Microeconomics For Life Smart Choices For You 2nd Edition Avi J. Cohen - Solutions

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Which of the following statements is false?a) A family of three in Toronto that makes less than$29 699 per year is considered to be in poverty.b) More than 50 percent of individuals in poverty live in a family whose major income earner is female.c) More than 9 million people in Canada lived below
If the marginal tax rate increases as income increases, the income tax is defined asa) progressive.b) proportional.c) negative.d) regressive.
Which of the following statements about the distribution of wealth in Canada is false?a) The bottom 50 percent of families own 5 percent of total wealth.b) The bottom 40 percent of families own 20 percent of total wealth.c) The wealthiest 10 percent of Canadian families own 51 percent of total
Which of the following statements about the distribution of market income in Canada is true?a) The poorest 20 percent of families earn 1 percent of total market income.b) The middle 20 percent of families earn 10 percent of total market income.c) The poorest 40 percent of families earn 15 percent
During the lockout that cancelled the 2004–2005 hockey season, fans should have blameda) the players.b) the owners.c) the CBC.d) themselves.
During the lockout that cancelled the 2004–2005 hockey season, fans blameda) the players.b) the owners.c) the CBC.d) themselves.
For inputs in inelastic supply, such as land or superstar talent,a) there is no supply response to higher prices.b) the price paid for the input is not proportional to its productivity.c) input prices are explained by output prices.d) all of the above.
Rents are determined bya) demand.b) input prices.c) the price of capital.d) all of the above.
The present value of a future amount of money isa) a stock concept.b) less than the future amount because future revenues are discounted to adjust for forgone interest.c) the amount that, if invested today, will grow as large as the future amount, taking account of earned interest.d) all of the
An investment choice is smart when thea) future stream of revenues is greater than the price of the investment.b) future stream of revenues is less than the price of the investment.c) present value of the future stream of revenues is greater than the price of the investment.d) present value of the
Economic rent isa) paid only for the use of land.b) paid only for the use of capital.c) determined only by supply.d) income paid to any input in relatively inelastic supply.
How many designers (which cost $50 per hour) should Wahid hire if he can charge $20 per webpage sold, rather than $15 per webpage sold?a) 2b) 3c) 4d) 5
Consider Figure 12.3 on page
The additional benefits from hiring an additional web designer are derived from the additionala) output of webpages she can produce.b) revenues from selling those additional webpages.c) profits from selling those additional webpages.d) all of the above.
Which of the following statements is false?a) Wealth is income received from supplying labour.b) Rent is income received from supplying land.c) Normal profits are income received from supplying entrepreneurial abilities.d) Interest is income received from supplying capital.
Wealth differs from income becausea) income is a stock; wealth is a flow.b) wealth is derived from income.c) income is what you earn; wealth is what you own.d) income is what you own; wealth is what you earn.
Suppose someone offers you a bond that will pay you $2000 at the end of a year. If the interest rate is 7 percent (0.07), what is the most you would be willing to pay for the bond today? Why?
What is the comparison problem that the concept of present value helps solve?
In your own words, explain present value. Using the formula, compute the present value of $2000 earned one year from now if the interest rate is 5 percent per year.
In the example in Figure 12.3, what would happen to Wahid’s hiring decision if the price for which he could sell webpages rose from $15 per page to$20 per page? Declined from $15 to $10? Explain your answers.
In the example from Chapter 3, your boss is willing to pay you triple-time wages for working extra time. Explain the calculation she must have made in offering you that much money, assuming she was making a smart decision.
In your own words, define marginal revenue product.
All of the following are examples of public provision by the government, excepta) Canadian education up to grade 12.b) Canadian post-secondary education.c) streetlights.d) public transit.
Subsidies area) the opposite of taxes.b) paid by the government.c) rewards for those creating positive externalities for others.d) all of the above.
Smart subsidies for public goods equal the amount of thea) marginal social cost.b) marginal social benefit.c) marginal external cost.d) marginal external benefit.
Which of the following is not a public good?a) parksb) national defencec) clothesd) vaccinations
Public goods area) for the public.b) free.c) underproduced.d) all of the above.
Free riding occurs when there area) negative externalities.b) positive externalities.c) horses.d) unicorns.
