Questions and Answers of Leadership in organizations

Suppose capital and labor are perfect substitutes in production for clothing: 2 units of capital or 2 units of labor produce 1 unit of clothing. Suppose capital and labor are perfect complements in
How, if at all, will the presence of this ship alter the production and consumption decisions of Crusoe and Friday?
Now suppose a trading ship visits the island each day and offers to buy or sell food and clothing at the prices PF 4, PC
At the current allocation of consumption goods, each consumer’s marginal rate of substitution between food and clothing is 1.5. Is this economy efficient in terms of its product mix? If so, explain
Given the current allocation of productive inputs, the marginal rate of transformation of food for clothing in a simple two-good economy is equal to
Is this economy efficient in production? If so, explain why. If not, describe a reallocation that will lead to a Pareto improvement.
A simple economy produces two goods, food and clothing, with two inputs, capital and labor. Given the current allocation of capital and labor between the two industries, the marginal rate of
Suppose Sarah has an endowment of 2 units of X and 4 units of Y and has indifference curves that satisfy our four basic assumptions (see Chapter 3). Suppose Brian has an endowment of 4 units of X and
How will your answer to Problem 4 change if A wants to sell 3 units of clothing and B wants to sell 2 units of food?
How might a critic respond to the claim that taxes always make the allocation of resources less efficient?
Why is the slope of the production possibilities frontier equal to the ratio of marginal production costs?
In general equilibrium, can there be excess demand for every good?
How do the initial endowments constrain where we end up on the contract curve?
Distinguish among the terms “Pareto superior,” “Pareto preferred,” and “Pareto optimal.”
True or false: The fact that the voter turnout is significantly greater in close presidential elections than in one-sided ones provides clear support for the proposition that voters are rational.
Viewer-supported television stations often give contributors “free” gifts for making contributions at various levels. (“Two handsome News Hour coffee mugs for a donation of$120.”) Based on
Consider the scenario described in Problem 3, but now consider that the marginal cost of providing parks measured in hundreds of dollars is Determine the optimal size of local parks.
Ten identical consumers all have individual willingness-to-pay curves for a public good—say, local parks (where P is measured in hundreds of dollars and Q is measured in acres). Construct and graph
On the assumption that the public good described in Problem 1 is provided at the optimal level, how much should the state charge each citizen each time he or she uses the public good?
Why is a negative income tax, by itself, unable to solve the redistribution problem?
Describe two forms of inefficiency associated with rent seeking.
In what way does a private good produced under conditions of increasing returns to scale resemble a public good?Describe the trade-off between flexibility and cost that confronts users of such goods.
Why would even rich citizens be likely to oppose having equal tax payments by rich and poor alike?
Same as Problem 16, except now payoff values of each person area. If Smith and Jones are payoff maximizers and make their decisions individually, what will they do?b. If Smith and Jones can make
Same as Problem 14, except now the payoff values of each person areb. If Smith and Jones can make binding agreements with each other, what will they do?PROBLEMS 565 Smith Early Late Early Jones: 30
Smith and Jones face the choice of driving to work early or late. If they both drive to work at the same time, each gets in the way of the other on the road, and so their daily commute takes longer
Further, suppose that prior to the parties agreeing on a contract Jones becomes the mayor and grants to himself the property rights concerning whether the bakery windows are left open or closed. Does
Assume that the cafe has a constant marginal cost of 10, and that integration (merger) is not a possibility because each owner greatly enjoys owning and operating his own establishment.a. In the
Suppose Smith owns and works in a bakery located next to an outdoor cafe owned by Jones. The patrons of the outdoor cafe like the smell that emanates from the bakery.When Smith leaves his windows
Suppose the government attempts to restrict pollution by mandating a maximum amount that each firm can pollute. In general, this will result in a higher cost for pollution control than is necessary.
