your answers, do you think the stock split is positive for the company and for its stockholders?

Explain how an increase in the price level affects the real value of money.

In which of the following U.S. cities is one of the twelve Federal Reserve Banks located?

a) New York City

b) Seattle

c) Miami

d) Denver