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business
introduction to economic

Questions and Answers of Introduction To Economic

LO2. Explain how monopoly and competitive outcomes differ.
LO1. Calculate how a monopolist sets price.
8. Suppose that the monthly market demand schedule for Frisbees is Price $8 $7 $6 $5 $4 $3 $2 $1 Quantity demanded 1,000 2,000 4,000 8,000 16,000 32,000 64,000 128,000 Suppose further that the
7. According to the World View on page 491,(a) How many brands entered the flat-panel TV market between 2002 and 2007?(b) Where will long-run economic profit end up?(c) Will more firms enter the
6. According to Table 22.1 ,(a) What was the prevailing computer price in 1978?(b) How much total profit did the typical firm earn?(c) At what price would profits have been zero?(d) At what price
5. Suppose the typical catfish farmer was incurring an economic loss at the prevailing price p1.(a) Illustrate these losses on the firm and market graphs. (b) What forces would raise the price?What
4. Suppose the following data describe the demand for liquid-diet beverages:Price $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 Quantity demanded 7 10 13 16 19 22 25 28 31 34 Five identical, perfectly competitive
3. Suppose the following data summarize the costs of a perfectly competitive firm:Quantity 0 1 2 3 4 5 6 7 8 Total cost $100 101 103 106 110 115 121 128 136(a) Draw the firm’s MC curve on the graph
2. According to Table 22.1 ,(a) What were the fixed costs of production for the firm?(b) At what rate of output was profit per computer maximized?(c) At what output rate was total profit maximized?
1. According to the News on page 500,(a) How many years elapsed between IBM’s entry and exit of the home computer market?(b) By what percent did IBM cut the price of its low-end computer in a
7. How far are mobile-phone prices likely to fall in India?(See World View, p. 502.) LO3
5. What might cause catfish prices to rise far enough to eliminate losses in the industry? (See News, p. 488.) LO2
4. Why have flat-panel TV prices fallen so much? (See World View, p. 491.) LO2
2. Why wouldn’t producers necessarily want to produce output at the lowest average cost? Under what conditions would they end up doing so? LO1
What does society gain from market competition?
How does competition affect the profits of a firm or industry?
How are prices determined in competitive markets?
LO3. Describe how society benefi ts from perfect competition.
LO2. Explain why economic profi ts approach zero in competitive markets.
LO1. Identify the market characteristics of perfect competition.
9. A firm has leased plant and equipment to produce video game cartridges, which can be sold in unlimited quantities at $21 each. The following figures describe the associated costs of
8. Complete the following table:Total Marginal Average Average Output Cost Cost Total Cost Variable Cost 0 $100 5 110 10 130 15 170 20 220 25 290 30 380 35 490 According to the table above,(a) If the
7. Suppose labor is the only variable cost in fish farming and that a new minimum-wage law increases wages by 40 percent.(a) What will the new output rate be for the firm in Figure 21.7 ?(b) How much
6. Using the data from Problem 5 (at the original price of $17), determine how many ties the producer would supply if(a) A tax of $2 per tie were collected from the producer.(b) A property tax of $2
5. Assume that the price of silk ties in a perfectly competitive market is $17 and that the typical firm confronts the following costs:Quantity(ties per day) 0 1 2 3 4 5 6 7 8 9 10 Total Cost $10 $17
4. Complete the following cost schedules:Quantity 0 1 2 3 4 5 6 7 Total cost $9 $12 $16 $21 $30 $40 $52 $66 ATC MC Assuming the price of this product is $12, at what output rate is
3. (a) Complete the following cost and revenue schedules:Total Total Marginal Quantity Price Revenue Cost Cost 0 $70 $ 50 1 70 70 2 70 110 3 70 170 4 70 240 5 70 320 (b) Graph MC and p .(c) What rate
2. If the price of catfish fell from $13 to $9 per bushel, use Figure 21.7 to determine the(a) Profit-maximizing output.(b) Profit or loss per bushel.(c) Total profit or loss.