Carbon taxes are inequitable ifa) lower-income consumers are affected more than higher-income consumers.b) higher-income consumers are affected more than lower-income consumers.c) lower-income consumers receive a tax break.d) energy-sensitive businesses like trucking, taxis, air travel, or
Smart carbon taxesa) equal the marginal external cost.b) equal the damage of the negative externality.c) lead to prices and pollution levels that are best for society.d) all of the above.
Smart cap-and-trade systemsa) internalize the fraternity.b) internalize the externality.c) externalize the majority.d) externalize the externality.
If there is a positive externality and a negative externality, marginal private costa) equals marginal social cost, and marginal private benefit equals marginal social benefit.b) is less than marginal social cost, and marginal private benefit is less than marginal social benefit.c) is less than
If there is a positive externality and no negative externality, marginal private costa) equals marginal social cost, and marginal private benefit equals marginal social benefit.b) is less than marginal social cost, and marginal private benefit is less than marginal social benefit.c) is less than
If there is a negative externality and no positive externality, marginal private costa) equals marginal social cost, and marginal private benefit equals marginal social benefit.b) is less than marginal social cost, and marginal private benefit is less than marginal social benefit.c) is less than
The opportunity cost of reducing pollution includes the costs ofa) taking shorter showers.b) taking public transit rather than your car.c) shutting down factories.d) all of the above.
All the following statements are true, except:a) there is too much pollution in the world.b) there are too many cars on the road during rush hour.c) there are too many people smoking.d) there are too many people getting vaccinations.
Which of the following is not a negative externality?a) Jimbo blasts hip-hop music from his souped-up Honda as he cruises through his neighbourhood late at night.b) Jericho sings along to hip-hop music on the bus(and everyone on the bus thinks he is horrible).c) Jeremiah listens to hip-hop music in
While carbon taxes and cap-and-trade systems have the same objective, governments and political parties differ over which policy they support. Which policy would a political party have to adopt to gain your vote? Explain your reasons.
Some environmental groups try to expose businesses that pollute while supporting environmentally friendly businesses by posting information and photos on public websites. Explain how this strategy may “internalize the externality” for the polluters even without government action.
Explain what the the phrase “internalize the externality” means for a polluting business. Give an example of how government policies like emissions taxes“internalize externalities” for polluters to create smart social choices.
Economic thinking can be helpful in answering the following question(s):a) “When will government action improve market failure outcomes?”b) “When will government action fail?”c) “When will government action produce an outcome that is worse than market failure?”d) All of the above.
Which of the following statements about government regulation is/are true?a) The public-interest view suggests government actions improve market failure outcomes.b) The capture view suggests government actions produce government failure.c) Government failure can be worse than market failure because
Which of the following is an example of a government failure?a) Deregulation in the airline industry resulted in lower prices and changed the price–quality mix in a pro-consumer way.b) Previous regulations in the airline industry led airlines to provide more luxuries than consumers would choose
The Canadian Radio-television and Telecommunications Commission (CRTC)is an example of regulation througha) public ownership.b) government departments.c) government-appointed agencies.d) self-governing bodies.
Criminal offences in the Competition Act includea) price fixing.b) bid rigging.c) false advertising.d) all of the above.
Anti-combines (or anti-trust) laws attempt toa) support prices.b) establish Crown corporations.c) prevent monopoly practices.d) regulate monopolies.
According to game theory,a) businesses within cartels are tempted to cheat.b) businesses within cartels have incentives to cooperate.c) prison penalties help governments uncover secret cartels.d) all of the above are true.
Gas prices fluctuate wildly on long weekends because ofa) changes in the cost of oil used to produce gasoline.b) changes in the cost of gasoline.c) the cycle of trust and lack of trust among gasoline station owners.d) the cycle of trust and lack of trust between parents and teenagers.
In the prisoners’ dilemma with Bonnie and Clyde, each prisoner will be best off ifa) both prisoners confess.b) both prisoners deny.c) Bonnie denies and Clyde confesses.d) Clyde denies and Bonnie confesses.
