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survey of economics

Questions and Answers of Survey Of Economics

4. Suppose the formerly competing firms in the previous question form an employers’ association that hires labor as a monopsonist would. Describe verbally the effect on wage rates and employment.
3. Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the services of labor. Show this situation graphically, using W1 to indicate the
4. Consider a small landscaping company run by Mr. Viemeister.He is considering increasing his firm’s capacity. If he adds one more worker, the firm’s total monthly revenue will increase from
3. Suppose that a monopoly firm finds that its MR is $50 for the first unit sold each day, $49 for the second unit sold each day,$48 for the third unit sold each day, and so on. Further suppose that
2. Suppose that marginal product tripled while product price fell by one-half in Table 16.1. What would be the new MRP values in Table 16.1? What would be the net impact on the location of the
1. A delivery company is considering adding another vehicle to its delivery fleet; each vehicle is rented for $100 per day.Assume that the additional vehicle would be capable of delivering 1,500
6. A software company in Silicon Valley uses programmers(labor) and computers (capital) to produce apps for mobile devices.The firm estimates that when it comes to labor, MPL =5 apps per month while
3. Alice runs a shoemaking factory that utilizes both labor and capital to make shoes. Which of the following would shift the factory’s demand for capital? You can select one or more answers from
5. Florida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to$300,000
4. In each of the following four cases, MRPL and MRPC refer to the marginal revenue products of labor and capital, respectively, and PL and PC refer to their prices. Indicate in each case whether the
3. What factors determine the elasticity of resource demand?What effect will each of the following have on the elasticity or the location of the demand for resource C, which is being used to produce
2. A firm faces the following costs: total cost of capital = $1,000;price paid for labor = $12 per labor unit; and price paid for raw materials = $4 per raw-material unit. LO15.4a. Suppose the firm
1. Suppose a firm expects that a $20 million expenditure on R&D in the current year will result in a new product that can be sold next year. Selling that product next year would increase the firm’s
5. Which statement about market structure and innovation is true? LO15.7a. Innovation helps only dominant firms.b. Innovation keeps new firms from ever catching up with leading firms.c. Innovation
4. The inverted-U theory suggests that R&D expenditures as a percentage of sales ____________ with industry concentration after the four-firm concentration ratio exceeds about 50 percent.LO15.6a.
3. An additional unit of Old Product X will bring Cindy an MU of 15 utils, an additional unit of New Product Y will bring Cindy an MU of 30 utils, and an additional unit of New Product Z will bring
2. A firm is considering three possible one-year investments, which we will name X, Y, and Z.• Investment X would cost $10 million now and would return$11 million next year, for a net gain of $1
1. Listed below are several possible actions by firms. Write “INV”beside those that reflect invention, “INN” beside those that reflect innovation, and “DIF” beside those that reflect
6. Learning how to use software takes time. So once customers have learned to use a particular software package, it is easier to sell them software upgrades than to convince them to switch to new
4. Answer the following lettered questions on the basis of the information in this table: LO15.3 Expected Rate of Amount of R&D, Millions Return on R&D, %$10 16 20 14 30 12 40 10 50 8 60 6a. If the
3. Examine the following game tree. Fred and Sally are planning on running competing restaurants. Each must decide whether to rent space or buy space. Fred goes first at decision node F.Sally goes
2. Consider whether the promises and threats made toward each other by duopolists and oligopolists are always credible(believable). Look back at Figure 14.1. Imagine that the two firms will play this
1. Consider a “punishment” variation of the two-firm oligopoly situation shown in Figure 14.1. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting
1. Look back at Figures 1a and 1b, which show the costs and benefits to voters Adams, Benson, and Conrad of two different public goods that the government will produce if a majority of Adams, Benson,
3. True or False: The median-voter model explains why politicians so often stake out fringe positions that appeal only to a small segment of the electorate. LO5.3
2. We can apply voting paradoxes to the highway construction example of Chapter 4. Suppose there are only five people in a society and each favors one of the five highway construction options listed
1. Explain the paradox of voting through reference to the accompanying table, which shows the ranking of three public goods by voters Jay, Dave, and Conan: LO5.3 Rankings Public Good Jay Dave Conan
2. “Majority voting ensures that government will produce only those public goods for which benefits exceed costs.” Discuss. LO5.3 3. “The problem with our democratic institutions is that they
1. Explain how affirmative and negative majority votes can sometimes lead to inefficient allocations of resources to public goods. Is this problem likely to be greater under a benefits-received or an
2. Consider a specific example of the special-interest effect and the collective-action problem. In 2012, it was estimated that the total value of all corn production subsidies in the United States
1. Suppose that there are 1 million federal workers at the lowest level of the federal bureaucracy and that above them there are multiple layers of supervisors and supervisors-of-supervisors. Assume
5. ___________________ occur when politicians commit to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures.LO5.2a.
