Exercise 1 In class, you were told about comparative advantage with examples giv

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Exercise 1
In class, you were told about comparative advantage with examples giv

Exercise 1
In class, you were told about comparative advantage with examples given of businesses and industries. Yet, the idea that people specialize into their comparative advantage and then trade with others who have a different comparative advantage can also be applied inside families and partnerships.
In this exercise, I would like you to write a story. I want you to pick a relationship between two people you know well. They could be husband and wife, brother and sister, close friends, business partners, or any other close pairing. You can pick a relationship you are part of, but it could also be a relationship between others, like friends you know, family you know, or any other relationship you know well.
Describe that relationship in terms of the comparative advantages had by each side and the trade that there then is between them in terms of goods and services produced by each side. This means you must describe the things that each side of that relationship is good at and what they thus produce that is then shared (traded) with the other. Bear in mind that trade does not always need to involve money, but there has to be a clear exchange of a good or service. Also bear in mind that trade is different from co-production (like doing an activity together).
As with all the concepts we discuss, I would like you to be able to recognize in the real world the phenomena that we discuss in class. This leads to a more systematic way of perceiving the reality.
The goal of this exercise is not to explain what a comparative advantage is; it already is explained above. Rather, the goal is for you to reflect on your own experiences and memories to find examples from your own life of the concepts discussed in class. I am hoping to read some interesting stories.
Exercise 2
Read the slides and background literature on the topic of different types of economies of scale. Then please think of the organization you work for or one that you know well (like a previous job or the job of your partner, or some other organization you know a lot about).
Describe at least 3 diseconomies of scale in that organization.
Then make a judgment on whether you think the organization as a whole enjoys economies of scale overall ‘at the margin’: would the organization produce more than 10% extra if its size (in terms of people working for it, machines, offices, etc.) was 10% bigger? Argue why you think that is the case.
Exercise 3
Read the slides and extra literature in your content folder on the issue of limited liability. Then please think of the organization you work for or one that you know well (like a previous job or the job of your partner, or some other organization you know a lot about).
Who or which unit in this organization do you think has the greatest degree of limited liability (ie is held least responsible when they make mistakes)? Argue why you think this and whether you think this is optimal for the organization or not.
Who or which unit in this organization do you think has the least degree of limited liability (ie is held most responsible when they make mistakes)? Argue why you think this and whether you think this is optimal for the organization or not.
Exercise 4
Read the slides on Bitcoin.
Name a Bitcoin trading platform and give a link to the website. Then detail: i) what transaction costs you think are involved in exchanging 100 Euros into US dollars, ii) how many bitcoins one would then 3 get if one uses those US dollars to buy a certain number of bitcoins on the mentioned platform, iii) the number of US dollars one then gets when immediately selling the bitcoins just bought, and iv) the number of Euros one can then get for those US dollars. So I want you to find out (on the basis of looking up the costs or asking market participants) what would happen in each of the four steps above (buy USD with Euros, buy bitcoin with US dollars, sell bitcoin for US dollars, sell dollars for Euros). You should thus end with the number of Euros you would have left if you did the four steps above. Give references. Note that I really expect an effort into finding out the true transaction costs.
Read the slides on optimal investment strategies.
Give an example of 4 entirely different possible investments that in your opinion are almost equally risky (on their own), have almost equal ‘expected returns’, but where the risks are highly independent (like separate throws of a dice). Argue why you think they are similarly risky and with similar returns. The argue why you think the risks of each of these investments are quite unrelated.
Note that you do not need to pick high-expected return investments, or even high-risks investments. The point of the question is for you to show you have understood and can apply the principles involved in the basic idea of asset diversification.

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