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international economics theory

Questions and Answers of International Economics Theory

d. the supply of reproductions of Rembrandt paintings
c. the supply of Rembrandt paintings
b. the demand for elective cosmetic plastic surgery, given that the patient pays the full cost
a. the demand for cardiac bypass surgery, given that the government pays the full cost for any patient
c. Suppose that rich art collectors decide that it is essential to acquire Picasso Blue Period art for their collections. Show the impact of this on the market for these paintings.12. Draw the
b. Given the supply curve from parta, the price of a Picasso Blue Period work will be entirely dependent on what factor(s)? Draw a diagram showing how the equilibrium price of such a work is
a. Draw a supply curve for Picasso Blue Period works. Why is this supply curve different from ones you have seen?
11. Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his “Blue Period.” Picasso is now dead, and all of his Blue Period works are currently on display in
10. Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza.a. The price of mozzarella cheese rises.b. The health hazards of hamburgers are
c. the market for an hour of babysitting services 30 years into the future, when children born today are likely to be having children of their own
b. the market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today are old enough to work as babysitters
a. the market for an hour of babysitting services in Middling today
9. The small town of Middling experiences a sudden doubling of the birth rate. After three years, the birth rate returns to normal.Use a diagram to illustrate the effect of these events on the
c. To celebrate the defeat of the Spanish Armada, Queen Elizabeth declares several weeks of festivities, which involves commissioning new plays.
b. The bubonic plague, a deadly infectious disease, breaks out in London.
a. The playwright Christopher Marlowe, Shakespeare’s chief rival, is killed in a bar brawl.
8. Will Shakespeare is a struggling playwright in sixteenthcentury London. As the price he receives for writing a play increases, he is willing to write more plays. For the following situations, use
d. The country goes into a deep recession and the income of the average American falls sharply.
c. Music featuring handmade acoustic guitars makes a comeback as audiences tire of heavy metal and grunge music.
b. A foreign producer reengineers the guitar-making process and floods the market with identical guitars.
a. Environmentalists succeed in having the use of Brazilian rosewood banned in the United States, forcing luthiers to seek out alternative, more costly woods.
7. After several years of decline, the market for handmade acoustic guitars is making a comeback. These guitars are usually made in small workshops employing relatively few highly skilled luthiers.
e. Suppose the group announced their next tour was going to be their last. What effect would this likely have on the demand for and price of tickets? Illustrate with a supply and demand diagram.
d. Suppose the band’s next CD was a total dud. Do you think they would still have to worry about ticket prices being too high? Why or why not? Draw a supply and demand diagram to support your
c. Suppose Pearl Jam really wanted to bring down ticket prices. Since the band controls the supply of its services, what do you recommend they do? Explain using a supply and demand diagram.
b. Suppose that due to this star’s protests, ticket prices were lowered to $50. In what sense is this price too low? Draw a diagram using supply and demand curves to support your argument.
a. How would you evaluate the arguments that ticket prices are too high?
6. In Rolling Stone magazine, several fans and rock stars, including Pearl Jam, were bemoaning the high price of concert tickets.One superstar argued, “It just isn’t worth $75 to see me play.No
b. “A study shows that eating a clove of garlic a day can help prevent heart disease, causing many consumers to demand more garlic. This increase in demand results in a rise in the price of garlic.
a. “A technological innovation that lowers the cost of producing a good might seem at first to result in a reduction in the price of the good to consumers. But a fall in price will increase demand
5. Find the flaws in reasoning in the following statements, paying particular attention to the distinction between changes in and movements along the supply and demand curves.Draw a diagram to
4. Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following events on the designated market.a. the market for
c. The price of a round-trip ticket to Paris on Air France falls by more than $200 after the end of school vacation in September.This happens despite the fact that generally worsening weather
b. The price of a Christmas tree is lower after Christmas than before and fewer trees are sold.
a. Lobster prices usually fall during the summer peak harvest season, despite the fact that people like to eat lobster during the summer months more than during any other time of year.
