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microeconomics principles

Questions and Answers of Microeconomics Principles

1.1. In this chapter, we've emphasized that the elasticity of supply is higher in the long run than in the short run. In a lot of cases, this is surely true: If you see that jobs pay more in the next
1.9. Let's practice the midpoint formula. Calculate the elasticity of demand for each of the following goods or services.Beginning Quantity 50,000 1,000 10,000 40,000 Ending Price$10$1 .50$1
1.8. In the world of fashion, the power to imitate a trendy look is the power to make money.Stores such as H&M and Forever 21 focus on imitating fashions wherever possible: As soon as they see that a
1.7. Immigration is a fact of life in the United States. This will lead to a big boost in the labor supply. What field would you rather be in:a field where the demand for your kind of labor is
1.6. In the short run, the price elasticity of the demand and supply of electricity can be very low.a. How might revenue for the electricity in dustry change if one power plant were shut down for
1.5. How might elasticities help to explain why people on vacation tend to spend more for food and necessities than the local population?
1.4. In Chapter 10, you'll see that we recently purchased permits to pollute the air with sulfur dioxide (S02 ). We didn't use the permits:Instead, we threw them out. In other words, we bought
1.3. Henry Ford famously rna s-produced cars at the beginning of the twentieth century, starting Ford Motor Company. He made millions because mass production made cars cheap to make, and he passed
1.2. Suppose that drug addicts pay for their addiction by stealing: So the higher the total revenue of the illegal drug industry, the higher the amount of theft. If a government crackdown on drug
1.1. During the Middle Ages, the African city of Taghaza quarried salt in 200-pound blocks to be sent to the salt market in Timbuktu, in present day Mali. Travelers report that Taghazans used salt
1.11. A lot of American action movies are quests to eliminate a villain. If in real life villains are elastically supplied (like guns for buyback programs), should we care whether the hero captures a
1.10. Figure 5.3 and Table 5.2 both set out some important but tedious rules. Let's practice them, since they are quite likely to be on an exam.For each of the cases below, state whether the demand
1.9. As we noted in the chapter, many economists have estimated the short-run and long-run elasticities of oil demand. Let's see if a rise in the price of oil hurts oil revenues in the long
1.8. On average, old cars pollute more than newer cars. Therefore, every few years, a politician proposes a "cash for clunkers" program:The government offers to buy up and destroy old, high-polluting
1.This is clearly a situation where you'd want to know the elasticity of fruit and vegetable demand: If people respond a lot to mall changes in price, then government-funded fruit and vegetable
1.7. The U.S. Department of Agriculture (USDA)has been concerned that Americans aren't eating enough fruits and vegetables, and they've considered coupons and other subsidies to encourage
1.6. It's an important tradition in the Santos family that they eat the same meal at their favorite restaurant every Sunday. By contrast, the Chen family spends exactly $50 for their Sunday meal at
1.5. Let's work out a few examples to get a sense of what elasticity of demand means in practice.Remember that in all of these cases, we're moving along a fixed demand curve-so think of supply
1.4. For each of the following, indicate if the supply for the good would become more elastic or less elastic as a result of each change and briefl justify your answer (once again, in each case the
1.3. Indicate whether the demand for the good would become more elastic or less elastic after each of the following changes. (Note that in each of these cases, the demand curve may also shift inward
1.2. For each of the following pairs, which of the two goods is more likely to be elastically supplied? Table 5.3 should help:a. Supply of apples over the next growing sea son vs. supply of apples
1.1. For each of the following pairs, which of the two goods is more likely to be inelastically demanded and why? Table 5.1 should help:
1.7. Let's take the idea from the previous question and use it to explain why businesses sometimes try to make their employees happy. If a business can make a job seem fun (by offering inexpensive
1.6. When the crime rate falls in the area around a factory, what probably happens to wages at that factory?
1.5. Economists often say that prices are a "rationing mechanism." If the supply of a good falls, how do prices "ration" these now-scarce goods in a competitive market?
1.4.a. If oil executives read in the newspaper that massive new oil supplies have been discovered under the Pacific Ocean but will likely only be useful in 10 years, what is likely to happen to the
1.3. Many clothing stores often have clearance sales at the end of each season. Using the tools you learned in this chapter, can you think of an explanation why?
