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modern principles of economics

Questions and Answers of Modern Principles Of Economics

1.3.2 The payoff matrixes in Figure 2 at page bottom show the payoffs for two games. The payoffs are given in parentheses.The values on the left refers to the payoff to A; the values on the right
1.2.5 [related to the Economics in Practice on p. 330]T-Mobile is the fourth-largest wireless communication provider in the United States, behind Verizon, AT&T, and Sprint. In an effort to
1.2.4 What is the Cournot model? How does the output decision in the Cournot model differ from the output decision in a monopoly?
1.2.3 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
1.2.2 In 2007 Canadian authorities opened an investigation over allegations that major players in the Canadian chocolate market, including Nestle, Hershey, Mars and ITWAL conspired to fix prices and
1.2.1 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
1.1.3 Which of the following markets are likely to be perfectly contestable? Explain your answers.a. Coal miningb. Insurancec. Wind Farmsd. Landscapinge. Advertising
1.1.2 In a significant decision regarding patent eligibility, Alice Corp. v. CLS Bank International, the U.S Supreme Court in June 2004 effectively raised the bar for software patents by declining a
1.1.1 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. how would you expect the possibility of differentiating your product to change competition between oligopolists? In the 1920s, in contrast to the current period, many cities in the United States
1.1. how do these developments affect consumers?hotels? The OTA market? Explain. Skoosh.com, an online travel agency, lodged a complaint in 2010 with the Competition and Markets Authority (CMU,
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? As we have suggested, the smartphone
1.5.1 [related to the Economics in Practice on p. 316] One of the big success stories of recent years has been Google.Research the firm and write a memorandum to the head of the Antitrust Division of
1.4.2 [related to the Economics in Practice on p. 314] Many high street bookstores have adult and teen sections where the adult copies of the same books cost more than children’s copies, the only
1.4.1 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 = ATC.a.
1.3.1 The diagram below shows a firm (industry) that earns a normal return to capital if organized competitively. Price in the market place is Pc under competition. We assume at first that marginal
1.2.11 Explain why a monopoly faces no supply curve.
1.2.10 Taylor Swift is a singer-songwriter whose pop album 1989 was the top-selling album of 2014, with 3.66 million copies sold in just its first 9 weeks of release. The path to success for pop
1.2.9 [related to the Economics in Practice on p. 300] When the 2001 Toyota Prius was introduced in the United States, it was the first mass-produced hybrid gas/electric car in the U.S. market. At
1.2.8 [related to the Economics in Practice on p. 307] What would have been the wider implications of a favourable Supreme Court NFL ruling in other industries like credit card networks and chain
1.2.7 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
1.2.6 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.
1.2.5 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, MC = ATC. Copy the
1.2.4 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
1.2.3 There are a large number of pharmaceutical stores in the city of Medicovia, and certain chemists are in the business of supplying illegal medical goods. Over the course of three years, one
1.2.2 Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist.
1.2.1 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.
1.1.1 EasyJet is the only airliner serving the route Manchester, UK—Thessaloniki, Greece. Do you think that this airliner has a monopoly in serving this particular route? Explain.
1.1. Why would google want to manipulate its search results, particularly on cell phone searches? In January 2012 the Federal Trade Commission settled a suit against Google. The original case
1.1. Many countries follow the local/foreigner price discrimination strategy. Why do you think it is unusual in the United States? If at some point you are visiting one of the many impressive
1.1. how do you think a Supreme court ruling favorable to the nFl would have affected nFl ticket prices and broadcasting options? In 2004, American Needle, a headwear manufacturing company, filed a
1.1. What kind of benchmarks do you think were used in the pricing of the kindle when it was first brought to market? A new firm entering an existing market may have a hard time making money, given
1.3.5 Explain the difference between a positive externality and a negative externality. Can both types of externalities result in market failure? Why or why not?
1.3.4 Briefly explain whether each of the following represents a public good.a. The samba street parade held during the Rio de Janiero Carnival.b. A high tea at the Mount Nelson Hotel in Cape Town
1.3.3 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,
1.3.2 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
1.3.1 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
1.2.11 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?
1.2.10 Explain why resources are allocated efficiently among firms and why output is distributed efficiently among households in perfectly competitive markets.