3. The market for many goods changes in predictable ways according to the time of year, in response to events such as holidays, vacation times, seasonal changes in production, and so on. Using supply
2. In a supply and demand diagram, draw the change in demand for hamburgers in your hometown due to the following events.In each case show the effect on equilibrium price and quantity.a. The price of
c. The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream.d.New technology for mixing and freezing ice cream lowers manufacturers’ costs of producing chocolate
b. A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits.
a. A severe drought in the Midwest causes dairy farmers to reduce the number of milk-producing cows in their herds by a third. These dairy farmers supply cream that is used to manufacture chocolate
1. A survey indicated that chocolate ice cream is America’s favorite ice-cream flavor. For each of the following, indicate the possible effects on the demand and/or supply, equilibrium price, and
5. Which of the following would decrease the effect of a quota on a market? A(n)a. decrease in demandb. increase in supplyc. increase in demandd. price ceiling above the equilibrium pricee. none of
4. Quotas lead to which of the following?I. inefficiency due to missed opportunities II. incentives to evade or break the law III. a surplus in the marketa. Ib. IIc. IIId. I and IIe. I, II, and III
3. If the government established a quota of 1,000 in this market, the quota rent would bea. $2.b. $4.c. $6.d. $8.e. more than $8.
2. If the government established a quota of 1,000 in this market, the supply price would bea. less than $4.b. $4.c. $6.d. $8.e. more than $8.
1. If the government established a quota of 1,000 in this market, the demand price would bea. less than $4.b. $4.c. $6.d. $8.e. more than $8.0 Price Quantity$8 64 1,000 1,800 2,600 DS E
2. Again replicate the graph from Figure 9.1. Suppose that the quota is 8 million rides and that demand decreases due to a decline in tourism. Show on your graph the smallest parallel leftward shift
1. Suppose that the supply and demand for taxi rides is given by Figure 9.1 and a quota is set at 6 million rides. Replicate the graph from Figure 9.1, and identify each of the following on your
iv. how many previously employed workers would no longer have a job?
iii. how many workers would want to work that did not want to work for the equilibrium wage?
ii. how many workers would be hired?
i. how many workers would supply their labor?
1. Refer to the graph provided to answer the following questions.a. What are the equilibrium wage and quantity of workers in this market?b. For it to be effective, where would the government have to
4. Refer to the graph provided. If the government establishes a minimum wage at $10, how many workers will benefit from the higher wage?0 Wage(per hour)Number of workers$10 750 80 110 ED Sa. 30b.
c. Proponents claim that they are helping gas station owners without hurting anyone else. Opponents claim that consumers are hurt and will end up doing things like buying gas in a nearby state or on
b. Proponents claim consumers will be better off because gas stations will provide better service. Opponents claim consumers will be generally worse off because they prefer to buy gas at cheaper
a. Proponents of the law claim it will increase the income of gas station owners. Opponents claim it will hurt gas station owners because they will lose customers.
3. The state legislature mandates a price floor for gasoline of PF per gallon. Assess the following statements and illustrate your answer using the figure provided.
2. True or false? Explain your answer. A price ceiling below the equilibrium price in an otherwise efficient market does the following:a. increases quantity suppliedb. makes some people who want to
f. Some homeowners rent spaces for more than $7 but pretend that the buyers are non paying friends or family.
e. Friends of homeowners near the stadium regularly attend games, even if they aren’t big fans. But some serious fans have given up because of the parking situation.
d. Some fans now arrive several hours early to find parking.
Explain how each of the following adverse effects arises from the price ceiling.
c. Some fans can’t find parking and leave without seeing the game.
b. Some fans who used to carpool to the game now drive alone.
a. Some homeowners now think it’s not worth the hassle to rent out spaces.
