How does shielding employees and suppliers from business risk help to improve economic outcomes? Who is responsible for managing business risks in the market system?
> Assume that a business firm finds that its profit is greatest when it produces $40 worth of product A. Suppose also that each of the three techniques shown in the table below will produce the desired output. Resource units required a. With the resource p
> Let’s put dollar amounts on the flows in the circular flow diagram of Figure 2.2. a. Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60
> What are the advantages of using capital in the production process? What is meant by the term “division of labor”? What are the advantages of specialization in the use of human and material resources? Explain why exchange is the necessary consequence of
> Construct a table from the data shown on the graph below. Which is the dependent variable and which the independent variable? Summarize the data in equation form. Graph for Problem 4 100 80 60 40 20 0 2 4 6. 8 10 Study time (hours) Exam score (points
> Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is: a. 10 pens. b. 5 pens. c. zero pens. d.
> Contrast how a market system and a command economy try to cope with economic scarcity.
> Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also a fisherman, and he i
> What is meant by the term “utility” and how does the idea relate to purposeful behavior?
> Indicate whether each of the following relationships is usually a direct relationship or an inverse relationship. a. A sports team's winning percentage and attendance at its home games. b. Higher temperature and sweater sales. c. A person's income and
> Refer to the expanded table below from review question 8. a. What is the equilibrium price? At what price is there neither a shortage nor a surplus? Fill in the surplus-shortage column and use it to confirm your answers. b. Graph the demand for wheat an
> Explain the law of supply. Why does the supply curve slope upward? How is the market supply curve derived from the supply curves of individual producers?
> True or False: Money must be issued by a government for people to accept it.
> With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneur
> Why is private property, and the protection of property rights, so critical to the success of the market system? How do property rights encourage cooperation?
> The following table contains data on the relationship between saving and income. Rearrange these data into a logical order and graph them on the accompanying grid. What is the slope of the line? The vertical intercept? Write the equation that represents
> Look back at Figure 2, which shows the inverse relationship between ticket prices and game attendance at Gigantic State University. (a) Interpret the meaning of both the slope and the intercept. (b) If the slope of the line were steeper, what would tha
> Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can af
> Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. Candy bars cost $0.75 each while bags of peanuts cost $1.50 each. a. Construct a table showing the alternative combinati
> What is meant by the term “utility” and how does the idea relate to purposeful behavior?
> Graph and label as either direct or indirect the relationships you would expect to find between a. The number of inches of rainfall per month and the sale of umbrellas b. The amount of tuition and the level of enrollment at a university c. The populari
> Government inspectors who check on the quality of services provided by retailers as well as government requirements for licensing in various professions are both attempts to resolve: a. The moral hazard problem. b. The asymmetric information problem.
> Why is it in the interest of new homebuyers and builders of new homes to have government building codes and building inspectors?
> Assume that candle wax is traded in a perfectly competitive market in which the demand curve captures buyers’ full willingness to pay while the supply curve reflects all production costs. For each of the following situations, indicate whether the total o
> Refer to Table 4.2 below. If the six people listed in the table are the only producers in the market and the equilibrium price is $6 (not the $8 shown), how much producer surplus will the market generate? TABLE 4.2 Producer Surplus (2) (3) Minimum Ac
> Use the ideas of consumer surplus and producer surplus to explain why economists say competitive markets are efficient. Why are below- or above-equilibrium levels of output inefficient, according to these two sets of ideas?
> Consider the market for coffee beans. Suppose that the prices of all other caffeinated beverages go up 30 percent while at the same time a new fertilizer boosts production at coffee plantations dramatically. Can you tell what will happen to the equilibri
> The table below shows two demand schedules for a given style of men’s shoes—that is, how many pairs per month will be demanded at various prices at a men’s clothing store in Seattle called Stromnord.
> Most scalping laws make it illegal to sell—but not to buy—tickets at prices above those printed on the tickets. Assuming that is the case, use supply and demand analysis to explain why the equilibrium ticket price in an illegal secondary market tends to
> True or False: A “change in quantity demanded” is a shift of the entire demand curve to the right or to the left.