1.2. Think about two products: "safe cars" (a heavy car such as a BMW 530xi with infrared night vision, four-wheel antilock brakes, and electronic stability control), and "dangerous cars" (a
1.1. For many years, it was illegal to color margarine yellow (margarine is naturally white). In some states, margarine manufacturers were even required to color margarine pink! Who do you think
1.12. In recent years, there have been news reports that toys made in China are unsafe. When those news reports show up on CNN and Fox News, what probably happens to the demand for toys made in
1.11. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains, became very popular. What do you suppose that did to the price and quantity of bread? Use supply and demand
1.10. If a snowstorm was forecast for the next day, what would happen to the demand for snow shovels? Is this a change in quantity demanded or a change in demand? This shift in the demand curve would
1.9. The market for sugar is diagramed below:a. What would happen to the equilibrium quantity and price if the wages of sugar cane harvesters increased?b. What if a new study was published that
1.8. If the price of margarine decreases, what happens to the demand for butter? What happens to the equilibrium quantity and price for butter? What would happen ifbutter and margarine were not
1.7. Suppose you decided to follow in Vemon Smith's footsteps and conducted your own experiment with your friends. You give out 10 cards, 5 cards to buyers with the figures for willingness to pay
1.6. The market for marbles is represented in the graph below. What is the total producer surplus? The total consumer surplus? What are the total gains from trade?Price$11 50 50 Quantity
1.5. In the figure below, how many pounds of ugar are sellers willing to sell at a price of $20? How much is demanded at this price? What is the buyer's willingness to pay when the quantity is 20 lb?
1.4. Detemune the equilibrium quantity and price without drawing a graph.Price of Good X$22$25$30$32 Quantity Supplied 100 115 130 150 170 Quantity Demanded 225 200 175 150 110 What is the
1.3. If the price of a one-bedroom apartment in Washington, D.C., is currently $1,000 per month, but the supply and demand curves look as follows, then is there a shortage or surplus of
1.2. Consider the following supply and demand tables for bread. Draw the supply and demand curves for this market. What is the equilibrium price and quantity?Price of One Loaf$0.50$1$2$3$5 Quantity
1.1. Suppose the market for batteries looks as follows:Price 10 20 30 Quantity
1.11. What's the best way to think about the rise in oil prices in the last 10 years, as China and India have become richer: Was it a rise in demand, a fall in demand, a rise in supply, or a fall in
1.10. What's the best way to think about the rise in oil prices in the 1970s, when wars and oil embargoes wracked the Middle East? Was it a rise in demand, a fall in demand, a rise in supply, or a
1.9.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to
1.8.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to
1.7. When supply falls, what happens to quantity demanded in equilibrium? (This should get you to notice that both suppliers and demanders change their behavior when one curve shifts.)
1.6. What happened in Vernon Smith's lab? Choose the right an wer:a. The price and quantity were close to equi librium but gain from trade were far from the maximum.b. The price and quantity were far
1.5. Jules wants to purchase a R oyale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing
1.4. Now, Jon is in Japan, trying to get a job a a full-time translator; he wants to tran late English TV shows into Japanese and vice versa.He notices that the wage for translator is very low. Who
1.3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:The Dark Knight Returns. In this market, who is Jon competing with: the seller of the graphic
1.2. When the price is above the equilibrium price, does greed (in other words, self-intere t) tend to push the price down or does it push it up?
1.1. If the price in a market is above the equilibrium price, does this create a surplus or a shortage?
1.7. Let's take the idea from the previous question and use it to explain why businesses sometimes try to make their employees happy. If a business can make a job seem fun (by offering inexpensive
1.6. When the crime rate falls in the area around a factory, what probably happens to wages at that factory?
1.5. Economists often say that prices are a "rationing mechanism." If the supply of a good falls, how do prices "ration" these now-scarce goods in a competitive market?
1.4.a. If oil executives read in the newspaper that massive new oil supplies have been discovered under the Pacific Ocean but will likely only be useful in 10 years, what is likely to happen to the
1.3. Many clothing stores often have clearance sales at the end of each season. Using the tools you learned in this chapter, can you think of an explanation why?
1.2. Think about two products: "safe cars" (a heavy car such as a BMW 530xi with infrared night vision, four-wheel antilock brakes, and electronic stability control), and "dangerous cars" (a
1.1. For many years, it was illegal to color margarine yellow (margarine is naturally white). In some states, margarine manufacturers were even required to color margarine pink! Who do you think
1.12. In recent years, there have been news reports that toys made in China are unsafe. When those news reports show up on CNN and Fox News, what probably happens to the demand for toys made in
1.11. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains, became very popular. What do you suppose that did to the price and quantity of bread? Use supply and demand
1.10. If a snowstorm was forecast for the next day, what would happen to the demand for snow shovels? Is this a change in quantity demanded or a change in demand? This shift in the demand curve would
1.9. The market for sugar is diagramed below:a. What would happen to the equilibrium quantity and price if the wages of sugar cane harvesters increased?b. What if a new study was published that
1.8. If the price of margarine decreases, what happens to the demand for butter? What happens to the equilibrium quantity and price for butter? What would happen ifbutter and margarine were not
1.7. Suppose you decided to follow in Vemon Smith's footsteps and conducted your own experiment with your friends. You give out 10 cards, 5 cards to buyers with the figures for willingness to pay
1.6. The market for marbles is represented in the graph below. What is the total producer surplus? The total consumer surplus? What are the total gains from trade?Price$11 50 50 Quantity
1.5. In the figure below, how many pounds of ugar are sellers willing to sell at a price of $20? How much is demanded at this price? What is the buyer's willingness to pay when the quantity is 20 lb?
