Question: Draw a graph that shows a monopolist

> Do you agree with the following statement: “The problem with economics is that it assumes that consumers and firms always make the correct decisions? But we know that everyone makes mistakes.”

> On most days, the price of a rose is $1, and 8,000 roses are purchased. On Valentine’s Day, the price of a rose jumps to $2, and 30,000 roses are purchased. a. Draw a demand and supply graph that shows why the price jumps. b. Based on this information, w

> Some professional sports teams charge fans a one-time lump sum for a personal seat license. The personal seat license allows a fan the right to buy season tickets each year. No one without a personal seat license can buy season tickets. After the origina

> When asked what was most valuable about the big data Disney was collecting from its MagicBands program, the executive in charge of the program stated, “The biggest value comes from being able to segment customers into better, smarter segments so you know

> While in Shanghai, China, to teach an MBA course, Craig Richardson, an economics professor from Winston- Salem State University, asked his American students to haggle with sellers in a market where prices for the same items can vary widely. Professor Ric

> Why might employers be more likely to interview a job applicant with a white-sounding name than an applicant with an African-American–sounding name? Leaving aside legal penalties, will employers who follow this practice incur an economic penalty? Briefly

> Some people—usually business travelers—have a very strong desire to fly to a particular city on a particular day, and airlines charge these travelers higher ticket prices than they charge other people, such as families who are planning vacations months i

> Is it possible to practice price discrimination across time? Briefly explain.

> Many antibiotics are no longer effective in eliminating infections because bacteria have evolved to become resistant to them. Some bacteria are now resistant to all but one or two existing antibiotics. In 2015, the Obama administration proposed subsidizi

> What is perfect price discrimination? Is it likely to ever occur? Is perfect price discrimination economically efficient? Briefly explain.

> What is yield management? Give an example of a firm using yield management to increase profits.

> In 2015, the Rock and Roll Hall of Fame and Museum charged adults $25.85 for admission. Seniors (65 years and older) and military personnel were charged $20.50, and children between 9 and 12 years old were charged $16.25. Use the admission fees to rank t

> What is price discrimination? Under what circumstances can a firm successfully practice price discrimination?

> Suspicions about arbitrage have a long history. For example, Valerian of Cimiez, a Catholic bishop who lived during the fifth century, wrote: “When something is bought cheaply only so it can be retailed dearly, doing business always means cheating.” What

> Briefly explain whether you agree with the following observation: “Technological change refers only to the introduction of new products, so it is not relevant to the operations of most firms.”

> Suppose California has many apple trees, and the price of apples there is low. Nevada has few apple trees, and the price of apples there is high. Abner buys low-priced California apples and ships them to Nevada, where he resells them at a high price. Is

> A political commentator makes the following statement: The idea that international trade should be based on the comparative advantage of each country is fine for rich countries like the United States and Japan. Rich countries have educated workers and la

> A column in the New York Times has the headline, “Should We Tax People for Being Annoying?” a. Do annoying people cause a negative externality? Should they be taxed? Do crying babies on a bus or plane cause a negative externality? Should the babies (or t

> What are the three most important variables that cause the market supply curve of labor to shift?

> In discussing the NCAA, the late Nobel Laureate Gary Becker, an economist, wrote, “It is impossible for an outsider to look at these [NCAA] rules without concluding that their main aim is to make the NCAA an effective cartel that severely constrains comp

> An article on espn.com about declining attendance at college football games noted that schools in the central time zone had particular problems with attendance at games that started at 11 a.m. The athletic director at the University of Illinois was quote

> Prices for many goods are higher in the city of Shenzhen on the mainland of China than in the city of Hong Kong. An article in the Economist notes that “individuals can arbitrage these differences through what effectively amounts to smuggling.” a. Explai

> Economist Richard Thaler of the University of Chicago notes that most economists consider arbitrage to be one way “that markets can do their magic.” Briefly explain the role arbitrage can play in helping markets to work. Source: Richard H. Thaler, “Unle

> Does a product always have to sell for the same price everywhere? Briefly explain.

> What is the law of one price? What is arbitrage?

> Suppose that the city has given Jorge a monopoly selling baseball caps at the local minor league stadium. Use the following graph to answer the questions. a. What quantity will Jorge produce, and what price will he charge? b. How much profit will Jorge

> Suppose a second seafood restaurant opens in Stonington, Maine. Will consumer surplus and economic efficiency necessarily increase? Briefly explain.

