Questions and Answers of Economics Today The Macro View

1.1. Look at the area equal to areas 3 5 in Exhibit 6. If there is a price floor, this area ends up being a deadweight loss. It is the loss to society of not producing Q1. Are there mutually
1.2. If people pay for good weather, who ultimately receives the “good-weather payment”?
1.2. A professor tells her students that they can have an extra week to complete their research papers. Under what condition are the students better off with the extra week? Can you think of a case
1.• Why aren’t any aisle seats left?
1.• What do supply, demand, and price have to do with Carlos driving 5 mph on a freeway on his way home from work?
1.• Why are house prices higher in some parts of the country than in other parts of the country?
1.• What is the relationship between the probability of Bob Mason being admitted to the college of his choice and the tuition the college charges?
1.7 In the following figure, can the movement from point 1 to point 2 be explained by a combination of an increase in the price of a substitute and a decrease in the price of nonlabor resources?
1. 6 At what quantity in the preceding figure is the maximum buying price equal to the minimum selling price?
1.5 At equilibrium in the following figure, what area(s) does consumers’ surplus equal? producers’ surplus? P 0
1.4 Draw a diagram that shows a smaller increase in supply than the increase in demand.
1. 3 Draw a diagram that shows a larger increase in demand than the decrease in supply.
1.14 Explain how the market moves to equilibrium in terms of shortages and surpluses and in terms of maximum buying prices and minimum selling prices.
1.13 Use the law of diminishing marginal utility to explain why demand curves slope downward.
1.10 Describe how each of the following will affect the demand for personal computers: (a) a rise in incomes(assuming computers are a normal good); (b) a lower expected price for computers; (c)
1.7 Must consumers’ surplus equal producers’ surplus at equilibrium price? Explain your answer.
1.1 True or false? As the price of oranges rises, the demand for oranges falls, ceteris paribus. Explain your answer.
1.3. Who might argue for a price ceiling? a price floor?
1.1. Do buyers prefer lower prices to higher prices?
1. 2. Why are demand curves downward sloping?
1. Please give another example to convey the meaning of why economists use the term ceteris paribus.
1. • Does the burglary rate have anything to do with how “hard”or“soft”a city is on crime?
1. • Why does it take so long (nine months) to get tickets to see the Late Show with David Letterman?
1. • What does getting his shower fixed have to do with James living in a rent-controlled apartment?
1. • At the time James checks stock prices,Wal-Mart is selling for$44.09, Microsoft for $23.75, and Dell for $21.75.Why doesn’t Dell sell for more than Wal-Mart?Why does Microsoft sell for more
7 If PPF1 in the preceding figure is the relevant production possibilities frontier, then which point(s) represent productive efficiency? Explain your answer.
14 Give an example of a negative third-party effect (negative externality).
12 Are all exchanges or trades beneficial to both parties in the ex post position? Explain your answer.
11 Describe the three time periods relevant to the trading process.
10 Use the PPF framework to explain something in your everyday life that was not mentioned in the chapter.
9 “A nation may be able to live beyond its means, but the world cannot.” Do you agree or disagree? Explain your answer.
8 Suppose a nation’s PPF shifts inward as its population grows. What happens, on average, to the material standard of living of the people? Explain your answer.
7 Some people have said that during the Cold War, the Central Intelligence Agency (CIA) regularly estimated(a) the total quantity of output produced in the Soviet Union and (b) the total quantity of
6 Within a PPF framework, explain each of the following:(a) a disagreement between a person who favors more domestic welfare spending and one who favors more national defense spending; (b) an
2 Explain how the following can be represented in a PPF framework: (a) the finiteness of resources implicit in the scarcity condition; (b) choice; (c) opportunity cost;(d) productive efficiency; (e)
1 Describe how each of the following would affect the U.S. production possibilities frontier: (a) an increase in the number of illegal immigrants entering the country;(b) a war; (c) the discovery of
• What did eBay do that really wasn’t that hard?
• What led Karen and Larry to specialize in doing certain tasks?
• Why can’t Bob get As in both biology and calculus, and what does Jim’s desire to produce “more time”tell us about life?
