WU Economics Marginal Analysis Questions

1.A simple search on the Internet can give you access to many resources and information to this concept. Provided below is only one such link : (I have tried to hyperlink it, but if it does not open, please copy and paste it in your url box)

https://www.vox.com/cards/fracking/what-is-frackingLinks to an external site.

Hydraulic Fracking became a popular form of exploring for fossil/nonrenewable forms of energy in United states in the early 2000. Fracking as a technology was not new and existed for a long time. However, this form of tapping for fuel source has been controversial from the very beginning. Here is a link to the idea of Hydraulic Fracking from the Internet. 

a. Using the Economic concept of Marginal analysis (marginal cost – Marginal benefit), what could be some of the cost considerations and benefit considerations in tapping oil and natural gas through fracking? 

b. Using the Market model, (Demand and Supply model), create a general scenario of the possible impact on fuel prices. (If sketching the graph is challenging, you can explain the impact in words, in detail).

c. There was a period of time in the mid 2000’s through the early part of 2010’s, when fracking lost its popularity in United states. Many towns in North Dakota and other states which flourished at one time due to the business of fracking, became “ghost towns”.  What could have been some of the causes of this? And why?

2. Question 2: 

a. The EpiPen is a life-saving device used by people with severe allergies. The U.S. manufacturer of the EpiPen raised its price by nearly 25% per year for nearly a decade. Foe each price increase of 25%, what do you expect happened to the quantity demanded of EpiPen? Is the demand elastic or relatively inelastic? Explain your response clearly. 

b. Europe has eight different companies selling devices similar to the EpiPen. If these devices were available in the U.S. market, what would happen to the price elasticity of demand for the EpiPen? Why? 

c. How does quick and easy access to internet on smartphones, impacted the business of Best Buy or Barnes and Noble(if a few stores still do exist). What are some strategies these companies could implement to combat any negative impacts?  

3. Question 3: 

A 2019 article in the New York Times was headlined: “Trump Thinks Dollar Is Too Strong, Blames Fed Policy.”

a. What does it mean to say that the dollar is “too strong”? what makes dollar strong?

b. Which groups in the United States gain and which lose when the dollar is strong?

c. Briefly explain the connection between Fed Policy (Monetary Policy) and the strength of the dollar. 

Question 4:
A. Explain how does monetary policy reduce inflation?

B.Explain how the average American is affected by monetary policy. How does a change in the federal funds rate (the targeted interest rate for monetary policy) affect the Equity markets?

C.The Federal Reserve functions as a lender of the last resort to financial institutions in the economy. In your opinion, does this lead to the financial institutions making more risky investments? What problem might the economy face if these institutions were left to fail?