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modern principles of economics

Questions and Answers of Modern Principles Of Economics

1.The overuse of a common resource is often referred to as the tragedy of the commons, and traffic congestion has been described as a modern example of this problem. Explain how traffic congestion
1.The recent economic growth resulting from government policies of newly industrializing nations such as India and China has increased environmental strains on global air and water systems. The
1.Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods—once produced, information can be shared at virtually no cost.
1.Society is made up of two individuals, Bert and Ernie, whose demands for public good A are given in Figure 1 . Assuming that the public good can be produced at a constant marginal cost of $7, what
1.Explain why you agree or disagree with each of the following statements:a. The government should be involved in providing health care for all citizens because health care is a“public good.”b.
1.It has been argued that the following are examples of “mixed goods.” They are essentially private but partly public. For each example, describe the private and public components and discuss
1.The existence of “public goods” is an example of potential market failure and suggests that a government or public sector can improve the outcome of completely free markets.Write a brief
1.Velma, a book editor for a local publishing company, and Daphne, an opera singer in a local opera company, share a townhouse in Miami. Velma enjoys reading and editing books at home, and Daphne
1.Two firms, Vesuvius and Etna, are each emitting nine units of pollution, and the government wants to reduce the total level of pollution from the current level of 18 to six. To do this, the
1.Refer to the previous question but assume that the government has imposed a per-unit tax on this product that is exactly equal to the marginal damage costs. Use the diagram to show what will happen
1.The following diagram represents the profit-maximizing price and output for a firm in a perfectly competitive industry with no externalities. Use this diagram to explain what will happen if the
1.[Related to the Economics in Practice ] The Economics in Practice suggests that economists often distinguish between short-run and long-run effects of policies or actions when adjusting to
1.The Coase theorem implies that we never need to worry about regulating externalities because the private individuals involved will reach the efficient outcome through negotiations. Is that
1.[Related to the Economics in Practice ] Microsoft and Disney are just two of a growing number of organizations using internal carbon taxes in an attempt to reduce carbon emissions, and the carbon
1.A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial
1.Many people are concerned with the problem of urban sprawl.As the development of new housing tracts and suburban shopping malls continues over time, metropolitan areas have become more congested
1.[Related to the Economics in Practice ] The kingdom of Freedonia is divided into two countries: East Babalu and West Babalu. In an effort to reduce carbon dioxide emissions, the kingdom has enacted
1.If government imposes penalties (taxes) that exceed the actual value of the damages done by the pollution on the firms in a polluting industry, the result is an inefficient and unfair imposition of
1.1. What do you think would have happened to pass through if the largest of the electricity providers had been heavily invested in solar power, which does not produce carbon? The cap-and-trade
1.1. Why would a private company voluntarily adopt internal carbon “taxes?” As we have seen in this chapter, many economists favor the use of carbon prices to reflect the social cost of carbon
1.Question 2 Suppose that there are small, but nontrivial, barriers to entry into a monopolistically competitive market. How would this affect the long-run profitability of firms in the market?
1.Question 1 Explain why the demand for a monopolistically competitive firm’s product variant is more elastic than the demand for the product overall.
1.For each of the following, state whether you agree or disagree.Explain your answer.a. Monopolistically competitive firms generate economic profits because they are protected by barriers to entry.b.
1.Explain the relationship between price and marginal revenue for a perfectly competitive firm and for a monopolistically competitive firm. Why is the relationship different for these markets?
1.The following diagram shows the structure of cost and demand facing a monopolistically competitive firm in the short run.a. Identify the following on the graph and calculate each one.i.
1.Every weekend more than 500 different vendors set up at the local farmers’ market, selling a variety of items from homemade prepared foods to fresh produce. Yolanda rents a booth each weekend at
1.[Related to the Economics in Practice ] The Economics in Practice discusses the increase in sales of books that have been endorsed by Oprah Winfrey’s book club. While Oprah receives no payment
1.If you have traveled to other countries, you may have firsthand knowledge about McDonald’s menu items that are available only in foreign markets, but McDonald’s menus also contain regional
1.Conduct an online search for “iPhone repair San Diego” You will find about 10 million entries. Now try “iPhone screen repair San Diego.” You will find more than 6 million entries.Try to
1.The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its output that it expects it can sell at a fixed price of $12 per unit.a. In
1.As cities go, Las Vegas is about as “over-the-top” as is imaginable. Where else in the world can you find a 350-foot tall glass pyramid, a half-scale replica of the Eiffel Tower, a firespewing
1.[Related to the Economics in Practice ] If you look at the prices listed in the Economics in Practice , you will see that the more well-known brands are being sold for a lower price than the less
1.In a market in which there is vertical differentiation, we always see price differences among the products. In markets with horizontal differentiation, sometimes the products differ but prices are
1.Write a brief essay explaining the accuracy of this statement:The Beatles were once a monopolistically competitive firm that became a monopolist.