4. A few hundred U.S. sugar makers lobby the U.S. government each year to make sure that the government taxes imported sugar at a high rate. They do so because the policy drives up the domestic price
3. Tammy Hall is the mayor of a large U.S. city. She has just established the Office of Window Safety. Because windows sometimes break and spray glass shards, every window in the city will now have
2. To an economist, a government program is too big if an analysis of that program finds that MB _______ MC. LO5.1a. Is greater than.b. Is less than.c. Is equal to.d. Is less than twice as large
1. Select all of the following that are true. To an economist, a coercive government can be useful in order to: LO5.1a. Reallocate resources in order to improve efficiency.b. Fight negative
8. last word How do the concepts of pork-barrel politics and the special-interest effect relate to the items listed in the Last Word?
7. Critique: “Thank goodness we have so many government regulatory agencies. They keep Big Business in check.” LO5.2
6. Explain: “Politicians would make more rational economic decisions if they weren’t running for reelection every few years.” LO5.2
5. Discuss the political incentives that helped motivate federal politicians to approve budget deficits in all but five years between 1960 and 2015. LO5.2
4. How does the problem of limited and bundled choice in the public sector relate to economic efficiency? Why are public bureaucracies possibly less efficient than business firms? LO5.2
3. What is rent seeking and how does it differ from the kinds of profit maximization and profit seeking that we discussed in previous chapters? Provide an actual or hypothetical example of rent
2. Jean-Baptiste Colbert was the Minister of Finance under King Louis XIV of France. He famously observed, “The art of taxation consists in so plucking the goose as to obtain the largest possible
1. Why might citizens interested in maximizing economic efficiency be happy to invest their government with the right to coerce them in at least some situations? LO5.1
LO5.3 (Appendix) Explain the difficulties of conveying economic preferences through majority voting.
LO5.2 Discuss “government failure” and explain why it happens.
LO5.1 Describe how government’s power to coerce can be economically beneficial and list some of the difficulties associated with managing and directing the government.
3. True or False: A market may collapse and have relatively few transactions between buyers and sellers if buyers have more information than sellers. LO4.6
2. Government inspectors who check on the quality of services provided by retailers as well as government requirements for licensing in various professions are both attempts to resolve:LO4.6a. The
1. People drive faster when they have auto insurance. This is an example of: LO4.6a. Adverse selection.b. Asymmetric information.c. Moral hazard.
3. True or False: A market may collapse and have relatively few transactions between buyers and sellers if buyers have more information than sellers. LO4.6
2. Government inspectors who check on the quality of services provided by retailers as well as government requirements for licensing in various professions are both attempts to resolve:LO4.6a. The
1. People drive faster when they have auto insurance. This is an example of: LO4.6a. Adverse selection.b. Asymmetric information.c. Moral hazard.
3. Place an “M” beside the items in the following list that describe a moral hazard problem and an “A” beside those that describe an adverse selection problem. LO4.6a. A person with a
2. Why is it in the interest of new homebuyers and builders of new homes to have government building codes and building inspectors? LO4.6
1. Because medical records are private, an individual applying for health insurance will know more about his own health conditions than will the insurance companies to which he is applying for
7. Look at Tables 4.1 and 4.2, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of bags of oranges. For the following questions, assume that the
6. Use your demand schedule for a public good, determined in problem 5, and the following supply schedule to ascertain the optimal quantity of this public good. LO4.3 P Qs$19 10 16 8 13 6 10 4 7 2 4 1
5. On the basis of the three individual demand schedules in the following table, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the
4. advanced analysis Assume the following values for Figures 4.4a and 4.4b: Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags.The market equilibrium price is $45 per bag. The price at a is$85 per bag. The
3. Look at Tables 4.1 and 4.2 together. What is the total surplus if Bob buys a unit from Carlos? If Barb buys a unit from Courtney? If Bob buys a unit from Chad? If you match up pairs of buyers and
2. Refer to Table 4.2. If the six people listed in the table are the only producers in the market and the equilibrium price is $6(not the $8 shown), how much producer surplus will the market
1. Refer to Table 4.1. If the six people listed in the table are the only consumers in the market and the equilibrium price is $11(not the $8 shown), how much consumer surplus will the market
7. Use marginal cost/marginal benefit analysis to determine if the following statement is true or false: “The optimal amount of pollution abatement for some substances, say, dirty water from storm
6. Match each of the following characteristics or scenarios with either the term negative externality or the term positive externality.LO4.4a. Overallocation of resources.b. Tammy installs a very
5. Use the distinction between the characteristics of private and public goods to determine whether the following should be produced through the market system or provided by government:(a) French
4. Draw a production possibilities curve with public goods on the vertical axis and private goods on the horizontal axis.Assuming the economy is initially operating on the curve, indicate how the
3. Efficiency losses _______________. LO4.2a. Are not possible if suppliers are willing to produce and sell a product.b. Can only result from underproduction.c. Can only result from overproduction.d.
