Economic Forecasting Discussion Paper

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1. A monopolist sells a product at price P and has no cost of production. The demand equation is Q = 2a – P, where Q is quantity and a is a demand shifter.

a. What is the profit equation for the monopolist? b. What is the profit-maximizing price as a function of a? Denote the profit- maximizing price as P*. c. What profit is earned as a function of a? Denote the optimal profit at π*. d. Now suppose that a is unknown, and the firm must forecast it. The firm sets its price based upon this forecasted value of a,â. The forecast error is a – â. What is the expression for the loss, π* – π(â)? Note that this expression will include both a and â. What relationship does this bear to a quadratic loss function?

2. f yt =b0 +b1*Timet +et And Timen = 100 for n = 100, which is the second quarter of 2019 (quarterly data). Suppose the estimated model is

𝛽0 = 0.51 𝛽1 = 0.02 𝜎2 = 16

a. Construct point and normal 90% interval forecasts for the next four quarters (third quarter 2019 to second quarter 2020).

b. Suppose that the yt in the previous part was yt = ln(Yt). Construct point and interval forecasts for Yt for the four quarters following 2019q2.

3. In the trend model Tt = 0 + 1*Timet, suppose that 1 > 0.

a. Is the series expected to grow or decline in future periods?

b. Does this mean that the series grow or decline with certainty in every period?

Distinguished

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Proficient

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Basic

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Below Expectations

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Non-Performance

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Thesis Statement

Raises the strongest objection to the thesis presented in the assignment. The objection is strongly grounded in research and logical reasoning.

Raises a plausible objection to the thesis presented in the assignment. The objection is mostly grounded in research and logical reasoning.

Raises an objection to the thesis presented in the assignment. The objection is somewhat grounded in research and logical reasoning.

Attempts to raise an objection to the thesis presented in the assignment. The objection is minimally grounded in research and logical reasoning.

The objection to the thesis is either nonexistent or lacks the components described in the assignment instructions.

Counter Argument

Provides a strong, thorough rebuttal to the objection. The rebuttal effectively demonstrates that the thesis can withstand the objection and applies the principles of charity and accuracy.

Provides a rebuttal to the objection. The rebuttal mostly demonstrates that the thesis can withstand the objection and mostly applies the principles of charity and accuracy.

Provides a limited rebuttal to the objection. The rebuttal somewhat demonstrates that the thesis can withstand the objection and somewhat applies the principles of charity and accuracy.

Attempts to provide a rebuttal to the objection; however, the rebuttal minimally demonstrates that the thesis can withstand the objection and does not apply the principles of charity and accuracy.

The rebuttal is either nonexistent or lacks the components described in the assignment instructions.

Conclusion

– Provides clear and concise closing remarks that comprehensively summarize the essay. The remarks consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem.

Provides closing remarks that summarize the essay. The remarks mostly consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are somewhat unclear.

Provides closing remarks that minimally summarizes the essay. The remarks minimally consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problems. The closing remarks are unclear and/or vague.

Attempts to provide closing remarks that summarize the essay, however, the remarks do not consider the broader controversy and/or further research that could offer additional insight into the moral solution of the business problem. The closing remarks are unclear and vague.

The closing remarks are either nonexistent or lack the components described in the assignment instructions.

Written Communication: Context of and Purpose for Writing

Demonstrates methodical application of organization and presentation of content. The purpose of the writing is evident and easy to understand. Summaries, quotes, and/or paraphrases fit naturally into the sentences and paragraphs. Paper flows smoothly.

Demonstrates sufficient application of organization and presentation of content. The purpose of the writing is, for the most part, clear and easy to understand. There are some problems with the blending of summaries, paraphrases, and quotes. Paper flows somewhat smoothly.

Demonstrates a limited understanding of organization and presentation of content in written work. The purpose of the writing is somewhat evident but may not be integrated throughout the assignment. There are many problems with the blending of summaries, paraphrases, and quotes. Paper does not flow smoothly in all sections.

Organization and presentation of content are extremely limited. The purpose of the writing is unclear. There is little or no blending of summaries, paraphrases, and quotes. Paper does not flow smoothly when read.