Questions and Answers of Economics Today The Macro View

1.Are union wages always higher than nonunion wages in a given industry?
1.What percentage of U.S. workers are members of unions?
1.What does the wage increase a union seeks have to do with the number of union members working?
1.3. How could a collectively bargained higher wage rate in the unionized sector of the economy lead to a lower wage rate in the nonunionized sector of the economy?
1.2. Under what conditions will the minimum wage increase the number of people working?
1.1. What is a major difference between a monopsonist and a factor price taker?
1.3. What is the objective of a strike?
1.2. What is the difference between a closed shop and a union shop?
1.1. What will lower the demand for union labor?
1.• Are union wages always higher than nonunion wages in a given industry?
1.• What percentage of U.S. workers are members of unions?
1.• What does the wage increase a union seeks have to do with the number of union members working?
1.5 Look at the two factor demand curves in the following figure. Is the price of the product that labor goes to produce higher for MRP2 than for MRP1? Explain your answer. Wage Rate 0 MRP1 MRP2
1.4 Explain why the factor supply curve is horizontal for a factor price taker.
1.3 On the same diagram, draw the VMP curve and the MRP curve for an oligopolist. Explain why the curves look the way you drew them.
1.2 If the price of a factor is constant at $48, how many units of the factor will the firm buy?
1.1 Determine the appropriate numbers for the lettered spaces. (1) (6) Marginal Revenue Product of X (MRPx) HNOLO G M KOHLIK (2) Quantity of (3) Marginal Physical Product of X (MPPx) 0 (4) Product
1.10 Explain the relationship between each of the following pairs of concepts: (a) the elasticity of demand for a product and the elasticity of demand for the labor that produces the product; (b) the
1.9 Discuss the firm’s objective, its constraints, and how it makes choices in its role as a buyer of resources.
1.8 Explain why the market demand curve for labor is not simply the horizontal “addition” of the firms’ demand curves for labor.
1.7 Prepare a list of questions that an interviewer is likely to ask an interviewee in a job interview. Try to identify which of the questions are part of the interviewer’s screening process.
1.6 Discuss the factors that might prevent the equalization of wage rates for identical or comparable jobs across labor markets.
1.5 Using the theory developed in this chapter, explain the following: (a) why a worker in Ethiopia is likely to earn much less than a worker in Japan; (b) why the army expects recruitment to rise
1.4 What might be one effect of government legislating wage rates?
1.3 What is the relationship between labor productivity and wage rates?
1.2 What forces and factors determine the wage rate for a particular type of labor?
1.1 The supply curve is horizontal for a factor price taker;however, the industry supply curve is upward sloping.Explain why this occurs.
1.Is Alex Rodriguez paid too much?
1.Would you work more or less at higher wages?
1.Will jobs always flow to where wages are the lowest?
1.What is the right number of employees to hire?
1.4. Workers in labor market X do the same work as workers in labor market Y, but they earn$10 less per hour. Why?
1.3. Why are wage rates higher in one competitive labor market than in another? In short, why do wage rates differ?
1.2. Suppose the coefficient of elasticity of demand for labor is 3. What does this mean?
1.1. The demand for labor is a derived demand. What could cause the firm’s demand curve for labor to shift rightward?
1.4. How much labor should a firm purchase?
1.3. What is the distinguishing characteristic of a factor price taker?
1.2. What is the difference between marginal revenue product (MRP) and value marginal product (VMP)?
1.1. When a perfectly competitive firm employs one worker, it produces 20 units of output, and when it employs two workers, it produces 39 units of output. The firm sells its product for$10 per unit.
1.When There Is More Than One Factor, How Much of Each Factor Should the Firm Buy?
1.• Is Alex Rodriguez paid too much?
1.• Would you work more or less at higher wages?
1.• Will jobs always flow to where wages are the lowest?
1.• What is the right number of employees to hire?
1.4 Which quantity in the figure is consistent with profit regulation? with price regulation? Explain your answers. Price P P2 MC ATC P3 0 Q2 Q3 D Quantity
1.3 Will the firm in the figure earn profits if it produces Q3 and charges P3? Explain your answer. Price P P2 MC ATC P3 0 Q2 Q3 D Quantity
1.2 Is the firm in the figure a natural monopoly? Explain your answer. Price P P2 MC ATC P3 0 Q2 Q3 D Quantity
1.1 Calculate the Herfindahl index and the four-firm concentration ratio for the following industry: Firms Market Share A 17% B 15 C 14 D 14 E 12 F 10 G 9 H 9
1.13 Discuss the advantages and disadvantages of regulation(as you see it).
1.12 It is usually asserted that public utilities such as electric companies and gas companies are natural monopolies.But an assertion is not proof. How would you go about trying to prove (disprove)
1.11 In your opinion, what is the best way to deal with the monopoly power problem? Do you advocate antitrust laws, regulation, or something not discussed in the chapter? Give reasons for your answer.