2. Assume that candle wax is traded in a perfectly competitive market in which the demand curve captures buyers’ full willingness to pay while the supply curve reflects all production costs. For
1. Draw a supply and demand graph and identify the areas of consumer surplus and producer surplus. Given the demand curve, what impact will an increase in supply have on the amount of consumer
9. last word Distinguish between a carbon-tax and a cap-andtrade strategy for reducing carbon dioxide and other so-called greenhouse gases (that are believed by many scientists to be causing global
8. Explain why zoning laws, which allow certain land uses only in specific locations, might be justified in dealing with a problem of negative externalities. Explain why in areas where buildings sit
7. The LoJack car recovery system allows the police to track stolen cars. As a result, they not only recover 90 percent of LoJack-equipped cars that are stolen but also arrest many auto thieves and
6. An apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees help the apple grower by pollinating his apple blossoms. Use Figure 4.6b to explain why this
5. Why are spillover costs and spillover benefits also called negative and positive externalities? Show graphically how a tax can correct for a negative externality and how a subsidy to producers can
4. What divergences arise between equilibrium output and efficient output when (a) negative externalities and (b) positive externalities are present? How might government correct these divergences?
3. What are the two characteristics of public goods? Explain the significance of each for public provision as opposed to private provision. What is the free-rider problem as it relates to public
2. Use the ideas of consumer surplus and producer surplus to explain why economists say competitive markets are efficient.Why are below- or above-equilibrium levels of output inefficient, according
1. Explain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously? LO4.1
LO4.6 (Appendix) Describe how information failures may justify government intervention in some markets.
LO4.5 Show why we normally won’t want to pay what it would cost to eliminate every last bit of a negative externality such as air pollution.
LO4.4 Explain how positive and negative externalities cause under- and overallocations of resources.
LO4.3 Describe free riding and public goods and illustrate why private firms cannot normally produce public goods.
LO4.2 Explain the origin of both consumer surplus and producer surplus and explain how properly functioning markets maximize their sum, total surplus, while optimally allocating resources.
LO4.1 Differentiate between demand-side market failures and supply-side market failures.
6. Governments can use subsidies to increase demand. For instance, a government can pay farmers to use organic fertilizers rather than traditional fertilizers. That subsidy increases the demand for
5. Suppose both the demand for olives and the supply of olives decline by equal amounts over some time period. Use graphical analysis to show the effect on equilibrium price and quantity.LO3.7
4. Suppose that you are the economic advisor to a local government that has to deal with a politically embarrassing surplus that was caused by a price floor that the government recently imposed. Your
3. A price ceiling will result in a shortage only if the ceiling price is _______________ the equilibrium price. LO3.7a. Less than.b. Equal to.c. Greater than.d. Faster than.
2. Consider the market for coffee beans. Suppose that the prices of all other caffeinated beverages go up 30 percent while at the same time a new fertilizer boosts production at coffee plantations
1. Will the equilibrium price of orange juice increase or decrease in each of the following situations? LO3.7a. A medical study reporting that orange juice reduces cancer is released at the same time
7. When asked for investment advice, humorist Will Rogers joked that people should “[b]uy land. They ain’t making any more of the stuff.” Explain his advice in terms of the supply and demand
6. Assume that both the supply of bottled water and the demand for bottled water rise during the summer but that supply increases more rapidly than demand. What can you conclude about the directions
5. Assume the demand for lumber suddenly rises because of a rapid growth of demand for new housing. Assume no change in supply. Why does the equilibrium price of lumber rise? What would happen if the
4. Suppose the supply of apples sharply increases because of perfect weather conditions throughout the growing season.Assuming no change in demand, explain the effect on the equilibrium price and
3. Go to the website of the Energy Information Administration, www.eia.doe.gov, and follow the links to find the current retail price of gasoline. How does the current price of regular gasoline
2. Most scalping laws make it illegal to sell—but not to buy—tickets at prices above those printed on the tickets. Assuming that is the case, use supply and demand analysis to explain why the
1. Why are shortages or surpluses more likely with preset prices, such as those on tickets, than flexible prices, such as those on gasoline? LO3.7
7. Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the following table.LO3.6 Monthly Apartments Apartments Rent Demanded Supplied$2,500 10,000
6. advanced analysis Assume that demand for a commodity is represented by the equation P = 10 − .2Qd and supply by the equation P = 2 + .2Qs, where Qd and Qs are quantity demanded and quantity

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