1.2.9 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
1.2.8 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
1.2.7 Assume that there are two sectors in an economy: goods(G) and services (S). Both sectors are perfectly competitive, with large numbers of firms and constant returns to scale. As income rises,
1.2.6 Suppose a well known international airline carrier ends up double-booking its last remaining seat in its economy traveller section on its route from London to Mumbai.Two alternatives are
1.2.5 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
1.2.4 Rugby World Cup organizers have opened up a new front in their battle to prevent tickets being resold for huge profits, targeting hundreds of individuals and dozens of websites. Organizers have
1.2.3 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
1.2.2 The output of workers at a factory depends on the number of supervisors hired (see below). The factory sells its output for $0.50 each, it hires 50 production workers at a wage of$100 per day,
1.2.1 South African Airways (SAA) and Quantas Airlines hold a duopoly- a ‘code-share’ – on direct flights from Australia to South Africa. The International Air Services Commission has indicated
1.1.3 Consider a simple Asian economy with only four markets(energy, food, labour, and capital) and two types of households (rich and poor). Explain why an excise tax on energy is likely to hurt
1.1.2 For each sentence below describing changes in the tangerine market, note whether the statement is true, false, or uncertain, and explain your answer. You will find it helpful to draw a graph
1.1.1 [related to the Economics in Practice on p. 286] The Economics in Practice in this chapter describes the adjustment of the corn market in the United States to the federal mandate requiring
1.1. Use general equilibrium supply and demand analysis to show the impact of requiring more corn ethanol on the market for food. Treat corn as good X and all other foods as Y. For decades, the
1.1A.12 Explain what will happen to the present value of money 1 year from now if the market interest rate falls? What if the market interest rate rises?
1.1A.11 You have just won a million-dollar lottery and will receive$50,000 a year for the next 20 years. How much is this worth to you today?
1.1A.10 The market interest rate is 5 percent and is expected to stay at that level. Consumers can borrow and lend all they want at this rate. Explain your choice in each of the following
1.1A.9 You are offered the choice of two payment streams:a. $150 paid one year from now and $150 paid two years from nowb. $130 paid one year from now and $160 paid two years from now. Which payment
1.1A.8 Assume that the present discounted value of an investment project (commercial development) at a discount rate of 7 percent is $825,445,000. Assume that the building just sold for $850 million.
1.1A.7 Based on your answers to questions 1A.5 and 1A.6, state whether each of the following is true or false:a. Ceteris paribus, the price of a bond increases when the interest rate increases.b.
1.1A.6 What should someone be willing to pay for each of the bonds in question 1A.5 if the interest rate doubled to 7 percent?
1.1A.5 Determine what someone should be willing to pay for each of the following bonds when the market interest rate for borrowing and lending is 3.5 percent.a. A bond that promises to pay $15,000 in
1.1A.4 Calculate the present value of the income streams A to E in Table 1 at an 8 percent interest rate and again at a 10 percent rate.Suppose the investment behind the flow of income in E is a
1.1A.3 The town council’s finance committee has evaluated data and determined that the present discounted value of the benefits from a proposed dog park comes to $3,250,000.The total construction
1.1A.2 You are retiring from your job and are given two options. You can accept a lump sum payment from the company, or you can accept a smaller annual payment that will continue for as long as you
1.1A.1 Suppose you were offered $5,000 to be delivered in 1 year.Further suppose you had the alternative of putting money into a safe certificate of deposit paying annual interest at 8 percent. Would
1.3.6 The Blume quintuplets, Aster, Dahlia, Iris, Jasmine, and Poppy, have an opportunity to purchase a wholesale florist company. Each of the women would have to put up$300,000 to make the purchase.
