Questions and Answers of The Law Of Healthcare Administration

14 How is buying a house in a good school district like sending children to a private school?
13 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 the
12 What is the endowment effect?
11 Do you think people with high IQs are in consumer equilibrium(equating marginal utilities per dollar) more often than people with low IQs? Why or why not?
10 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
9 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 the
8 Describe five everyday examples of you or someone else making an interpersonal utility comparison.
7 Individuals who buy second homes usually spend less for them than they do for their first homes. Why is this the case?
6 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 she spends
5 If a person consumes fewer units of a good, will marginal utility of the good increase as total utility decreases? Why or why not?
4 Is it possible to get so much of a good that it turns into a bad? If so, give an example.
3 “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.
2 The law of diminishing marginal utility is consistent with the fact that people trade. Do you agree or disagree? Explain your answer.
1 Give a numerical example that illustrates total utility rising as marginal utility declines.
5 In the following figure, what is the price elasticity of demand between the two prices on D1? on D2? P $12 $10 0 8 10 12 D Dz
4 The quantity supplied of a good rises from 120 to 140 as price rises from $4 to $5.50. What is the price elasticity of supply?
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?
2 As the price of good X rises from $10 to $12, the quantity demanded of good Y rises from 100 units to 114 units. Are X and Y substitutes or complements? What is the cross elasticity of demand?
1 A college raises its annual tuition from $2,000 to $2,500, and its student enrollment falls from 4,877 to 4,705. Compute the price elasticity of demand. Is demand elastic or inelastic?
14 A tax is placed on the sellers of a good. What happens to the percentage of this tax that buyers pay as the price elasticity of demand for the good decreases? Explain your answer.
13 It has been said that, if government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand. What is the rationale for this statement?
12 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
11 Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price for wheat and a price $2 higher per bushel. Do you think farmers collectively would try to reduce
10 Assume the demand for product A is perfectly inelastic.Further, assume that the buyers of A get the funds to pay for it by stealing.a. If the supply of A decreases, what happens to its price?b.
9 How might you determine whether toothpaste and mouthwash manufacturers are competitors?
8 In each of the following pairs of goods, which has the higher price elasticity of demand?a. Airline travel in the short run or airline travel in the long run.b. Television sets or Sony television
7 Suppose Austin, Texas, is hit by a tornado that destroys 25 percent of the housing in the area. Would you expect the total expenditure on housing after the tornado to be greater than, less than, or
6 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 on
5 Identify whether total revenue rises, falls, or remains constant for each of the following:a. Demand is inelastic, and price falls.b. Demand is elastic, and price rises.c. Demand is unit elastic,
4 Suppose the current price of gasoline at the pump is $3 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. She
3 Prove that price elasticity of demand is not the same as the slope of a demand curve.
2 For each of the following, identify where demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic:a. Price rises by 10 percent, and quantity demanded falls by 2
1 Explain how a seller can determine whether the demand for his or her good is inelastic, elastic, or unit elastic between two prices.
3 Smith has been trying to sell his house for six months, but so far, there are no buyers. Draw the market for Smith’s house.
2 Diagrammatically show and explain why there is a shortage of classroom space for some college classes and a surplus for others.
1 The price to drive on a freeway is $0 at all times of the day.This price establishes equilibrium at 3 a.m. but is too low to establish equilibrium at 5 p.m. There is a shortage of freeway space at
18 Samantha is flying from San Diego, California, to Arlington, Texas, on a commercial airliner. She asks for an aisle seat but only middle-of-the-row seats are left. Why aren’t any aisle seats
17 What is the relationship between the probability of a person being admitted to the college of his choice and the tuition the college charges?
16 Consider the theater in which a Broadway play is performed.If tickets for all seats are the same price (say, $70), what economic effect might arise?
15 Suppose the equilibrium wage for a college athlete is$40,000, but because of NCAA rules, the university can offer him only $22,000 (full tuition). How might the university administrators, coaches,
14 Explain and diagrammatically represent how a price floor can bring about a transfer from consumers to producers.
13 University A charges more for a class for which there is high demand than for a class for which there is low demand.University B charges the same for all classes. All other things being equal
12 Wilson walks into his economics class ten minutes late because he couldn’t find a place to park. Because of his tardiness, he doesn’t hear the professor tell the class there will be a quiz at
11 Using each of the supply and demand equations in problem 10, identify quantity demanded and quantity supplied if price equals $15.