• What does a point on a production possibilities frontier have to do with the collapse of the Soviet Union?
9 Plot the following data and specify the type of relationship between the two variables. (Place “price” on the vertical axis and “quantity supplied” on the horizontal axis.) Price of Apples
7 What is the slope of a 45° line?
6 What is the special characteristic of a 45° line?
3 Plot the following data and specify the type of relationship between the two variables. (Place “price” on the vertical axis and “quantity demanded” on the horizontal axis.) Price of Apples
2 Represent the following data in bar graph form. Year U.S. Money Supply (billions of dollars) 2001 1,182 2002 1,219 2003 1,304 2004 1,372 2005 1,369
1 What type of relationship would you expect between the following: (a) sales of hot dogs and sales of hot dog buns, (b) the price of winter coats and sales of winter coats, (c) the price of personal
14 What is the difference between positive economics and normative economics? between microeconomics and macroeconomics?
13 Why do people enter into exchanges?
12 A change in X will lead to a change in Y; the predicted change is desirable, so we should change X. Do you agree or disagree? Explain.
11 How would an economist define the efficient amount of time spent playing tennis?
10 Economists say that individuals make decisions at the margin.What does this mean?
9 A layperson says that a proposed government project simply costs too much and therefore shouldn’t be undertaken. How might an economist’s evaluation be different?
8 Smith says that we should eliminate all pollution in the world. Jones disagrees. Who is more likely to be an economist, Smith or Jones? Explain your answer.
7 Explain the relationship between changes in opportunity cost and changes in behavior.
6 Discuss the opportunity costs of attending college for four years. Is college more or less costly than you thought it was? Explain.
5 Is it possible for a person to incur an opportunity cost without spending any money? Explain.
4 Explain the link between scarcity and each of the following:(a) choice, (b) opportunity cost, (c) the need for a rationing device, (d) competition.
3 What is the difference between the resource labor and the resource entrepreneurship?
• How do changes in government spending and taxes affect the economy?
• Can government policy affect consumer behavior?
• Stephanie stopped studying at 9:00 P.M.Would she have been better off if she had studied 30 more minutes?
• Does whether or not Jackie will go on to get a master’s degree have anything to do with economics?
• What does a basic economic fact have to do with Stephanie’s buying two books at her campus bookstore?
•Is Jackie more likely to miss some classes than she is to miss other classes? What determines which classes Jackie will attend and which classes she won’t attend?
Suppose that in a recent market period, the following relationship existed between the price of tablet devices and the quantity supplied and quantity demanded.Graph the supply and demand curves for
Suppose that in a later market period, the quantities supplied in the table in Problem 3-1 are unchanged.The amount demanded, however, has increased by 30 million at each price. Construct the
Consider the market for cable-based Internet access service, which is a normal good. Explain whether the following events would cause an increase or a decrease in demand or an increase or a decrease
In the market for wireless earbuds (a normal good), explain whether the following events would cause an increase or a decrease in demand or an increase or a decrease in the quantity demanded.Also
Listed below are some changes in (shifts in)demand for various items. In each case, the change in demand has been caused by a change in the price of a substitute or of a complement. Explain whether
In Figure 3-2, what are the effects of a price decrease from $4 per wireless earbud to $2 per wireless earbud on the quantities of wireless earbuds demanded by buyer 1 and by buyer 2 individually and
In Figure 3-2, what are the effects of a price increase from $1 per wireless earbud to $3 per wireless earbud on the quantities demanded by buyer 1 and by buyer 2 individually and combined?Figure 3-2
In Figure 3-4, the current position of the demand curve is D1, and the price of a wireless earbud is $3.If there is an increase in the price of tablet devices that are complements to wireless
In Figure 3-4, the current position of the demand curve is D1, and the price of a wireless earbud, which is a normal good, is $3. If there is an increase in consumer incomes, will the demand curve
In Figure 3-7, what are the effects of a price decrease from $5 per wireless earbud to $3 per wireless earbud on the quantities supplied by supplier 1 and by supplier 2 individually and
In Figure 3-7, what are the effects of a price increase from $2 per wireless earbud to $4 per wireless earbud on the quantities supplied by supplier 1 and by supplier 2 individually and