A village has six residents, each of whom has $1000. Each resident may either invest his money in a government bond, which pays 11 percent/yr, or use it to buy a year-old steer, which will graze on
A and B live on adjacent plots of land. Each has two potential uses for her land, the present values of each of which depend on the use adopted by the other, as summarized in the table. All the
Smith can produce with or without a filter on his smokestack. Production without a filter results in greater smoke damage to Jones. The relevant gains and losses for the two individuals are listed in
Every November, Smith and Jones each face the choice between burning their leaves or stuffing them into garbage bags. Burning the leaves is much easier but produces noxious smoke. The utility values
Why do most property laws limit private coastal property to the waterline at high tide?
Around 1890 the vineyards in Bordeaux were infected by Phylloxera, a louse that attacks the vine’s roots. To preserve the original grape varieties, the Bordeaux vines were grafted onto roots taken
Explain why depreciation is an economic cost just like any other.
Because it is the only employer in the area, the firm faces a supply curve for labor given by W 10 L, where W is the wage rate and L is the number of person-hours employed. This supply curve yields
The Ajax Coal Company is the only employer in its area. Its only variable input is labor, which has a constant marginal product equal to
Faced with this payment schedule, Smith chooses to work 12 hr/day. If Smith is offered a new job that pays $1.50/hr for as many hours as he chooses to work, will he take it? Explain.
Find its optimal quantity demanded of labor at a wage of w $10/hr.
A perfectly competitive firm has MPL 22 L. Find and graph its value of the marginal product of labor at a product price of P
Given the information in the following table, fill in the value of the marginal product of labor for price P
Why does economic theory lead us to place more emphasis on discrimination by persons and institutions other than employers as a cause of wage differences that exceed productivity differences?
Why might local employers pay workers the value of what they produce even if workers are unable or unwilling to move to another area to accept a better job?
What is the difference between the perfect competitor’s VMPL curve and the imperfect competitor’s MRPL curve?
The state has announced its plans to license two firms to serve a market whose demand curve is given by P 100 Q. The technology is such that each can produce any given level of output at zero cost,
Firm 1 and firm 2 are automobile producers. Each has the option of producing either a big car or a small car. The payoffs to each of the four possible combinations of choices are as given in the
A family dispute broke the firm in two. Alfredo Zambino now runs one firm and Luigi Zambino runs the other.They still have the same marginal costs, but now they are Cournot duopolists. How much
Because of their unique expertise with explosives, the Zambino brothers have long enjoyed a monopoly of the U.S. market for public fireworks displays for crowds above a quarter of a million. The
The market demand curve for mineral water is given by P 15 Q. If there are two firms that produce mineral water, each with a constant marginal cost of 3 per unit, fill in the entries for each of the
Describe the trade-off between cost and variety.
Does the equilibrium in the Cournot model satisfy the definition of a Nash equilibrium?
An author has signed a contract in which the publisher promises to pay her $10,000 plus 20 percent of gross receipts from the sale of her book. True or false: If both the P, P*This problem is most
He sets two prices for his product, a regular price, PH, and a discount price, PL. Everyone is eligible to purchase the product at PH. To be eligible to buy at PL, it is necessary to present a copy
The New York Times, a profit-maximizing newspaper, faces a downward-sloping demand schedule for advertisements. When advertising for itself in its own pages (for example, an ad saying “Read Maureen
Suppose the government imposed a price ceiling on a monopolist (an upper bound on the price the monopolist can charge). Let denote the price ceiling, and suppose the monopolist incurs no costs in
What is the monopolist’s marginal cost?
A monopolist’s price is $10. At this price the absolute value of the elasticity of demand is
If you have ever gone grocery shopping on a weekday afternoon, you have probably noticed some elderly shoppers going slowly down the aisles checking their coupon book for a coupon that matches each
If the marginal cost per patron is $1 per showing, how much should the theater charge members of each group?
The demand curve for all other patrons has a constant price elasticity equal to
The demand by senior citizens for showings at a local movie house has a constant price elasticity equal to
Find the monopolist’s profit-maximizing quantity and price. Find the efficiency loss from this monopoly.
Now suppose the monopolist in Problem 2 has a long-run marginal cost curve of MC
How much will he sell in the foreign market? What will his new quantity and price be in the original market?