10 Determine equilibrium price and quantity for the following supply and demand equations: Q 1,800 b. Q = 60P; Q, = 400 + 10P 950 23P; Q,900 + 27P Q 2,250 = 12P; Q, 1,200 + 13P
8 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?
7 At what quantity in the preceding figure is the maximum buying price equal to the minimum selling price?
33 What is the difference between a price ceiling and a price floor?
22 Describe how each of the following will affect the supply of personal computers: (a) a rise in wage rates, (b) an increase the production of computers, and (d) a subsidy placed on the production
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
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) 2003 1,273 2004 1,344 2005 1,371 2006 1,374 2007 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
3. What is a put option?
2. You expect that a stock will rise in the next few months, but you do not have enough money to buy many shares of the stock. What can you do instead?
4. What is the difference between a municipal bond and a Treasury bond?
3. If the annual coupon payment for a bond is $1,000 and the price paid for the bond was $9,500, then what is the yield or interest rate?
2. If the coupon payment on a bond is $400 a year and the coupon rate is 7 percent, then what is the face value?
1. What is a bond?
4. What does a P/E ratio of 23 mean?
3. What does the yield of a stock equal?
2. Why do people buy stocks?
1. How many stocks does the DJIA consist of?
2. Explain how expansionary fiscal policy works in an open economy.
1. Explain how expansionary monetary policy works in an open economy.
2. What is the effect on the U.S. price level of lower real interest rates in Japan than in the United States? Explain your answer.
1. How do foreign input prices affect the U.S. SRAS curve?
2. Predict and explain what will happen to U.S. Real GDP if the dollar appreciates relative to the Japanese yen.
1. Explain how an economic boom in one country can be felt in another country.
2. Identify some of the costs of globalization.
1. Identify some of the benefits of globalization.
3. How might advancing technology lead to increased globalization?
2. What is globalization?
1. Some have said that the end of the Cold War has led to greater globalization. Explain the reasoning.
3. How important is labor mobility in determining whether an area is an optimal currency area?
2. Country 1 produces good X, and country 2 produces good Y. People in both countries begin to demand more of good X and less of good Y. Assume that there is no labor mobility between the two
1. What is an optimal currency area?
4. Under a fixed exchange rate system, why might the United States want to devalue its currency?
3. In each of the following cases, identify whether the U.S. dollar is overvalued or undervalued:a. The fixed exchange rate is $2 £1, and the equilibrium exchange rate is $3 £1.b. The fixed
2. How does an overvalued dollar affect U.S. exports and imports?
1. Under a fixed exchange rate system, if one currency is overvalued, then another currency must be undervalued. Explain why this statement is true.
4. What does the purchasing power parity theory say? Give an example to illustrate your answer.
3. Suppose that the U.S. economy grows and that the Swiss economy does not. How will this affect the exchange rate between the dollar and the Swiss franc? Why?
2. What could cause the U.S. dollar to appreciate against the Mexican peso on the foreign exchange market?
1. In the foreign exchange market, how is the demand for dollars linked to the supply of pesos?
3. What is the difference between the merchandise trade balance and the current account balance?
2. Exports of goods and services equal $200 billion and imports of goods and services equal $300 billion.What is the merchandise trade balance?
1. If an American retailer buys Japanese cars from a Japanese manufacturer, is this transaction recorded as a debit or a credit? Explain your answer.
4. Outline the details of the infant industry argument for trade restriction.
3. What is a major difference between the effects of a quota and the effects of a tariff?
2. Identify the directional change in consumers’ surplus and producers’ surplus when we move from free trade to tariffs. Is the change in consumers’ surplus greater than, less than, or equal to
1. Who benefits and who loses from tariffs? Explain your answer.
3. Do government officials analyze data to determine what their country can produce at a comparative advantage?
2. If a country can produce more of all goods than any other country, would it benefit from specializing and trading? Explain your answer.
1. Suppose the United States can produce 120 units of X at an opportunity cost of 20 units of Y, and Great Britain can produce 40 units of X at an opportunity cost of 80 units of Y. Identify
4. Why is rent-seeking activity socially wasteful?
3. Give an example of public interest talk spoken by a special interest group.
2. Consider special interest legislation that will transfer $40 million from group A to group B, where group B includes 10,000 persons. Is this special interest legislation more likely to pass (a)
1. The average farmer is likely to be better informed about federal agricultural policy than the average food consumer is. Why?
2. In Example 2 with equal taxes, did the outcome of the vote make anyone worse off? If so, who and by how much?

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