1. If the owner of the Table 21.1 drugstore hired a manager for $10 an hour to take his place, how much of a change would show up in(a) Accounting profits?(b) Economic profits?
10. If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices?If so, when? LO1
9. Is Apple Computer a perfectly competitive firm?Explain your answer. LO1
8. What was the opportunity cost of Mr. Fujishige’s farm?(See News, p. 465.) Is society better off with another Disney theme park? Explain. LO2
7. What costs did GM eliminate when it shutdown its plants? (News, p. 479.) How about Dell? LO3
6. What rate of output is appropriate for a “nonprofit” corporation (such as a hospital)? LO2
5. Why wouldn’t a profit-maximizing firm want to produce at the rate of output that minimizes average total cost? LO2
4. If a firm is incurring an economic loss, would society be better off if the firm shut down? Would the firm want to shut down? Explain. LO2
3. How many fish should a commercial fisherman try to catch in a day? Should he catch as many as possible or return to dock before filling the boat with fish? Under what economic circumstances should
2. How can the demand curve facing a firm be horizontal if the market demand curve is downward-sloping? LO1
1. What economic costs will a large corporation likely overlook when computing its “profits”? How about the owner of a family-run business or farm? LO2
How much output will a competitive firm produce?
What are the unique characteristics of competitive firms?
What are profits?
LO3. Discuss how a competitive fi rm’s supply curve is derived.
LO2. Explain how a competitive fi rm maximizes profi t.
LO1. Describe what a perfectly competitive fi rm is.
6. According to the World View on page 456, which nation had the biggest loss of competitive position in years 2000–2007?7. Suppose ( A ) the hourly wage rate is $18 in the United States and $1 in
5. The following table indicates the average total cost of producing varying quantities of output from three different plants:Rate of output 10 20 30 40 50 60 70 80 90 100 Average total cost Small
4. Refer to the production table for jeans ( Table 20.1 ). Suppose a firm has three sewing machines and can vary only the amount of labor input.(a) Graph the production function for jeans given the
3. Suppose a company incurs the following costs: labor, $500; equipment, $200; and materials, $100.The company owns the building, so it doesn’t have to pay the usual $800 in rent.(a) What is the
2. Based on the News on page 453, what is the ATC per dollar of sales at a(a) Large funeral home?(b) Small funeral home?
1. (a) Complete the following cost schedule:Average Average Rate of Total Marginal Average Variable Total Output Cost Cost Fixed Cost Cost Cost 0 $1000 1 1200 2 1450 3 1750 4 2100 5 2500(b) Use the
Why doesn’t someone build one colossal funeral home and drive costs down further? LO3
5. Corporate funeral giants have replaced small family-run funeral homes in many areas, in large part because of the lower costs they achieve. (See News, p. 453.) What kind of economies of scale
3. How many chip sets will Intel want to produce in China?(See World View, p. 451.) LO1
LO3. Describe how the various measures of cost are related.
LO2. Explain the law of diminishing returns.
LO1. Interpret the production function.
11. Using averages where appropriate, compute the price elasticity of demand for PlayStation 3 (News, p. 412).
10. Use the following data to illustrate the ( a ) demand curve and ( b ) total revenue curve:Price $ 1 2 3 4 5 6 7 8 9 10 Quantity 20 18 16 14 12 10 8 6 4 2(a) At what price is total revenue
9. Suppose the following table reflects the total satisfaction derived from consumption of pizza slices and Pepsis. Assume that pizza costs $1 per slice and a large Pepsi costs $2. With $20 to spend,
8. If Washington, DC, incomes declined by 2 percent in 2008, what is the income elasticity of demand for lottery tickets (News, p. 417)?
7. According to the calculation on page 416, by how much will popcorn sales increase if average income goes up by 10 percent? %
6. If the price of a pack of cigarettes (including taxes) was $4 before the 2009 tax hike (see News, p. 411),(a) What was the price after the tax hike?(b) What was the (average) percentage increase
5. From Figure 19.3 , compute ( a ) the price elasticity between each of the following points and( b ) the total revenue at each point.Price Elasticity Total Revenue Point D to E At point D EG to H G
4. Suppose consumers buy 30 million packs of cigarettes per month at a price of $4 per pack.If a $1 tax is added to that price,(a) By what percent does price change? (Use midpoint formula on p. 409.)