In Figure 3-9, the current position o f the supply curve is S1, and the price of a wireless earbud is $3.If supplier s anticipate a higher price of wireless earbuds in the future, will the supply
In Figure 3- 9, the current position of the supply curve is S1, and the price of a wireless earbud is $3.If the cos t of inputs that suppliers utilize to produce wireless earbud s decrease s, will
In recent years, technological improvements have greatly reduced the costs of producing smartphones, and a number of new firms have entered the smartphone industry. At the same time, prices of
Advances in research and development in the pharmaceutical industry have enabled manufacturers to identify potential cures more quickly and therefore at lower cost. At the same time, the aging of our
Consider the information in Problem 4-9 and your answers to that problem. Suppose that the market clearing price of Pakistani wheat in the absence of price supports is equal to $0.10 per kilogram. At
A city has decided to impose rent controls, and it has established a rent ceiling below the previous equilibrium rental rate for offices throughout the city. How will the quantity of offices leased
The government of the state of Arizona decided to boost its own minimum wage by an additional $1.60 per hour above the minimum wage established by the federal government. This pushed the wage rate
Consider Figure 4-1. The current demand and supply curves are D1, and S1, at which the equilibrium price and quantity are P1 and Q1. If firms adopt a cost-reducing technique for producing this good,
Suppose that in Figure 4-4, the government raises the floor price of peanuts above the displayed $500-per-ton floor price, to $600 per ton. Will the excess quantity of peanuts supplied increase or
Suppose that in Figure 4-4, the government reduces the floor price of peanuts below the displayed $500-per-ton floor price, to $400 per ton. Will the excess quantity of peanuts supplied increase or
Many people who do not smoke cigars are bothered by the odor of cigar smoke. If private contracting is impossible, will too many or too few cigars be produced and consumed? Taking all costs into
Draw a diagram of the market for oranges. Explain how the government policy you discussed in part (b) of Problem 5-2 is likely to affect the market price and equilibrium quantity in the orange
Draw a diagram of this nation's market for auto- mobiles, which are a substitute for buses. Explain how the government policy you discussed in part (b) of Problem 5-5 is likely to affect the market
After a government implements a voucher pro- gram, granting funds that families can spend at schools of their choice, numerous students in public schools switch to private schools. The program's
Based on your answer to Problem 5-17, if Pennsylvania's government aims to correct the steel market's negative externality via an effluent fee, is the appropriate fee higher or lower now that steel
Based on your answer to Problem 5-19, if the government aims to correct the positive externality in the inoculation market via a per-unit subsidy to consumers, in the wake of the study, is the
In Problem 6-10, what was the individual's marginal state income tax rate in 2018? Did this individual experience proportional, progressive, or regressive taxation? Explain briefly.Problem
An individual's income rises from $80,000 per year to $84,000 per year, and as a consequence the per- son's purchases of movie downloads rise from 48 per year to 72 per year. What is this
Assume that the income elasticity of demand for hot dogs is -1.25 and that the income elasticity of demand for lobster is 1.25. What will happen to each good's demand curve as income goes up?
Return to Problem 20-4. Suppose that the price of cheeseburgers falls to $1. Determine the new utility-maximizing combination of cheeseburgers and french fries.Problem 20-4From the data in Problem
You determine that your daily consumption of soft drinks is 3 and your daily consumption of tacos is 4 when the prices per unit are 50 cents and $1, respectively. Explain what happens to your
Refer to the third table for a different consumer, and assume that each week this consumer buys only weekly subscriptions to economic statistics apps and subscriptions to office productivity apps.
Take a look at Table 20-1. Suppose that the price of each digital app rises to $5.97. At the same time, the price of each wireless earbud falls to $2.70. Income remains unchanged at $26. Rework the
At the optimal quantities of digital apps and wire- less earbuds determined in your answer to Problem 20-21, after rounding to the nearest 10 cents, is the $26 income all spent at the new consumer
The short-run production function for a manufacturer of wireless earbuds is shown in the table below. Based on this information, answer the following questions.a. Calculate the average product at

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