1.3.5 Draw a graph showing an investment demand curve and explain the slope of the curve.
1.3.4 Abigail, an analyst with a venture capital firm, is approached by Tomas about financing his new business venture, a company which will produce solar-powered hydroponic growing equipment for
1.3.3 You are operating a heavy equipment leasing and rental company. Your consultant tells you to focus you marketing strategy on new start-up companies rather than thriving companies that are
1.3.2 The board of directors of the Estelar Company in Brazil was presented with the following list of investment projects for implementation in 2016:Sketch total investment as a function of the
1.3.1 Why might a college athlete invest heavily in training to become a professional basketball player given that the chances of succeeding are less than 2 percent? Does this mean that investing in
1.2.9 For each of the following, decide whether you agree or disagree and explain your answer:a. Savings and investment are just two words for the same thing.b. When I buy a share of Microsoft stock,
1.2.8 [related to the Economics in Practice on p. 267] The text states that in terms of value, the majority of stock in the United States is held by households through institutions and the percentage
1.2.7 What important factors might cause the supply curve for loanable funds to increase (shift to the right)? Identify the effect that such a shift in the supply curve for loanable funds would have
1.2.6 For most of 2014 and the early part of 2015, the Wall Street Journal had suggested that the Chinese stock market was grossly overvalued even while it was breaking all time records monthly. Its
1.2.5 [related to the Economics in Practice on p. 262]Netscape Communications Corporation was founded in April 1994, and was one of the pioneers in the era when Internet was evolving as a
1.2.4 Explain what we mean when we say that “households supply capital and firms demand capital.”
1.2.3 From an international newspaper such as the Herald Tribune or from the business section of your local daily business newspaper, or from the Internet, look up the prime interest rate, the
1.2.2 Give at least three examples of how savings can be channeled into productive investment. Why is investment so important for an economy? What do you sacrifice when you save today?
1.2.1 The Eurozone debt crisis did not stop the European Central Bank (ECB) raising interest rates twice in 2011 as it focused on the “day job” of fighting inflation. The central bank that sets
1.1.3 Describe the capital stock of your college or university.How would you go about measuring its value? Has your school made any major investments in recent years? If so, describe them. What does
1.1.2 For each of the following, decide whether you agree or disagree and explain your answer:a. Capital and investment are just two words for the same thing.b. For a capital asset to depreciate, it
1.1.1 Which of the following are capital, and which are not?Explain your answers.a. Ambulance Medic training and certification from the Red Crossb. The Khanna Paper Mill in Kalimpong, Indiac. The
1.1. Why do some companies have more institutional shareholdings and less individual holdings than other companies? As described in the text, buying shares of stock in a company provides households a
1.1. Stock prices after an iPO are often quite volatile. Why? Automobile production is, as we noted in Chapter 9, subject to economies of scale. Becoming a new car manufacturer requires considerable
3.2 A mining company’s land concession in Angola incorporates five major mines that extract copper. The productivity of each mine is as followsAssume that each mine is the identical size and that
1.2 The following schedule shows the technology of production at Mahalo Macadamia Nut Farm for 2015:If macadamia nuts sell for $3.50 per pound and workers can be hired in a competitive labor market
1. Farmland prices across some regions are skyrocketing, though the commodities associated with the land are experiencing a significant decline in prices.Why is this so? Buying the right land is a
1. What would you suggest for teams to successfully evaluate and identify players with natural ability and have the most potential for continued improvement? The prevalence of long term guaranteed
1. Many of the firms treated had multiple plants. after the researchers left, what do you think they did about training in their other plants? Many of you will likely someday go on to work as
1A.3 A representative firm producing watermelons is earning a normal profit at a price of $35 per hundred pounds. Draw a supply and demand diagram showing equilibrium at this price. Assuming that the
3.7 For each of the three scenarios in the previous question(P* = 25, P* = 15, and P* = 10), explain the long-run incentives for each representative firm in the industry. Also explain what should
3.5 Assume that you are employed as an analyst at an international consulting firm. Your latest assignment is to do an industry analysis of the fast-growing “telemonica” industry.After extensive
3.4 The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market.a. Complete the following table for a single firm in
3.1 From 2000 to 2005, the home building sector was expanding and new housing construction as measured by housing starts was approaching an all-time high. (At www.census.gov, click “Housing,”
2.7 The concept of economies of scale refers to lower perunit production costs at higher levels of output. The easiest way to understand this is to look at whether long-run average cost decreases
2.5 The Languedoc-Roussillon region, southern France, is the home to three vineyards. Château Beauregard Mirouze produces 2,500 bottles of wine per month at a total cost of €40,000. Châteaude
2.3 [related to the Economics in Practice on p. 227] One of the more recent innovations in computer technology is called “cloud computing.” With cloud computing, information and software are
1.4 You are given the following cost data:If the price of output is $12, how many units of output will this firm produce? What is the total revenue? What is the total cost? Will the firm operate or
1.3 For cases A through F in the following table, would you(a) operate or shut down in the short run and (b) expand your plant or exit the industry in the long run? A B C D E F Total revenue 500

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