2. Suppose that marble is a normal good for a certain sculptor and that she has just received a
MacArthur “genius” fellowship ($625,000 paid in quarterly installments over five years). What
will happen to her demand for marble? Illustrate your answer by drawing her demand curve
for marble before and after she received the fellowship (either attach the drawing or explain how the demand curve is positioned and how it changes).

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2. Suppose that the following table gives recent figures for yield per acre ininois and Kansas: 37 51 42 31 If we assume that farmers in inois and Kansas use the same amount of labor, capital, and fertilizer, which state has an absolute advantage in wheat production and has an absolute advantage in wheat production and (2) has an absolute advantage in soybean production. If we transfer land out of wheat into soybeans, how many bushels of wheat do we give up in Ilinois and in Kansas per additional bushel of soybean production? In linois, an additional bushel of soybean production results in esults in fewer bushels of wheat, and in Kansas, an additional bushel of soybean production fewer bushels of wheat. (Enter your responses rounded to three decimal places) Which state has a comparative advantage in soybean production and in soybean production? has a comparative advantage in soybean production and (4) has a comparative advantage in wheat production The following table gives the distribution of land planted for each state in millions of acres in the same year TILL WHEAT SOYBEANS (83%) 11.8 70% (397%) 1.9 Kansas 20.7 2% Are these data consistent with your answers above? (5) (1) O Kansas (2) Kansas (3) O Kansas 4) O Kansas (5) O No O Illinois linois O Yes

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2.Supposing that Canada and China were the only two countries in the world, why would it be impossible for Canada to import a greater value of goods from China than the value we export to China, even if China produced most goods more cheaply than Canada? Use this example to explain why increasing our imports from China can never create unemployment in Canada

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2. The demand curve for bonds would be shifted to the left by A) an increase in expected returns on other assets. B)a decrease in the information costs of bonds relative to other assets. C) a decrease in expected inflation. D) an increase in the liquidity of bonds relative to other assets.

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2.  The Hall Dental Supply Company sells at $32 per share, and Randy Hall, the CEO of this well-known Research Triangle firm, estimates the latest 12-month earnings are $4 per share with a dividend payout of 50%. Hall's earnings estimates are very accurate.

a.  What is Hall's current P/E ratio?

b.  If an investor expects earnings to grow by 10% a year, what is the projected price for next year if the P/E ratio remains unchanged?

c.  Ray Parker, President of Hall Dental Supply Company, analyzes the data and estimates that the payout ratio will remain the same. Assume the expected growth rate of dividends is 10% and an investor has a required rate of return of 16%. Explain whether or not this stock would be a good buy and support your rationale.

d.  If interest rates are expected to decline, discuss the likely effect on Hall's P/E ratio. 

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