> If a market is a monopoly, will a negative externality in production always lead to production beyond the level of economic efficiency? Use a graph to illustrate your answer.

> What is meant by a consumer’s budget constraint? What is the rule of equal marginal utility per dollar spent?

> Most cities own the water system that provides water to homes and businesses. Some cities charge a flat monthly fee, while other cities charge by the gallon. Which method of pricing is more likely to result in economic efficiency in the water market? Be

> Patrick J. Buchanan, a former presidential candidate, argued in his book on the global economy that there is a flaw in David Ricardo’s theory of comparative advantage: Classical free trade theory fails the test of common sense. According to Ricardo’s law

> Give an example of a firm using a two-part tariff as part of its pricing strategy.

> Economist Harvey Leibenstein argued that the loss of economic efficiency in industries that are not perfectly competitive has been understated. He argued that when competition is weak, firms are under less pressure to adopt the best techniques or to hold

> Paolo and Alfredo are twins who both want to open pizza restaurants. Their parents have always liked Alfredo best, and they buy two pizza ovens and give both to him. Unfortunately, Paolo must buy his own pizza ovens. Does Alfredo have a lower cost of pro

> Review Figure 15.5 on page 512 on the inefficiency of monopoly. Will the deadweight loss due to monopoly be larger if the demand is elastic or if it is inelastic? Briefly explain. Figure 15.5: Price and cost MC Transfer of consumer surplus to monop

> For Jill Johnson’s pizza restaurant, explain whether each of the following is a fixed cost or a variable cost: a. The payment she makes on her fire insurance policy b. The payment she makes to buy pizza dough c. The wages she pays her workers d. The leas

> Explain why market power leads to a deadweight loss. Is the total deadweight loss from market power for the economy large or small?

> Suppose that a perfectly competitive industry becomes a monopoly. Describe the effects of this change on consumer surplus, producer surplus, and deadweight loss.

> Will a monopoly that maximizes profit also be maximizing revenue? Will it be maximizing output? Briefly explain.

> When homebuilders construct a new housing development, they usually sell to a single cable television company the rights to lay cable. As a result, anyone buying a home in that development is not able to choose between competing cable companies. Some cit

> A student argues: “If a monopolist finds a way of producing a good at lower cost, he will not lower his price. Because he is a monopolist, he will keep the price and the quantity the same and just increase his profit.” Do you agree? Use a graph to illust

> Harvard Business School started using case studies— descriptions of strategic problems encountered at real companies—in courses in 1912. Today, Harvard Business Publishing (HBP) sells its case studies to about 4,000 colleges worldwide. HBP is the sole pu

> Briefly explain whether you agree with the following statement: “International trade is more important to the U.S. economy than it is to most other economies.”

> In most universities, economics professors receive larger salaries than English professors. Suppose that the government requires that from now on, all universities must pay economics professors the same salaries as English professors. Use demand and supp

> Does a monopolist have a supply curve? Briefly explain. (Hint: Look again at the definition of a supply curve in Chapter 3 on page 83 and consider whether this definition applies to a monopolist.)

> Before inexpensive pocket calculators were developed, many science and engineering students used slide rules to make numerical calculations. Slide rules are no longer produced, which means nothing prevents you from establishing a monopoly in the slide ru

> Use the information in Solved Problem 15.3 to answer the following questions. a. What will Comcast do if the tax is $36.00 per month instead of $25.00? (Hint: Will its decision be different in the long run than in the short run?) b. Suppose that the flat

> What is the lemons problem? Is there a lemons problem in the market for health insurance? Briefly explain.

> Ed Scahill has acquired a monopoly on the production of baseballs (don’t ask how) and faces the demand and cost situation shown in the following table. a. Fill in the remaining values in the table. b. If Ed wants to maximize profit, w

> Marty and Ann discussed the rule of equal marginal utility per dollar spent, a topic that was recently covered in the economics course they were both taking: Marty: “When I use my calculator to divide the marginal utility of pizza by a price of zero, I d

> In what sense is a monopolist a price maker? Will charging the highest possible price always maximize a monopolist’s profit? Briefly explain.