1.10 The courts have ruled that it is a reasonable restraint of trade (and therefore permissible) for the owner of a business to sell his business and sign a contract with the new owner saying he
1.9 George Stigler and Claire Friedland studied both unregulated and regulated electric utilities and found no difference in the rates they charged. One could draw the conclusion that regulation is
1.8 What is the major difference between the capture theory of regulation and the public interest theory of regulation?
1.7 Why might profit regulation lead to rising costs for the regulated firm?
1.6 Explain price regulation, profit regulation, and output regulation.
1.5 What is the implication of saying that regulation is likely to affect incentives?
1.4 How does a vertical merger differ from a horizontal merger? Why would the government look more carefully at one than at the other?
1.3 What is one difference between the four-firm concentration ratio and the Herfindahl index?
1.2 Explain why defining a market narrowly or broadly can make a difference in how antitrust policy is implemented.
1.1 Why was the Robinson-Patman Act passed? the Wheeler-Lea Act? the Celler-Kefauver Antimerger Act?
1.Would businesses ever ask for government regulation?
1.At what level of government are antitrust and regulatory issues best addressed?
1.What are the arguments for and against outlawing smoking in Irish pubs?
1.What does AIDS have to do with antitrust?
1.4. Are economists for or against regulation?
1.3. What is the difference between the capture theory and the public choice theory of regulation?
1.2. State the essence of the capture theory of regulation.
1.1. What is a criticism of average cost pricing?
1.In many towns, the local gas company is considered a natural monopoly; local government officials argue that no other firm can successfully compete with it (it can produce gas at a lower average
1.3. What is the advantage of the Herfindahl index over the four- and eight-firm concentration ratios? Explain your answer.
1.2. Suppose there are 20 firms in an industry and each firm has a 5 percent market share.What is the four-firm concentration ratio for this industry? What is the Herfindahl index?
1.1. Why does it matter whether a market is defined broadly or narrowly for purposes of antitrust policy?
1.Does the Herfindahl index have an advantage over the four- and eightfirm concentration ratios?
1.• Would businesses ever ask for government regulation?
1.• What are the arguments for and against outlawing smoking in Irish pubs?
1.• At what level of government are antitrust and regulatory issues best addressed?
1.• What does AIDS have to do with antitrust?
1.6 Refer to the following figure. Because of a cartel agreement, the firm has been assigned a production quota of q2 units.The cartel price is P2.What do the firm’s profits equal if it adheres to
1.5 According to the kinked demand curve theory, if the firm is considering a price hike, which demand curve in the following figure does it believe it faces and why? Price d2 d 0 Quantity
1.3 In Exhibit 6, what is the highest dollar amount to which marginal cost can rise without changing price?
1.2 Diagrammatically identify a monopolistic competitor that is incurring losses.
1.1 Diagrammatically identify the quantity of output a monopolistic competitor produces and the price it charges.
1.11 How are oligopoly and monopolistic competition alike?How are they different?
1.10 Give an example of a prisoner’s dilemma situation other than the ones mentioned in this chapter.
1.7 Airline companies sometimes fly airplanes that are onequarter full between cities. Some people point to this as evidence of economic waste. What do you think?Would it be better to have fewer
1.6 Why does interdependence of firms play a major role in oligopoly but not in perfect competition or monopolistic competition?
1.4 Does the theory of contestable markets shed any light on oligopoly pricing theories? Explain your answer.
1.2 What causes the unusual appearance of the marginal revenue curve in the kinked demand curve theory?
1.1 What, if anything, do all firms in all four market structures have in common?
1.3. According to the price leadership theory of oligopoly, how does the dominant firm determine what price to charge?
1.2. What explains the kink in the kinked demand curve theory of oligopoly?
1.1. The text states, “Firms have an incentive to form a cartel, but once it is formed, they have an incentive to cheat.” What, specifically, is the incentive to form the cartel, and what is the
1.2. Why do monopolistic competitors operate at excess capacity?
1.1. How is a monopolistic competitor like a monopolist? How is it like a perfect competitor?
1.One thing seems odd to me. Both the perfectly competitive firm and the monopolistic competitive firm produce the quantity of output at which MR MC. And both charge the highest price (per unit)
1.All firms, no matter what market setting they find themselves in, seem to produce the quantity of output at which MR MC. Is this correct?
1.It seems that one way to differentiate between firms in different market structures is in terms of the number and quality of substitutes each faces. Is this correct?
1.If Carl and Amanda both want to end grade inflation, why don’t they just do it?
1.6 Redraw the figure and label consumers’ surplus when the market is perfectly competitive and when it is monopolized. P 90 50 50 0 50 50 MR 100 MC = ATC D

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