Now suppose the monopolist in Problem 2 also has access to a foreign market in which he can sell whatever quantity he chooses at a constant price of
A monopolist has a demand curve given by P 100 Q and a total cost curve given by TC 16 Q2. The associated marginal cost curve is MC 2Q. Find the monopolist’s profit-maximizing quantity and price.
How does the hurdle method of price discrimination mitigate both the efficiency and fairness problems associated with monopoly?
What forces work against X-inefficiency in privately owned monopolies?
True or false: If a monopolist faces a perfectly horizontal demand curve, then the dead-weight loss to the economy is zero.
True or false: A lump-sum tax on a monopolist will always increase the price charged by the monopolist and lower the quantity of output sold.
Suppose the elasticity of demand is 3. By how much will a profit-maximizing monopolist’s price exceed marginal cost? How does this markup of price over marginal cost compare with perfect
What effect will the imposition of a 50 percent tax on economic profit have on a monopolist’s price and output decisions? (Hint: Recall that the assumed objective is to choose the level of output
Why is an output level at which MR intersects MC from below never the profit-maximizing level of output?
When is marginal revenue less than price for a monopolist? Explain.
If the United States has thousands of cement producers but a small town has only one, is this cement producer a monopolist? Explain.
What five factors give rise to monopoly? In the long run, why is economies of scale the most important factor?
If the firm faces a price of 6, what quantity should it sell? What profit does the firm make at this price? Should the firm shut down?
A firm in a competitive industry has a total cost function of TC 0.2Q2 5Q 30, whose corresponding marginal cost curve is MC 0.4Q
You are the owner/manager of a small competitive firm that manufactures house paints.You and all your 1000 competitors have total cost curves given by and the industry is in long-run equilibrium.Now
Merlin is like all other managers in a perfectly competitive industry except in one respect:Because of his great sense of humor, people are willing to work for him for half the going wage rate. All
Applicants participate in a lottery, and the six winners get a medallion, which is a permanent license to operate a taxi in Metropolis. What will the equilibrium fare be now? How much economic profit
Now suppose that the city council of Metropolis decides to curb congestion in the downtown area by limiting the number of taxis to
Same as Problem 6, except now Could any firm actually have this particular LTC curve? Why or why not?
All firms in a competitive industry have long-run total cost curves given by where Q is the firm’s level of output. What will be the industry’s long-run equilibrium price? (Hint: Use either
Is this firm earning an economic profit in the short run? Should it alter its output in the short run? In the long run, what should this firm do?
The minimum point on its long-run average cost curve is equal to
Its short-run average variable cost is equal to
A perfectly competitive firm faces a price of 10 and is currently producing a level of output at which marginal cost is equal to 10 on a rising portion of its short-run marginal cost curve. Its
Assuming the aflatoxin outbreak in Problem 3 persists, will the long-run loss in producer and consumer surplus be larger than, smaller than, or the same as the short-run loss?
Each of 1000 identical firms in the competitive peanut butter industry has a short-run marginal cost curve given by If the demand curve for this industry is what will be the short-run loss in
Would you expect a firm that adopts cost-saving innovations faster than 80 percent of all firms in its industry to earn economic profits? If so, will there be any tendency for these profits to be bid
Suppose all firms in a competitive industry are operating at output levels for which price is equal to long-run marginal cost. True or false: This industry is necessarily in long-run equilibrium.
What do economists mean when they say that the shortrun competitive equilibrium is efficient?
Does the fact that a business manager may not know the definition of marginal cost contradict the theory of perfect competition?
A firm’s total revenue curve is given by TR aQ 2Q2. Is this a perfectly competitive firm? Explain why or why not.
Under what conditions will we expect firms to behave as price takers even though there are only a small number of other firms in the industry?
What is the difference between economic profit and accounting profit, and how does this difference matter for actual business decisions?
If a firm’s LMC curve lies above its SMC curve at a given level of output, what will be the relationship between its ATC and LAC curves at that output level?*12. A firm has a long-run total cost

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