Econ Homework Due 9/14 at 3 PM

Scenario 1  (length: 0.5 – 1 page)
If you were the CEO of a women’s clothing retail firm, what specific strategies can be used to sustain profitability at the firm level?  How do those strategies fit the three basic strategies that arise from the resource-based view of sustaining profitability?

Scenario 2 (length: 0.5 – 1 page)
Review the following resources:

· Website: 

Chinese Currency to Loosen Exchange Rate: Business Chief

· Website: 

China to Free Yuan in 5 Years, Says Hong Kong Exchanges’ Li

China is considering letting the exchange rate for the yuan freely float instead of being tightly controlled by the government.  Currently, the Chinese government sets the official exchange rate* such that the Chinese yuan was undervalued.  That is, one can purchase more yuan with a dollar than would be expected if the exchange rate was set by the market. Use supply and demand curves to explain how allowing the exchange rate to freely float would affect United States’ citizens and firms.

*Actually, the Chinese government sets an official rate but allows some deviation, but not significant deviation, from the official rate.

Scenario 3 (length: 0.5 page)
Review the following resource:

· Website: 

Gas Spending and Prices by State

According to the Purchasing Power Parity theory, non-perishable goods should have similar costs in different markets because if they did not, an arbitrage opportunity would be present. However, according to the CNN/AAA Fuel Gauge Report from July 19, 2013, the price of gasoline in Hawaii is $4.37 per gallon while California is the state that has the highest average gas price per gallon in the contiguous United States at $4.04. Why are the prices of gasoline so far apart?

Scenario 4 (length: as needed)
Suppose you only consumed breakfast cereal and milk.  You only wish to consume the milk and cereal in fixed proportions such that for every box of cereal you eat, you use two gallons of milk. Cereal costs $5 per box and milk costs $2 per gallon.

1. On a graph with gallons of milk on the horizontal axis and boxes of cereal on the vertical axis, draw your budget constraint if you have $50 to spend. Draw two more budget constraints corresponding to an income of $20 and $100. Clearly label the three budget constraints with the income associated with each budget constraint and label the intercepts (the amount of one good you can buy when you do not buy any of the other good).

2. Draw some sample indifference curves. (Hint: any extra milk or cereal will go to waste, so if you have two boxes of cereal, you would have the same happiness with four gallons of milk as you would with five).

3. Show on the graph what bundle would be chosen at incomes of $20, $50, and $100.

Scenario 5 (length: as needed)
Continuing with the situation in Scenario 4, suppose your income was $100 but the price of milk doubled to $4/gallon. What bundle would you choose? If milk decreased in price to $1/gallon, what bundle would you purchase? Using those two points and the point determined in Question 3 (in which you had an income of $100 and milk cost $2/gallon) draw your demand curve for milk.

Writing Requirements

· Length: as indicated (Show your calculations where appropriate.)

· 1-inch margins

· Double spaced

· 12-point Times New Roman font