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modern principles of economics

Questions and Answers of Modern Principles Of Economics

7. Two roommates are opposites. One enjoys playing Modern Warfare with his friends all night. The other likes to get to bed early for a full 8 hours of sleep. If Coase is right, the roommates have an
6. The students at a crowded university have trouble waking up before 10 a.m., and most work jobs after 3 p.m. As a result, there is a great deal of demand for classes between 10 a.m. and 3 p.m., and
5. Which of the following activities give rise to the free-rider problem?a. recycling programsb. bikingc. studying for an examd. riding a bus
3. Indicate whether the following are private goods, club goods, common-resource goods, or public goods:a. a bacon double cheeseburgerb. an NHL hockey game between the Detroit Red Wings and Boston
2. Indicate whether the following activities create a positive or negative externality:a. Late-night road construction begins on a new bridge. As a consequence, traffic is rerouted past your house
5. What is the tragedy of the commons? Give an example that is not in the chapter.
10. Approximately 4,000 people in the United States die each year because they cannot find a suitable kidney donor. Under U.S. law, citizens cannot sell their spare kidney, which effectively means
9. Most of us would agree that movie theater popcorn is outrageously priced. Why don’t price gouging laws result in arrests and prosecutions of theater operators and other firms that charge prices
8. Demand and supply curves can be represented with equations. Suppose that the demand for low-skilled labor, QD, is represented by the following equation, where W is the wage rate:QD = 53,000,000 -
5. Many local governments use parking meters on crowded downtown streets. However, the parking spaces along the street are typically hard to find because the metered price is often set below the
4. Suppose that a group of die-hard sports fans are upset about the high price of tickets to many games. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting
3. Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all of the leftover chocolate that consumers do not buy. If
2. Imagine that the community you live in decides to enact a rent control of $700 per month on every one-bedroom apartment. Using the following table, determine the market price and equilibrium
1. In the song “Minimum Wage,” the punk band Fenix TX comments on the inadequacy of the minimum wage for making ends meet. Using the poverty thresholds provided by the Census Bureau,* determine
3. Will a surplus or a shortage caused by a price control become smaller or larger over time? Explain.4. Are price gouging laws an example of a price floor or a price ceiling?
13. We defined deadweight loss as the decrease in economic activity caused by market distortions.One place where we see deadweight loss is during Halloween’s trick-or-treat.Children of all ages
12. A well-known saying goes, “Honesty is not only morally right, it is also highly efficient.”Explain why firms that practice honesty lead to more social welfare than firms that practice
11. Suppose that a new $50 tax is placed on each new cell phone sold. Use the information in the following graph to answer these questions.a. What is the incidence of the tax?b. What is the
10. In this chapter, we focused on the effect of taxes on social welfare. However, governments also subsidize goods, making them cheaper to buy or sell. How would a $2,000 subsidy on the purchase of
9. Suppose that the demand for a concert, QD, is represented by the following equation, where P is the price of concert tickets and Q is the number of tickets sold:QD = 2500 - 20P The supply of
8. The cost of many electronic devices has fallen appreciably since they were first introduced.For instance, computers, cell phones, microwave ovens, and calculators not only provide more functions
6. A new medical study indicates that eating blueberries helps prevent cancer. If the demand for blueberries increases, what will happen to the size of the consumer surplus and producer surplus?