John Nash, who extended the idea of game theory, was the subject of what Academy Award–winning movie?a) Beauty and the Beastb) A Beautiful Economistc) A Beautiful Mind D) A Beautiful Body
An industry with high __________ is likely to have economies of scale.a) average total costsb) marginal costsc) opportunity costsd) fixed costs
The challenge facing government policymakers isa) who will be the next Canadian Idol.b) how to gain the low-cost efficiencies of economies of scale, but avoid the inefficiencies of monopoly’s restricted output and rise in price.c) how to avoid the low-cost efficiencies of economies of scale, but
Which of the following is least likely to be a natural monopoly?a) electric utilityb) taxi servicec) water and sewer serviced) cable TV service
A natural monopoly is likely to havea) low fixed cost and low marginal cost.b) low fixed cost and high marginal cost.c) high fixed cost and low marginal cost.d) high fixed cost and high marginal cost.
Market failure can happen when there area) inequalities.b) economies of scale.c) inefficiencies.d) all of the above.
Other than in setting gas prices, what is another competitive area where this situation might arise? Explain, using game theory, the two smart choices available to the players in the competitive area you selected.
What is a Nash equilibrium?
In your own words, explain the idea of the prisoners’ dilemma.
An industry of perfect competition is in short-run equilibrium with price below average total cost.Which of the following is not a prediction of what will happen in long-run equilibrium?a) Price will increase.b) Industry output will increase.c) Economic profits will be zero.d) Businesses will exit
When economic profits are zero in an industry of perfect competition,a) the product will not be produced in the short run.b) the product will not be produced in the long run.c) revenues are not covering implicit costs.d) none of the above are true.
If a profit-maximizing business in perfect competition is earning economic profits, it must be producing a quantity of output wherea) price is greater than marginal cost.b) price is greater than marginal revenue.c) marginal cost is greater than average total cost.d) marginal cost is less than
A business in perfect competition will earn economic profits whena) marginal revenue is greater than average total cost.b) marginal revenue is less than average total cost.c) marginal revenue equals average total cost.d) price equals average total cost.
A business in perfect competition earns maximum total profits when it chooses the quantity of output where marginal revenuea) equals average total cost.b) is greater than price.c) equals marginal cost.d) is greater than marginal cost.
The supply curve for a business in perfect competition is generally itsa) marginal cost curve.b) marginal revenue curve.c) average total cost curve.d) marginal product curve.
In perfect competition, each businessa) chooses price but not quantity of output.b) chooses quantity of output but not price.c) chooses both price and quantity of output.d) cannot choose either price or quantity of output.
According to the idea of diminishing marginal productivity, 1 marginal productivity eventually increases.2 marginal productivity eventually decreases.3 marginal cost eventually increases.4 marginal cost eventually decreases.a) 1 and 3b) 1 and 4c) 2 and 3d) 2 and 4
If ATC is decreasing as output increases, MC must bea) equal to ATC.b) less than ATC.c) greater than ATC.d) decreasing.
A business’s total fixed costs are $100. If total costs are $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?a) $100b) $110c) $200d) $210
Marginal cost is the amount thata) total cost increases when one more labourer is hired.b) fixed cost increases when one more labourer is hired.c) total cost increases when one more unit of output is produced.d) fixed cost increases when one more unit of output is produced.
Which of the following statements by a restaurant owner refers to diminishing marginal productivity?a) “The higher the quality of the ingredients we use, the higher the cost of producing each meal.”b) “We can increase the number of meals we serve by just adding more kitchen staff, but each
The demand curve for an individual business in perfect competition isa) perfectly elastic.b) perfectly inelastic.c) also the business’s marginal cost curve.d) also the business’s average total cost curve.
A business facing a perfectly elastic demand curve for its producta) is not a price-taker.b) wants to lower its price to increase sales.c) wants to raise its prices to increase total revenue.d) has a marginal revenue curve equal to the price of the product.
Which of the following is not a characteristic of perfect competition?a) downward-sloping industry demand curveb) horizontal demand curve facing each individual businessc) each business decides its quantity of outputd) slightly differentiated products
The paper clip industry is perfectly competitive and is initially in long-run equilibrium. Then the demand for paper clips decreases because people are using tablets and less paper. Using one graph for the paper clip industry and one graph for an individual business like Figures 9A.11a and 9A.8,
In Figure 9A.9, explain why the breakeven point is a market price of$4 per bushel and an output of 1200 bushels.