1.[Related to the Economics in Practice ] Recreational Equipment, Inc, commonly known as REI, is an outdoor recreational retail company whose product offerings include sporting goods, camping gear,
1.Consider the local music scene in your area. Name some of the local live bands that play in clubs and music halls, both on and off campus. Look in your local newspaper for advertisements of
1.Mariano’s Hacienda Ranch is a Mexican restaurant in Dallas.Founder Mariano Martinez is not only known for serving up great Mexican food, but also for being the inventor of the world’s first
1.1. Do you think the Oprah effect is likely to be similar to the endorsement effect of Theron or Harris? We are all familiar with celebrity endorsements: Neil Patrick Harris has been a long time
1.1. What would you expect to see happen to the placement of Green Dragon Tea if we discovered sugar was good for us?
1.1. How would you expect a profit-maximizing retailer to choose which shoes to stock in his or her store?
1.Question 2 In Game Theory, players who adopt the maximin strategy are said to be risk averse. Why is that a reasonable characterization?
1.Question 1 One problem with using concentration ratios is that they can mask certain differences in concentration between markets. The table below presents the market shares of the four largest
1.[Related to the Economics in Practice ] After 17 months of negotiations, the Federal Communications Commission announced in July 2008 its approval of the merger between the world’s only satellite
1.The following table represents the market share percentage for each firm in a hypothetical industry.a. Calculate the four-firm concentration ratio for this industry.b. Calculate the
1.Explain whether you agree or disagree with the following statements:a. In all oligopoly models except the contestable-market model, market concentration leads to output below the efficient level,
1.Bernie and Leona were arrested for money laundering and were interrogated separately by the police. Bernie and Leona were each presented with the following independent offers. If one confesses and
1.Suppose we have an industry with two firms producing the same product. Acme Corporation produces 19,000 units, while Zoltar Corporation produces 1,000 units. The price in the market is $20, and
1.The payoff matrices in Figure 2 at the top of the next column show the payoffs for two games. The payoffs are given in parentheses. The values on the left refer to the payoff to A; the values on
1.The matrix in Figure 1 above shows payoffs based on the strategies chosen by two firms. If they collude and hold prices at $10, each firm will earn profits of $5 million. If A cheats on the
1.[Related to the Economics in Practice ] T-Mobile is the thirdlargest wireless communication provider in the United States, behind Verizon and ATT, and ahead of Sprint. In an effort to differentiate
1.What is the Cournot model? How does the output decision in the Cournot model differ from the output decision in a monopoly?
1.Explain whether you agree or disagree with the following statement. If all firms in an industry successfully engage in collusion, the resulting profit-maximizing price and output would be the same
1.[Related to the Economics in Practice ] Between 2011 and 2018, dozens of lawsuits were brought or reinstated against U.S. firms for conspiracy to fix prices of things as diverse as pharmaceuticals,
1.Assume that you are in the business of providing medical insurance. You have analyzed the market carefully, and you know that at a price of $6,000 per year, you will sell 40,000 insurance policies
1.Which of the following markets are likely to be perfectly contestable? Explain your answers.a. Coal miningb. Insurancec. Wind Farmsd. Landscapinge. Advertising
1.[Related to the Economics in Practice ] In recent years, the Federal Trade Commission (FTC) has been concerned with patent litigation settlements between brand-name and generic manufacturers in the
1.Which of the following industries would you classify as an oligopoly? Explain your answer. If you are not sure, what information do you need to know to decide?a. Motorcyclesb. Hotelsc. Cruise
1.1. Why do you think there are so few firms in this business in the first place? Many of you have no doubt been annoyed by the plethora of advertisements as you begin to eat your popcorn in most
1.1. You are shopping for a new microwave. How would reducing price transparency soften competition between sellers of microwaves?
1.1. How would you expect the possibility of differentiating your product to change competition between oligopolists?
1.1. Suppose you believed that the size of the fine levied in price-fixing cases was an important deterrent to pricefixing.What market factors would you want to look at to figure out what fine to
1.1. Smartphones all rely on technology covered by a number of different patents, owned by many different firms. How does this complicate the competitive picture?
1.Question 2 Economists often refer to a deadweight loss being created by monopolies. That is, monopolies tend to generate less economic surplus than perfectly competitive markets. What specific
1.Question 1 The marginal revenue formula, MR=P+(P/Q)*Q shows that marginal revenue of producing an additional unit is always less than price, because (P/Q)*Q should always be negative. For this
1.[Related to the Economics in Practice ] According to the United Airlines Website, their Basic Economy fare differs from their standard Economy fare as follows: complimentary seat selection and
1.[Related to the Economics in Practice ] One of the most popular tourist destinations in the United States is Las Vegas, famous for its casinos, hotels, shopping, dining, and live entertainment.