4. If the government wants to raise tax revenue, which of the following items are good candidates for an excise tax? Why?a. granola barsd. automobile tiresb. cigarettese. bird feedersc. toilet paper
3. Andrew pays $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet.He was willing to pay $45. When Andrew’s friend Nick learns that Andrew bought a potato cannon, he asks
2. A cash-starved town decides to impose a $6 excise tax on T-shirts sold. The following table shows the quantity demanded and the quantity supplied at various prices.a. What are the equilibrium
1. A college student enjoys eating pizza. Her willingness to pay for each slice is shown in the following table:a. If pizza slices cost $3 each, how many slices will she buy? How much consumer
14. Suppose a hotel raises the price of the bottled water in the minibar in each room from $3 to$5. The hotel tracks the number of customers who buy the bottled water and finds that consumption drops
13. The TV show Extreme Couponing features coupon users who go to extraordinary measures to save money on their weekly purchases. The show follows these coupon users throughout the week as they
12. A private university notices that in-state and out-of-state students seem to respond differently to tuition changes.As the price of tuition rises from $15,000 to $20,000, what is the price
9. A worker eats at a restaurant once a week. He then gets a 25% raise. As a result, he decides to eat out twice as much as before and cut back on the number of frozen lasagna dinners from one frozen
6. A local paintball business receives a total revenue of $8,000 a month when it charges $10 per person and $9,600 in total revenue when it charges $6 per person. Over that range of prices, does the
5. Characterize the demand for each of the following goods or services as perfectly elastic, relatively elastic, relatively inelastic, or perfectly inelastic.a. a lifesaving medicationb. photocopies
4. If a 20% increase in price causes a 10% drop in the quantity demanded, is the price elasticity of demand for this good elastic, unitary, or inelastic?
3. Black Friday, the day after Thanksgiving, is the largest shopping day of the year. Do the early shoppers, who often wait in line for hours in the cold to get doorbuster sale items, have elastic or
2. College logo T-shirts priced at $15 sell at a rate of 25 per week, but when the bookstore marks them down to $10, it finds that it can sell 50 T-shirts per week. What is the price elasticity of
1. Assume that, over time, consumer incomes generally increase but also that technological advancements in oil extraction lead to lower prices of crude oil (the primary input for gasoline).a. If
1. The following table shows the price and the ✷quantity demanded of apples (per week).Price per Apple Quantity Demanded$0.25 10$0.50 7$0.75 4$1.00 2$1.25 1$1.50 0a. Plot the data provided in the
11. Despite what you might think, the opportunity cost is not $200. You would be giving up$200 in enjoyment if you go to the Maroon 5 concert, but you would also have to pay $135 to see Taylor Swift,
8.a. Rachel gives up 2 pies for every loaf she makes. Joey gives up 1 pie for every loaf he makes.b. Rachelc. Joeyd. Joey should make the bread and Rachel the pies.e. Rachel makes 2 pies per loaf and
6. A new fertilizer that doubles potato production will shift the entire PPF out along the potato axis but not along the carrot axis.Nevertheless, the added ability to produce more potatoes means
1.a. Michael’s opportunity cost is 2 sculptures for each painting he produces. How do we know this? If he devotes all of his time to sculptures, he can produce 10. If he devotes all of his time to
11. Suppose that you must decide between attending a Taylor Swift concert or a Maroon 5 concert. The concerts are at the same time on the same evening, so you cannot see both. You love Taylor Swift
9. Where would you plot unemployment on a production possibilities frontier? Where would you plot full employment on a production possibilities frontier? Now suppose that in a time of crisis everyone
8. Two friends, Rachel and Joey, enjoy baking bread and making apple pie. Rachel takes 2 hours to bake a loaf of bread and 1 hour to make a pie. Joey takes 4 hours to bake a loaf of bread and 4 hours
7. Suppose that a politician tells you about a plan to create two expensive but necessary programs to build more production facilities for solar power and wind power. At the same time, the politician
6. Suppose that an amazing new fertilizer doubles the production of potatoes. How would this invention affect the production possibilities frontier for an economy that produces only potatoes and
5. How does your decision to invest in a college degree add to your human capital? Use a projected production possibilities frontier for 10 years from now to compare your life with and without the
4. Are the following statements positive or normative?a. My dog weighs 75 pounds.b. Dogs are required by law to have rabies shots.c. You should take your dog to the veterinarian once a year for a
3. Think about comparative advantage when answering this question: Should your professor, who has highly specialized training in economics, take time out of his or her teaching schedule to mow the
2. The following table shows scores that a student can earn on two upcoming exams according to the amount of time devoted to study:a. Plot the production possibilities frontier.b. Does the production
1. Michael and Angelo live in a small town in Italy. They work as artists. Michael is the more productive artist. He can produce 10 small sculptures each day but only 5 paintings.Angelo can produce 6
