Questions and Answers of Economics Today The Macro View

1.12 Explain why a firm might want to produce its good even after diminishing marginal returns have set in and marginal cost is rising.
1.11 Some people’s everyday behavior suggests that they do not hold sunk costs irrelevant to present decisions. Give some examples different from those discussed in this chapter.
1.10 We know there is a link between productivity and costs. For example, recall the link between the marginal physical product of the variable input and marginal cost. With this in mind, what link
1.9 Some individuals decry the decline of the small family farm and its replacement with the huge corporate megafarm. Discuss the possibility that this is a consequence of economies of scale.
1.8 Is studying for an economics exam subject to the law of diminishing marginal returns? If so, what is the fixed input? What is the variable input?
1.7 When would total costs equal fixed costs?
1.6 The average variable cost curve and the average total cost curve get closer to each other as output increases.What explains this?
1.5 “A firm that earns only normal profit is not covering all its costs.” Do you agree or disagree? Explain your answer.
1.4 Illustrate the average-marginal rule in a noncost setting.
1.3 Explain why even conscientious workers will shirk more when the cost of shirking falls.
1.2 Is the managerial coordination that goes on inside a business firm independent of market forces? Explain your answer.
1.1 Explain the difference between managerial coordination and market coordination.
1.Would Quentin be more likely to quit his accounting job to own a sports bar if he earned a salary of $60,000 a year instead of $150,000 a year?
1.What keeps Ursula from cheating?
1.Should Olaf sell the chair for a price below his cost?What would you do if you were Lisa?
1.3. Firm A charged $4 per unit when it produced 100 units of good X, and it charged $3 per unit when it produced 200 units. Furthermore, the firm earned the same profit per unit in both cases. How
1.2. What would the LRATC curve look like if there were always constant returns to scale?Explain your answer.
1.1. Give an arithmetical example to illustrate economies of scale.
1.What is the difference between diminishing marginal returns and diseconomies of scale?
1.4. Do changes in marginal physical product influence unit costs?Explain your answer.
1.3. What happens to unit costs as marginal costs rise? Explain your answer.
1.2. Would a business ever sell its product for less than cost? Explain your answer.
1.1. Identify two ways to compute average total cost (ATC).
1.Suppose MC is rising. Does it follow that ATC must be rising too?
1.3. Suppose a marginal cost (MC) curve falls when output is in the range of 1 unit to 10 units, flattens out and remains constant over an output range of 10 units to 20 units, and then rises over a
1.2. “As we add more capital to more labor, eventually the law of diminishing marginal returns will set in.” What is wrong with this statement?
1.1. If the short run is 6 months, does it follow that the long run is longer than 6 months?Explain your answer.
1.Suppose an MPP curve is entirely horizontal. What would the corresponding MC curve look like?
1.What is the best way to understand the difference between the short run and the long run? Is the long run longer than the short run? For example, if the short run is 6 months, is the long run
1.4. When can a business owner be earning a profit but not covering his costs?
1.3. Is accounting or economic profit larger? Why?
1.2. Suppose everything about two people is the same except that one person currently earns a high salary and the other person currently earns a low salary. Which is more likely to start his or her
1.1. Will individuals form teams or firms in all settings?
1.When most people use the word profit, do they mean accounting profit or economic profit?
1.• Would Quentin be more likely to quit his accounting job to own a sports bar if he earned a salary of$60,000 a year instead of $150,000 a year?
1.• What keeps Ursula from cheating?
1.• What would you do if you were Lisa?
1.• Should Olaf sell the chair for a price below his cost?
1.4 Derive a demand curve using indifference curve analysis.
1.3 Explain why consumer equilibrium is equivalent whether using marginal utility analysis or using indifference curve analysis.
1.2 Explain why indifference curves (a) are downwardsloping,(b) are convex to the origin, and (c) do not cross.
1.1 Diagram the following budget constraints:a Income $4,000; PX $50; PY $100 b Income $3,000; PX $25; PY $200 c Income $2,000; PX $40; PY $150
1.7 The marginal utility curve for units 3–5 of good X is below the horizontal axis. Draw the corresponding part of the total utility curve for good X.
1.6 Draw the marginal utility curve for a good that has constant marginal utility.
1.5 Given the number of units of each good George purchased in Question 4, what is his total utility? Units of Good X TU of Good X (utils) Units of Good Y TU of Good Y (utils) 1 23+55 3. 4 26 20
1.4 If George spends $5 (total) a week on good X and good Y, and if the price of each good is $1 per unit, then how many units of each good does he purchase to maximize utility? Units of Good X TU
1.3 The total utilities of the first 5 units of good X are 10, 19, 26, 33, and 40 utils, respectively. In other words, the total utility of 1 unit is 10 utils, the total utility of 2 units is 19
1.2 Fill in blanks A–D in the following table. Units of Good Consumed Total Utility (utils) Marginal Utility (utils) 1 10 23+0 19 B 4 33 5 35 10 DABCD 8
1.1 The marginal utility for the third unit of X is 60 utils, and the marginal utility for the fourth unit of X is 45 utils. If the law of diminishing marginal utility holds, what is the minimum
1.11 After each toss of the coin, one person has more money and one person has less. If the person with less money cares about relative rank and status, will he be willing to pay, say, $1 to reduce
1.10 What is the endowment effect?
1.9 Do you think people with high IQs are in consumer equilibrium (equate marginal utilities per dollar) more often than people with low IQs? Why or why not?