3. According to Professor Becker (News, p. 413), by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in(a) 1 year? %(b) 3 years? %
8. If Washington, DC, incomes declined by 2 percent in 2008, what is the income elasticity of demand for lottery tickets (News, p. 417)?
7. According to the calculation on page 416, by how much will popcorn sales increase if average income goes up by 10 percent? %
6. If the price of a pack of cigarettes (including taxes) was $4 before the 2009 tax hike (see News, p. 411),(a) What was the price after the tax hike?(b) What was the (average) percentage increase
5. From Figure 19.3 , compute ( a ) the price elasticity between each of the following points and( b ) the total revenue at each point.Price Elasticity Total Revenue Point D to E At point D EG to H G
4. Suppose consumers buy 30 million packs of cigarettes per month at a price of $4 per pack.If a $1 tax is added to that price,(a) By what percent does price change? (Use midpoint formula on p. 409.)
3. According to Professor Becker (News, p. 413), by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in(a) 1 year? %(b) 3 years? %
1. Illustrate the following demand on the accompanying graph:Price (per pair) $100 $80 $60 $40 $20 Quantity demanded (pairs per day) 10 14 18 22 26(a) How many pairs will be demanded when the price
11. If the elasticity of demand for coffee is so low( Table 19.1 ), why doesn’t Starbucks raise the price of coffee to $10 a cup? LO2
8. Why does the price elasticity of demand differ for teenagers and adults? LO2
7. Why are per capita advertising expenditures so high in the United States and so low in Brazil? (See World View, p. 424.) LO1
6. Why is the demand for PlayStation 3 (News, p. 412) so much more elastic than the overall market demand for video-game consoles? LO1
4. If the price of gasoline doubled, how would consumption of ( a ) gasoline, ( b ) cars, and ( c ) public transportation be affected? How quickly would these adjustments be made? LO2
3. How does total and marginal utility change as you spend more time surfing the Net? LO3
Why do we buy certain products but not others?
How does a change in a product’s price affect the quantity we purchase or the amount of money we spend on it?
How do we decide how much of any good to buy?
LO3. Describe how consumers maximize utility.
LO2. Discuss what price and income elasticities of demand measure.
LO1. Explain the basis for the law of demand.
7. Complete the following chart by summarizing the policy prescriptions of various economic theories:
6. The following table displays Congressional Budget Office forecasts of federal budget balances for the following fiscal year. Compare these forecasts with actual surplus and deficits for those same
5. According to the News on page 392, what is the implied value of the multiplier for(a) Increased unemployment benefits?(b) Infrastructure spending?
4. What MPC for tax cuts is assumed in the News on page 392?
3. According to the World View on page 386,(a) Which country had the greatest macro misery in the 2000s? (Compute the“misery index” from Chapter 16.)(b) Who had the fastest growth?
2. If the unemployment rate stays two percentage points above full employment for an entire year,(a) How many jobs will be lost in a labor force of 160 million?(b) If the average worker produces
1. If the Congressional Budget Office makes its average error this year, by how much will it underestimate next year’s budget deficit? (See News on p. 391) %
10. Why are the dimensions of the consumption and investment functions so important for policy design? LO2
9. What are the pros and cons of tax cuts or increased government spending as stimulative tools (News, p. 392)? LO3
6. Why is the multiplier higher for unemployment benefits than infrastructure spending (News, p. 392)? Which occurs faster? LO2
LO3. Discuss the constraints on policy effectiveness.
LO2. Explain how macro tools should work.
LO1. Identify the tools of macro policy.
11. Using data from the endcovers of this book, graph real GDP and population growth since 2000, setting 2000 values to an index base of 100.
10. Suppose that every additional five percentage points in the investment rate ( I ⫼ GDP) boost economic growth by one percentage point. Assume also that all investment must be financed with

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