5. Does having an absolute advantage mean that you should undertake to produce everything on your own? Why or why not?
3. Draw a production possibilities frontier curve.Illustrate the set of points that is feasible, the set of points that is efficient, the set of points that is inefficient, and the set of points that
1. What is a positive economic statement? What is a normative economic statement? Provide an example of each (other than those given in the chapter).
8. We have talked about how trade creates value.Use the information in each example below to compute the total value created in each exchange:a. Patrick bought an orange pen from Jill for$2.00.
7. Whiplash (2014) is about an aspiring college-age drummer who wants to become the best drummer in the world. He is willing to sacrifice personal relationships, practices tens of thousands of hours,
6. Would you wait in line three weeks to be the first customer at Best Buy on Black Friday(the day after Thanksgiving, the “official start” of the holiday shopping season)? Two women from
4. Suppose that Colombia is good at growing coffee but not very good at making computer software and that Canada is good at making computer software but not very good at growing coffee. If Colombia
2. Compare your standard of living with that of your parents when they were the age you are now. Ask them or somebody you know around their age to recall where they were living and what they owned.
1. What role do incentives play in each of the following situations? Are there any unintended consequences?a. You learn that you can resell a ticket to next week’s homecoming game for twice what
1.Question 2 The market for soybeans is a perfectly competitive market, and the government subsidizes the production of soybeans through various agricultural support programs. Suppose that the
1.Question 1 The market for corn is a perfectly competitive market, and the government subsidizes the production of corn through various agricultural support programs. Suppose that the government
1.Marginal cost represents the increase in total cost that results from producing one more unit of output. Marginal product represents the additional output that can be produced by adding one more
1.Use the information from your answer to the previous question to construct a rough plot showing marginal revenue, marginal cost, and average total cost. Also identify the profit-maximizing quantity
1.Fill in the columns in the following table. What quantity should a profit-maximizing firm produce? Verify your answer with marginal reasoning. 5 TFC TVC MC P = MR TR TC Profit 0 $5 $0 $5
1.The following curve is a production function for a firm that uses just one variable factor of production, labor. It shows total output, or product, for every level of labor input.a. Derive and
1.The following is a total cost curve. Sketch the corresponding marginal cost curve. If the price of output is $3 and there are no fixed costs, what is the profit maximizing level of output? 600 200
1.Isabel runs her family’s small pineapple processing plant, which takes fresh pineapples and cuts them into pineapple rings, spears, and chunks. The capital stock of the firm consists of three
1.A firm’s costs are given in the following table.a. Complete the table.b. Graph AVC, ATC, and MC on the same graph. What is the relationship between MC and ATC and between MC and AVC?c. Suppose
1.Do you agree or disagree with each of the following statements? Explain your reasons.a. For a competitive firm facing a market price above average total cost, the existence of economic profits
1.You are given the following cost data: Total fixed costs are $60.How many units of output will this firm produce at a price of $22 and at a price of $42? What is the total revenue and total cost at
1.Do you agree or disagree with this statement? Firms minimize costs; thus, a firm earning short-run economic profits will choose to produce at the minimum point on its average total cost curve.