1.4. Detemune the equilibrium quantity and price without drawing a graph.Price of Good X$22$25$30$32 Quantity Supplied 100 115 130 150 170 Quantity Demanded 225 200 175 150 110 What is the
1.3. If the price of a one-bedroom apartment in Washington, D.C., is currently $1,000 per month, but the supply and demand curves look as follows, then is there a shortage or surplus of
1.2. Consider the following supply and demand tables for bread. Draw the supply and demand curves for this market. What is the equilibrium price and quantity?Price of One Loaf$0.50$1$2$3$5 Quantity
1.1. Suppose the market for batteries looks as follows:Price 10 20 30 Quantity
1.11. What's the best way to think about the rise in oil prices in the last 10 years, as China and India have become richer: Was it a rise in demand, a fall in demand, a rise in supply, or a fall in
1.10. What's the best way to think about the rise in oil prices in the 1970s, when wars and oil embargoes wracked the Middle East? Was it a rise in demand, a fall in demand, a rise in supply, or a
1.9.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to
1.8.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to
1.7. When supply falls, what happens to quantity demanded in equilibrium? (This should get you to notice that both suppliers and demanders change their behavior when one curve shifts.)
1.6. What happened in Vernon Smith's lab? Choose the right an wer:a. The price and quantity were close to equi librium but gain from trade were far from the maximum.b. The price and quantity were far
1.5. Jules wants to purchase a R oyale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing
1.4. Now, Jon is in Japan, trying to get a job a a full-time translator; he wants to tran late English TV shows into Japanese and vice versa.He notices that the wage for translator is very low. Who
1.3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:The Dark Knight Returns. In this market, who is Jon competing with: the seller of the graphic
1.2. When the price is above the equilibrium price, does greed (in other words, self-intere t) tend to push the price down or does it push it up?
1.1. If the price in a market is above the equilibrium price, does this create a surplus or a shortage?
1.5. The industrial areas in northeast W ashington, D.C., were relatively dangerous in the 1980s.Over the last two decades, the area has become a safer place to work (although there are still several
1.4. What should happen to the "demand for speed"(measured by the average speed on highways)once airbags are included on cars?
1.3. For most young people, working full time and going to school are substitutes: You tend to do one or the other. When it's tough to find a job, does that raise the opportunity cost of going to
1.2. The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on his blog (econlog.econlib.org), he would have been
1.1. Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year.Instead, he earns $80,000 per year. (Note: This is the
1.14. Suppose that the supply curve for solar panels i as shown in the diagram:Price $80 70 60 so 40 30 20 10 020 40 60 80 100 Quantity The government decides that it would like to increase the
1.13. Cars and gasoline are complements. What will happen to the demand curve for gasoline if the price of cars decreases? Why? (Hint: What happens to the quantity demanded of cars?)
1.12. Assume that butter and margarine are substitute .What will happen to the demand curve for butter if the price of margarine increases? Why?
1.11. If income increases and the demand for good X shifts as shown below, then is good X a normal or inferior good? Give an example of a good like good X.Price Quantity
1.10. Let's think about the demand for plasma TVs.a. If the price for a 50" plasma TV is $2,010, and Newhart would be willing to pay$3,000, what is Newhart's consumer surplus?b. Consider the figure
1.9. If the price of glass dramatically increases, what are we likely to see a lot less of: glass windows or glass bottles? Why?
1.8. From the following chart, draw the demand curve for pencils (in hundreds):Price$5$15$25$35 Quantity Demanded(in hundreds)60 45 35 20
1.7. Consider the following demand curve for oil:Price of oil per barrel$40 25 15 10 10 20 40 55 Quantity of oil {MBD)a. Using the above demand curve, fill in the following table:Price$25 Quantity
1.6. Consider the farmers talked about in the chapter who have land that is suitable for growing both wheat and soybeans. Suppose all farmers are currently farming wheat but the price of soybeans
1.5. In Sucrosia, the supply curve for sugar is as follows:Price(per 1 00 pound bag)$30$50$70 Price of sugar$70 so 30 Quantity 10,000 15,000 20,000 Supply of sugar 10 15 20 Quantity of
1.4. Using the following diagram, identify and calculate total producer surplus if the price of oil is $50 per barrel. Recall that for a triangle, Area = (1 / 2) X Base X Height. (You never thought
1.3. Suppose LightBright and Bulbs4You were the only two suppliers of 60-watt lightbulbs in Springfield. Draw the supply curve for the 60-watt lightbulb industry in Springfield from the following
1.2. From the following table of prices per 100 pencils and quantities supplied (in hundreds of pencils), draw the supply curve for pencils:Quantity Price$5$15$25$35 Supplied 20 40 50 55

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