1. On game days, homeowners near Middletown University’s stadium used to rent parking spaces in their driveways to fans at a going rate of $11. A new town ordinance now sets a maximum parking fee
5. Which of the following is certainly true if demand and supply increase at the same time?a. The equilibrium price will increase.b. The equilibrium price will decrease.c. The equilibrium quantity
4. An increase in the number of buyers and a technological advance will causea. demand to increase and supply to increase.b. demand to increase and supply to decrease.c. demand to decrease and supply
3. The equilibrium price will rise, but equilibrium quantity may increase, decrease, or stay the same ifa. demand increases and supply decreases.b. demand increases and supply increases.c. demand
2. Which of the following will lead to an increase in the equilibrium price of product “X”? A(n)a. increase in consumer incomes if product “X” is an inferior goodb. increase in the price of
1. Which of the following describes what will happen in the market for tomatoes if a salmonella outbreak is attributed to tainted tomatoes?a. Supply will decrease and price will increase.b. Supply
2. Periodically, a computer chip maker like Intel introduces a new chip that is faster than the previous one. In response, demand for computers using the earlier chip decreases as customers put off
c. When a local cable company offers cheaper pay-per-view films, local movie theaters have more unfilled seats.Solutions appear at the back of the book.
b. As technological innovation has lowered the cost of recycling used paper, fresh paper made from recycled stock is used more frequently.
a. As the price of gasoline fell in the United States during the 1990s, more people bought large cars.
1. For each of the following examples, explain how the indicated change affects supply or demand for the good in question and how the shift you describe affects equilibrium price and quantity.
5. The market price of a good will tend to rise ifa. demand decreases.b. supply increases.c. it is above the equilibrium price.d. it is below the equilibrium price.e. demand shifts to the left.
4. Which of the following is true at equilibrium?a. The supply schedule is identical to the demand schedule at every price.b. The quantity demanded is the same as the quantity supplied.c. The
3. A technological advance in textbook production will lead to which of the following?a. a decrease in textbook supplyb. an increase in textbook demandc. an increase in textbook supplyd. a movement
2. An increase in the demand for steak will lead to an increase in which of the following?a. the supply of steakb. the supply of hamburger (a substitute in production)c. the supply of chicken (a
1. Which of the following will decrease the supply of good “X”?a. There is a technological advance that affects the production of all goods.b. The price of good “X” falls.c. The price of good
c. After a heavy snowfall, many people want to buy second-hand snowblowers at the local tool shop.
b. After a hurricane, Florida hoteliers often find that many people cancel their upcoming vacations, leaving them with empty hotel rooms.
a. In 2010 there was a bumper crop of wine grapes.
2. In the following three situations, the market is initially in equilibrium. After each event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to
e. Since new technologies have made it possible to build larger cruise ships (which are cheaper to run per passenger), Caribbean cruise lines have offered more cabins, at lower prices, than before.
d. Many construction workers temporarily move to areas that have suffered hurricane damage, lured by higher wages.
c. Immediately after the school year begins, fewer young people are available to work. Fast-food chains must raise wages, which represent the price of labor, to attract workers.
b. Many strawberry farmers open temporary roadside stands during harvest season, even though prices are usually low at that time.
a. During a real estate boom that causes house prices to rise, more homeowners put their houses up for sale.
1. Explain whether each of the following events represents (i) a change in supply or (ii) a movement along the supply curve.
d. A sharp rise in the price of gasoline leads many commuters to join carpools in order to reduce their gasoline purchases.
c. People buy more long-stem roses the week of Valentine’s Day, even though the prices are higher than at other times during the year.
b. When XYZ Telecom, a long-distance telephone service provider, offered reduced rates on weekends, its volume of weekend calling increased sharply.Solutions appear at the back of the book.
a. A store owner finds that customers are willing to pay more for umbrellas on rainy days.
1. Explain whether each of the following events represents (i) a change in demand (a shift of the demand curve) or (ii) a movement along the demand curve (a change in the quantity demanded).
The factors that shift the demand curve
The difference between movements along the demand curve and changes in demand
What the demand curve is

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