1.[Related to the Economics in Practice ] In addition to gambling, Las Vegas is famous for its live production shows.Close to 100 shows are performed at various venues across the city on any given
1.Evaluate the following statement. If the total variable cost of production is the sum of the marginal cost of each additional unit of output, we can calculate the marginal cost by taking the total
1.Explain how the following events would affect the cost curves in the graph from the previous question.a. Hourly wages for employees increase.b. The company signs a new three-year contract with its
1.Use the information in the graph to find the values for the following costs at an output level of 500.a. Total fixed costb. Total variable costc. Total costd. Marginal cost Cost per unit (5) 15 10
1.Explain which of the following is a fixed cost or a variable cost for General Motors.a. The cost of aluminum used for its automobiles.b. The property taxes on its Bowling Green, Kentucky assembly
1.For each of the following businesses, what is the likely fixed factor of production that defines the short run?a. Golf courseb. Movie theaterc. Law officed. Brewerye. Amusement park
1.The following table gives capital and labor requirements for 10 different levels of production.a. Assuming that the price of labor (P ) is $6 per unit and the price of capital (P ) is $4 per unit,
1.While charging a general admission price of $15 for adults most days of the week, the Museum of Fine Arts in Houston offers free admission every Thursday. Why do you suppose that museums often
1.Published in 2017, Celeste Ng’s bestselling novel, Little Fires Everywhere, spent 38 weeks on the New York Times Best Sellers list for hardcover fiction. In book publishing, fixed costs are high
1.Consider the following costs of owning and operating a car. An$18,000 Fiat 500 Pop financed over 60 months at 4 percent interest means a monthly payment of $331.50. Insurance costs$120 a month
1.1. Can you think of other products or services that have low marginal costs and high fixed costs and conversely those that have high marginal costs and low fixed costs?
1.The Red Racer Company and the Blue Bomber Company are each capable of minimizing cost and producing 4,000 bicycles per month. Red Racer’s factory is located in an area where the cost of labor is
1.Each month, a company can rent capital for $7,500 per unit and can hire workers for $2,500 each. Currently, the company is using 4 units of capital and 6 workers to produce 10,000 units of output.
1.Using the information from the isoquant/isocost diagram (Figure 2) and assuming that PPK = $2, complete Table 10. Figure 2 150 50 Units of capital (K) 15 75 100 100 25 q-100j q=200 0 25 50 75 100
1.In the isoquant/isocost diagram (Figure 1D), suppose the firm is producing 1,000 units of output at point A using 100 units of labor and 200 units of capital. As an outside consultant, what actions
1.Assume that MPL = 10 and MPK = 6. Assume also that PL = 4 and Pk = 2. This implies that the firm should substitute capital for labor. Explain why.
1.Question 2 Coffee shops often have different numbers of employees working at different times of day. At peak times, they typically have more people scheduled to work. When the second person is
1.Question 1 Automatic irrigation systems are widely used in agriculture.These systems are expensive to purchase, but they reduce the amount of labor needed to care for crops. How would the demand
1.Since the end of World War II, manufacturing firms in the United States and in Europe have been moving farther and farther outside of central cities. At the same time, firms in finance, insurance,
1.[Related to the Economics in Practice ] Darius has entered a competition in which he must drive from his home town of Memphis, Tennessee, to New Orleans, Louisiana, a distance of approximately 420
1.A female student who lives on the fourth floor of Bates Hall is assigned to a new room on the seventh floor during her junior year. She has 11 heavy boxes of books and “stuff” to move.Discuss
1.Suppose that widgets can be produced using two different production techniques, and . The following table provides the total input requirements for each of five different total output levels.a.
1.Following is information on the production levels of three different firms. Firm A is currently producing at a quantity where it is experiencing increasing returns. Firm B is currently producing at
1.Assume that we have a production process that exhibits increasing and then decreasing marginal productivity. That is, as we increase output, the marginal product of labor starts at some level above
1.The following table represents data for Randle’s Candles. Draw a graph showing the total product, marginal product of labor, and average product of labor. Identify where increasing returns,
1.The number of oil changes conducted by a service station depends on the number of workers as follows:Assume that all inputs (service bins, telephone, and utilities) other than labor are fixed in
1.During the early phases of industrialization, the number of people engaged in agriculture usually drops sharply, even as agricultural output is growing. Given what you know about production
1.[Related to the Economics in Practice ] A supply chain is a specific order of steps taken by a company to get its product or service to the public. Supply chain management involves managing the

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