1.8 List five sets of two goods (each set is composed of two goods; e.g., diamonds and water are one set) where the good with the greater value in use has a lower value in exchange than does the good
1.7 Is there a logical link between the law of demand and the assumption that individuals seek to maximize utility?(Hint: Think of how the condition for consumer equilibrium can be used to express
1.6 Describe five everyday examples of you or someone else making an interpersonal utility comparison.
1.5 Individuals who buy second homes usually spend less for them than they do for their first homes.Why is this the case?
1.4 Assume the marginal utility of good A is 4 utils and its price is $2, and the marginal utility of good B is 6 utils and its price is $1. Is the individual consumer maximizing(total) utility if
1.3 If a person consumes fewer units of a good, will marginal utility of the good increase as total utility decreases?Why or why not?
1.2 Is it possible to get so much of a good that it turns into a bad? If so, give an example.
1.1 “If we take $1 away from a rich person and give it to a poor person, the rich person loses less utility than the poor person gains.” Comment.
1.How is buying a house in a good school district like sending children to a private school?
1.2. Summarize David Friedman’s explanation of the endowment effect.
1.1. Brandon’s grandmother is very cautious about spending money. Yesterday, she gave Brandon a gift of $100 for his birthday. Brandon also received a gift of $100 from his father, who isn’t
1.Could you give an example of a person who benefits in absolute terms but finds himself declining in relative terms?
1.2. In a two-good world, in which the goods are A and B, what does it mean to be in consumer disequilibrium?
1.1. Alesandro purchases two goods, X and Y, and the utility gained for the last unit purchased of each is 16 utils and 23 utils, respectively. The prices of X and Y are $1 and $1.75, respectively.Is
1.Can you give a numerical example that illustrates the solution to the diamond-water paradox?
1.3. When would the total utility of a good and the marginal utility of a good be the same?
1.2. If total utility is falling, what does this imply for marginal utility? Give an arithmetical example to illustrate your answer.
1.1. State and solve the diamond-water paradox.
1.When I first started playing chess, I received less utility (per game) than I do now as an accomplished chess player. Doesn’t this observation invalidate the law of diminishing marginal utility?
1.• What is the price of an ocean view?
1.• How is buying a house in a good school district like sending children to a private school?
1.3 The quantity demanded of good X rises from 130 to 145 units as income rises from $2,000 to $2,500 a month.What is the income elasticity of demand?
1.9 In 1947, the U.S. Department of Justice brought a suit against the DuPont Company (which at the time sold 75 percent of all the cellophane in the United States)for monopolizing the production and
1.3 Suppose a straight-line downward-sloping demand curve shifts rightward. Is the price elasticity of demand higher, lower, or the same between any two prices on the new (higher) demand curve than
1.2 Suppose the current price of gasoline at the pump is $1 per gallon and that 1 million gallons are sold per month.A politician proposes to add a 10-cent tax to the price of a gallon of gasoline.
1.If everyone with an SUV trades it in for a smaller, more efficient car, will air pollution be reduced? If the pharmaceutical company raises the price of one of its products by 5 percent, will its
1.1. On Tuesday, price and quantity demanded are $7 and 120 units, respectively. Ten days later, price and quantity demanded are $6 and 150 units, respectively. What is the price elasticity of demand
1.Are we saying here that as the price of a good rises, the total revenue a firm receives for selling the good may go down?Isn’t this counterintuitive?
1.What does “price elasticity of demand is 2” mean?
1.• If the LA earthquake does result in higher apartment rents, does it follow that apartment landlords will have greater total revenue?
1.• If the pharmaceutical company raises the price of one of its products by 5 percent, will its total revenue rise?
1.• If everyone with an SUV trades it in for a smaller, more efficient car, will air pollution be reduced?
1.2 Diagrammatically represent each of the following:(a) economic growth from an inefficient level of production and (b) economic growth from an efficient level of production.
1.1 The economy of country X is currently growing at 2 percent a year. How many years will it take to double the Real GDP of country X?
1.12 What is Paul Romer’s position on the best way to proceed with research and development?
1.11 Explain how free trade is a form of technology.
1.10 Explain how each of the following relates to economic growth: (a) technological advance, (b) labor productivity,(c) natural resources, (d) education, (e) special interest groups.
1.9 How does discovering and implementing new ideas cause economic growth?
1.8 What is new about new growth theory?
1.4 Is it possible to have more workers working, producing a higher Real GDP, at the same time that labor productivity is declining? Explain your answer.
1.3 How do we compute (average) labor productivity?
1.• Might economic growth matter to hungry people?
1.• Does it matter to the average American what the economic growth rate is in the United States?
1.• Does it matter to the average North Korean what the economic growth rate is in North Korea?
1.• How is your life today different from the lives of your great grandparents?
1.3 Illustrate graphically what would happen in the short run and in the long run if individuals hold adaptive expectations, prices and wages are flexible, and there is a decrease in aggregate demand.
1.1 Illustrate graphically what would happen in the short run and in the long run if individuals hold rational expectations, prices and wages are flexible, and individuals underestimate the decrease
1.12 The expected inflation rate is 5 percent and the actual inflation rate is 7 percent. According to Friedman, is the economy in long-run equilibrium? Explain your answer.

Showing 800 - 900 of 1465