Which of the three scenarios would cause businesses to enter an industry?Explain why that increase in the number of businesses in an industry causes the market supply curve to shift rightward.
Industries with price-making power havea) the benefits of creative destruction.b) deadweight loss.c) marginal revenue equal to marginal cost at the quantity of output with maximum total profits.d) all of the above.
Industries with perfect competition havea) maximum total surplus.b) deadweight loss.c) the benefits of creative destruction.d) product variety.
When businesses follow the recipe for maximum profits, the outcome isa) always efficient.b) efficient for price-taking market structures and inefficient for price-making market structures.c) efficient for price-making market structures and inefficient for price-taking market structures.d) also best
The passenger next to you who paid more than you did for her airline ticket is probablya) smarter than you.b) older than you.c) travelling for business.d) all of the above.
The secret for successful price discrimination is to seta) higher prices for customers with elastic demand.b) higher prices for all customers.c) lower prices for customers with elastic demand.d) lower prices for customers with inelastic demand.
Price discrimination increases profits when businesses cana) charge lower prices to consumers with elastic demand.b) charge higher prices to consumers with inelastic demand.c) control resentment among higher-price buyers.d) do all of the above.
You have only five hours to divide between studying and working. Suppose your boss gets desperate and offers to pay you $15 an hour. How many hours will you now work?a) 1b) 2c) 3d) 4
If all you are trying to do is make the most money, and you have only five hours to divide between studying and working, how many hours should you work?a) 1b) 2c) 3d) 4
With each additional item sold by a monopolist under the one-price rule,a) total revenue falls.b) marginal revenue falls by less than price.c) marginal revenue falls by the same amount as the fall in price.d) marginal revenue falls by more than price.
A business probably has constant marginal costs ifa) workers are sending text messages and checking Facebook instead of working.b) customers are angry that wait times at the checkout are ridiculously long.c) it is offering workers increased overtime-pay rates.d) it is selling Christmas trees and it
To increase output, marginal costs increase when a business musta) shift to more expensive sources of raw materials.b) switch workers from jobs they are good at to jobs they are not so good at.c) use more workers at overtime rates.d) do all of the above.
The marginal cost of staying open an extra hour includesa) additional wages.b) additional costs of hydro/electricity.c) additional costs of time.d) all of the above.
Which statement about prices and marginal revenues is true?a) Marginal revenue equals price for monopolists.b) Marginal revenue equals price for businesses in perfect competition.c) Marginal revenue is greater than price for monopolists.d) Marginal revenue is greater than price for businesses in
Self-interest and competition will most likely push the price toward a single price fora) haircuts.b) coffee.c) tennis lessons.d) Broadway show tickets.
Marginal revenue is the additionala) sales revenue from staying open later.b) profit from staying open later.c) cost from staying open later.d) all of the above.
If I claim that “efficient price-taking businesses are better for society than inefficient price-making businesses,” is that a positive or a normative statement? Do you agree with the claim? What arguments would you make to support your position?
Redraw Figure 9.8b but make the marginal revenue and marginal cost curves intersect at a quantity of 200 piercings. At that point, what are the output, price, consumer and producer surpluses, and deadweight loss?
Explain in your own words why market structures with price-making power are inefficient.
Explain the difference between dynamic pricing and price discrimination.State your opinion on the fairness of these pricing strategies.Should businesses be allowed to use them? Explain your answer.
Compare the phone plan you have chosen with more expensive plans.What factors went into your decision to select your plan?What does your plan tell you about your price elasticity?
In your own words, write the basic recipe for successful price discrimination.
Pick one business where you think marginal costs are increasing and one where they are constant. Explain your choices showing why in each case marginal costs are increasing or constant.
What if, when the busload of piercing-seeking tourists arrives at Paola’s busy shop, she has employees on standby who she could bring in very quickly, and who would be paid their regular hourly wage? What difference, if any, would that make to Paola’s marginal cost of increasing piercing output?
Define marginal cost in a way that someone who has never taken an economics course will understand it.

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Microeconomics For Life Smart Choices For You 2nd Edition Avi J. Cohen - Solutions

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