1.The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run,MC=ATCa. Calculate
1.The diagram below shows a firm (industry) that earns a normal return to capital if organized competitively. Price in the market place is under competition. We assume at first that marginal cost is
1.Explain why a monopoly faces no supply curve.
1.Ed Sheeran is a singer-songwriter whose pop album Divide was Nielsen Music’s most popular album of 2017 in the United States as ranked by total equivalent album units. The path to success for pop
1.[Related to the Economics in Practice ] When the 2001 Toyota Prius was introduced in the United States, it was the first massproduced hybrid gas/electric car in the U.S. market. At the time of its
1.[Related to the Economics in Practice ] In 2017, the United States filed 59,624 international patent applications, more than any other country. Do an Internet search and find a list for the most
1.Prior to 1995, Taiwan had only one beer producer, a government-owned monopoly called Taiwan Beer. Suppose that while it was a monopoly, the company was run in a way to maximize profit for the
1.The following diagram shows the cost structure of a monopoly firm as well as market demand. Identify on the graph and calculate the following:a. Profit-maximizing output levelb. Profit-maximizing
1.The following diagram illustrates the demand curve facing a monopoly in an industry with no economies or diseconomies of scale and no fixed costs. In the short and long run, .Copy the diagram and
1.Edible Entomology, a monopoly, faces the following demand schedule for its chocolate-covered grasshoppers (sales in pounds per week):Calculate marginal revenue over each interval in the
1.Assume that the craft beer industry in Hawaii in 2017 was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return. In 2018, a young entrepreneur
1.Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist.
1.Do you agree or disagree with each of the following statements? Explain your reasoning.a. For a monopoly, price is equal to marginal revenue because a monopoly has the power to control price.b.
1.Suppose Vincent has the only franchise for a 7-Eleven convenience store in Oxford, Mississippi, a city with a population of roughly 21,000. Does the fact that Vincent has the only 7-Eleven in town
1.1. Do you agree with the airline that it is not the intention of the Basic Economy fare to encourage some passengers to pay a bit more?
1.1. Many countries follow the local/foreigner price discrimination strategy. Why do you think it is unusual in the United States?
1.1. China has relatively weak intellectual property protection.What types of multinational company activity would you expect to see in China?
1.1. What kind of benchmarks do you think were used in the pricing of the Kindle when it was first brought to market?
1.Question 2 Suppose that, during a recent checkup, your doctor told you that she would recommend running some genetic tests. These tests would not be covered by your insurance, and you had never
1.Question 1 The problem of externalities is sometimes referred to as a problem of “missing markets.” Referencing the positive externality generated by planting a flower garden in your front
1.Explain the difference between a positive externality and a negative externality. Can both types of externalities result in market failure? Why or why not?
1.Briefly explain whether each of the following represents a public good.a. The Krewe of Endymion parade as it travels down Canal Street in New Orleans during Mardi Grasb. A therapeutic stone massage
1.After suffering from three floods in 5 years, Clarice decided to have a new drainage ditch installed at the front of her property.This new ditch not only keeps water from flooding her home, but
1.Each instance that follows is an example of one of the four types of market failure discussed in this chapter. In each case, identify the type of market failure and defend your choice briefly.a.
1.Do you agree or disagree with each of the following statements? Explain your answer.a. Nutritional food is a public good and should be produced by the public sector because private markets will
1.Under what condition would society benefit from more of a good being produced, and under what condition would society benefit from less of a good being produced?
1.Explain why resources are allocated efficiently among firms and why output is distributed efficiently among households in perfectly competitive markets.
1.Three golf courses in the same resort town hire groundskeepers with the same skills. Ocean Oaks pays its workers $12 per hour, Luxury Links pays $11 per hour, and Pacific Paradise pays $14 per
1.Which of the following are actual Pareto-efficient changes?Explain briefly.a. You blast your MP3 player at full volume through your car speakers while driving your convertible through Chicago.b.
1.Assume that there are two sectors in an economy: goods and services Both sectors are perfectly competitive, with large numbers of firms and constant returns to scale. As income rises, households
1.Suppose two passengers end up with a reservation for the last seat on a train from San Francisco to Los Angeles. Two alternatives are proposed:a. Toss a coin.b. Sell the ticket to the highest
1.Which of the following are examples of Pareto-efficient changes? Explain your answers.a. The Hooterville Police Department implements costsaving programs without having to sacrifice the quality of
1.The point of scalping is to find someone who wants a ticket more than the person who presently has it. Whenever two different prices exist in a market, arbitrage opportunities (buy and then sell at
1.Emerald Island has a climate that is suited to banana production and yields 840 pounds per acre. Tropical Springs has a climate that is not well-suited for bananas and yields only 250 pounds per

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