> In a column in the Wall Street Journal, venture capitalist Peter Thiel described the difference between monopoly businesses and competitive ones: “Suppose you want to start a restaurant in Palo Alto that serves British food. ‘No one else is doing it,’ yo

> What is the relationship between a monopolist’s demand curve and the market demand curve? What is the relationship between a monopolist’s demand curve and its marginal revenue curve?

> As noted in this chapter, many generic versions of the diabetes drug Glucophage were introduced within the first year of Glucophage’s patent expiration. The U.S. Supreme Court has ruled that patients who become ill taking generic drugs cannot sue the man

> Use the following graphs to answer the questions. a. What is the equilibrium quantity of trash collectors hired, and what is the equilibrium wage? b. What is the equilibrium quantity of receptionists hired, and what is the equilibrium wage? c. Briefly

> Why is limited liability more important for firms trying to raise funds from a large number of investors than for firms trying to raise funds from a small number of investors?

> Suppose that the quantity demanded per day for a product is 90 when the price is $35. The following table shows costs for a firm with a monopoly in this market: Briefly explain whether this firm has a natural monopoly. Quantity (per day) Total Cost

> In China, the government owns many more firms than in the United States. A former Chinese government official argued that a number of government-run industries such as oil refining were natural monopolies. Is it likely that oil refining is a natural mono

> In a magazine article, a writer explained that the provision of electric power in the United States consists of two processes: the generation of electricity and the distribution of electricity. The writer argued that “power distribution is a natural mono

> Why was De Beers worried that people might resell their old diamonds? How did De Beers attempt to convince consumers that previously owned diamonds were not good substitutes for new diamonds? How did De Beers’s strategy affect the demand curve for new di

> Coca-Cola has been focusing on selling more 7.5-ounce cans in displays near supermarket checkout lines. Previously, Coke had relied more heavily on 20-ounce bottles displayed in the beverage sections of supermarkets. An article in the Wall Street Journal

> In a letter to his company’s stockholders, Warren Buffett offered the following opinion: “Most investors, of course, have not made the study of business prospects a priority in their lives. . . . I have good news for these non-professionals: The typical

> What is a free market? In what ways does a free market economy differ from a centrally planned economy?

> Why should it matter legally whether Professor Anspach is correct that Hasbro’s Monopoly game closely resembles a game that had been played for decades before Charles Darrow claimed to have invented it? Does it matter economically? Briefly explain.

> The German company Koenig & Bauer has 90 percent of the world market for presses that print currency. Discuss the factors that would make it difficult for new companies to enter this market.

> If firms incurred no cost in developing new technologies and new products, would there be any need for patents? Briefly explain.

> Lawrence Katz, an economist at Harvard, was quoted in a newspaper article as arguing that differences between the incomes of male physicians and female physicians “are largely explained by individual choices.” He also noted that discrimination could acco

> How does a change in the price of a product cause both a substitution effect and an income effect?

> Use the following table to answer the questions. a. What is the average tax rate at each income level? b. Based on these data, is the tax progressive or regressive? Briefly explain. c. Is it possible based on these data to determine the marginal tax ra

> Suppose the government eliminates the income tax and replaces it with a consumption tax. With a consumption tax, individuals pay a tax on only the part of their income they spend rather than save. Think about the effect of this change on the market for a

> Using the numbers in the table, explain which country has a comparative advantage in producing smart watches. Output per Hour of Work Smartwatches Fitness Bracelets Switzerland 8 10 Canada

> Almost all states levy sales taxes on retail products, but about half of them exempt purchases of food. In addition, virtually all services are exempt from state sales taxes. Evaluate these tax rate differences, using the goals and principles of taxation

> Currently, the Social Security and Medicare programs are funded by payroll taxes rather than by the federal personal income tax. In 2015, the payroll tax for Social Security was 12.4 percent on wage, salary, and self-employment income up to $118,500. (Ha

> President Barack Obama proposed legislation that Congress failed to enact that would have included the so-called “Buffett Rule,” named after billionaire Warren Buffett, who noted that he was paying a lower tax rate than his secretary. The Buffett Rule wo

> Use the information in Table 18.2 on page 602 to calculate the total federal income tax paid, the marginal tax rate, and the average tax rate for people with the following incomes. (For simplicity, assume that these people have no exemptions or deduction

> Many state governments use lotteries to raise revenue. If we think of a lottery as a type of tax, is a lottery likely to be progressive or regressive? What data would you need to determine whether the effect of a lottery is progressive or regressive?

