3 MANAGERIAL ECON QUESTIONS

 In 2003, a seat on the Chicago Board of Trade (CBOT) sold for only $338,000, compared to $2.0 million for on the New York Stock Exchange (NYSE).  In January 2005, however, a CBOT seat was sold for $1.25 million, while a NYSE seat sold for $975,000.   First, explain why anyone would pay a positive price for a CBOT or NYSE seat and what this price represents.  Second, explain why the seat values changed so much.

 

 

Economically speaking, the argument for public subsidies of some activities is that they generate positive externalities that benefit many individuals other than those who ordinarily would choose to pay for them and hence those individuals should help pay for the activity because they are receiving benefits— even if they don’t know it.   Evaluate the strength of this argument in the following instances involving public governmental subsidies:

 

a)      Public radio such as NPR

b)     Football at Old Dominion University (the subsidy here is from students)

c)      Public health services that are free or below cost

d)     State universities

e)      The interstate highway system

f)      The Chicago Symphony Orchestra

 

 If the People’s Republic of China (PRC) allows the value of its currency, the Yuan, to increase (which many elected official have been advocating as a way to cure the balance of payments deficit the U.S. has with the PRC), then which of the following will occur, and why?

 

a)     U.S. exports will become more price competitive in the PRC.

b)    Prices in the U.S. at places such as Wal-Mart likely will rise.

c)     Other Asian countries will step in and take the PRC’s place in the U.S.

d)    The wages of PRC workers are likely to rise.