> The federal government imposes a tax on sales of cigarettes. The following data are from a Gallup poll: Based on these data, would the federal cigarette tax be considered progressive or regressive? Be sure to define progressive tax and regressive tax in

> An article in a Federal Reserve publication notes that “nearly all taxes create some market ineff iciency in the form of deadweight loss.” The article notes that when something is taxed, the result is “an outcome in which both [buyers and sellers] would

> Suppose that a large oil field is discovered in Michigan. By imposing a tax on the oil, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the labor supply curve in Michigan?

> Briefly discuss each of the five goals and principles governments consider when deciding which taxes to use.

> If the United States were to stop trading goods and services with other countries, which U.S. industries would be likely to see their sales decline the most? Briefly explain.

> Movie studios split ticket revenues with the owners of the movie theaters that show their films. An article in the Wall Street Journal in 2015 discussed how the Disney studio was attempting to negotiate a larger share of the ticket revenue because it had

> When Apple first launched Apple Music, singer Taylor Swift refused to allow her album 1989, which had been the bestselling album of 2014, to be made available for the service because Apple did not intend to pay royalties on songs it streamed during an in

> Dane decides to give up a job earning $200,000 per year as a corporate lawyer and converts the duplex that he owns into a UFO museum. (He had been renting out the duplex for $20,000 a year.) His explict costs are $75,000 per year paid to his assistants a

> In a market economy, why does a f irm have a strong incentive to be productively efficient and allocatively efficient? What does the firm earn if it is productively and allocatively efficient, and what happens if it is not?

> What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the effect of a change in taxes on economic behavior?

> In 2012, Congress and President Barack Obama passed legislation raising tax rates on families earning $450,000 or more. Did this change in the law make the U.S. tax system more progressive or less progressive? Be sure to provide definitions of progressiv

> Which type of tax raises the most revenue for the federal government? What is the largest source of revenue for state and local governments?

> The late Nobel Laureate James Buchanan, who was one of the key figures in developing the public choice model, wrote, “The relevant difference between markets and politics does not lie in the kinds of values/interests that persons pursue, but in the condi

> In Chapter 4, we discussed the federal government’s agricultural programs. In arguing that the costs of these programs exceed their benefits, economist Vincent H. Smith stated, “The 10% to 15% of farm families that receive more than 85% of all farm subsi

> Most labor economists believe that many adult males are on a vertical section of their labor supply curves. Use the concepts of income and substitution effects to explain under what circumstances an individual’s labor supply curve would be vertical. Sou

> An article in the Wall Street Journal about attempts by Congress to rewrite the tax code to make it more efficient noted that there were many provisions in the code intended to reduce the taxes paid by industries in districts of the members of Congress s

> Patents are granted for 20 years, but pharmaceutical companies can’t use their patent-guaranteed monopoly powers for anywhere near this long because it takes several years to acquire approval of drugs from the Food and Drug Administration (FDA). Should t

> An article in the New York Times on President Obama’s unsuccessful attempt to eliminate tax benefits for college savings accounts notes, “In theory, tax reform is supposed to be built around cutting back preferences like these, in order to pay for some c

> An article in the Economist on the work of the late Nobel Laureate James Buchanan made the following observation: “It was important … to understand the ways that government could fail systematically.” a. What does government failure mean in this context?

> What does it mean to say that there is a separation of ownership from control in large corporations?

> Briefly explain whether you agree with the following argument: The median voter theorem will be an accurate predictor of the outcomes of elections when a majority of voters have preferences very similar to those of the median voter. When the majority of

> Michael Kinsley, a political columnist, observes: “The idea of insurance is to share the risks of bad outcomes.” In what sense does insurance involve sharing risks? How does the problem of adverse selection affect the ability of insurance to provide the

> Many political observers have noted that Republican presidential candidates tend to emphasize their conservative positions on policy issues while running for their party’s nomination, and Democratic presidential candidates tend to emphasize their liberal

> The Statistical Abstract of the United States was published for many years by the U.S. Census Bureau. The Abstract provided a summary of business, economic, social, and political statistics. It was available for free online, and a printed copy could also