> The figure below shows the supply curve for tennis balls, S1, for Drop Volley tennis, a producer of tennis equipment. Use the figure and the table below to give your answers to the following questions. a. Use the figure to fill in the quantity supplied o
> Briefly explain the use of graphs as a way to represent economic relationships. What is an inverse relationship? How does it graph? What is a direct relationship? How does it graph?
> What are the determinants of demand? What happens to the demand curve when any of these determinants change? Distinguish between a change in demand and a movement along a fixed demand curve, noting the cause(s) of each.
> Match each term with the correct definition. Private property Freedom of enterprise Mutually agreeable Freedom of choice Self-interest Competition Market a. An institution that brings buyers and sellers together. b. The right of private persons and firm
> Suppose Natasha currently makes $50,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start an organic soap company. In the other, she will try
> How does self-interest help achieve society’s economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy, but commanded by consumers?
> Erin grows pecans. The number of bushels (B) that she can produce depends on the number of inches of rainfall (R) that her orchards get. The relationship is given algebraically as follows: B = 3,000 + 800R. Match each part of this equation with the c
> Indicate how each of the following might affect the data shown in the table and graph in Figure 2 of this appendix: a. GSU’s athletic director schedules higher-quality opponents. b. An NBA team locates in the city where GSU plays. c. GSU contracts to ha
> Describe the graphical relationship between ticket prices and the number of people choosing to visit amusement parks. Is that relationship consistent with the fact that, historically, park attendance and ticket prices have both risen? Explain.
> Indicate whether each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 5.1 percent in September 2015. b. A U.S. software firm discharged 15 workers last month and transferred the
> Pham can work as many or as few hours as she wants at the college bookstore for $9 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or at other potential jobs. One potential job,
> What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: Allocating a square block in the heart of New York City for a surface parking lot or allocat
> Match each term with the correct definition. Economics Opportunity cost Marginal analysis Utility a. The next best thing that must be foregone in order to product one more unit of a given product. b. The pleasure, happiness, or satisfaction obtained fro
> People drive faster when they have auto insurance. This is an example of: a. Adverse selection. b. Asymmetric information. c. Moral hazard.
> Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car th
> Because medical records are private, an individual applying for health insurance will know more about his own health conditions than will the insurance companies to which he is applying for coverage. Is this likely to increase or decrease the insurance
> Refer to Table 4.1 below. If the six people listed in the table are the only consumers in the market and the equilibrium price is $11 (not the $8 shown), how much consumer surplus will the market generate? TABLE 4.1 Consumer Surplus (2) (3) Maximum P
> Explain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously?
> Will the the equilibrium price of orange juice increase or decrease in each of the following situations? a. A medical study reporting that orange juice reduces cancer is released at the same time that a freak storm destroys half of the orange crop in Fl
> What explains why millions of economic resources tend to get arranged logically and productively rather than haphazardly and unproductively?
> Demand and supply often shift in the retail market for gasoline. Here are two demand curves and two supply curves for gallons of gasoline in the month of May in a small town in Maine. Some of the data is missing. a. Use the following facts to fill in t
> Studies indicate that married men on average earn more income than unmarried men of the same age and education level. Why must we be cautious in concluding that marriage is the cause and higher income is the effect?
> Distinguish between the resource market and the product market in the circular flow model. In what way are businesses and households both sellers and buyers in this model? What are the flows in the circular flow model?
> Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9,000 piz
> In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern. Why the difference?
> Specify and explain the typical shapes of marginal-benefit and marginal-cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefit
> Distinguish between a carbon-tax and a cap-and-trade strategy for reducing carbon dioxide and other so-called greenhouse gases (that are believed by many scientists to be causing global warming). Which of the two strategies do you think would have the mo
> A price ceiling will result in a shortage only if the ceiling price is ____________ the equilibrium price. a. less than b. equal to c. greater than d. louder than
> In a sentence, describe the meaning of the phrase “invisible hand.”
> Why is money not considered to be a capital resource in economics? Why is entrepreneurial ability considered a category of economic resource, distinct from labor? What are the major functions of the entrepreneur?
> Explain why zoning laws, which allow certain land uses only in specific locations, might be justified in dealing with a problem of negative externalities. Explain why in areas where buildings sit close together tax breaks to property owners for installin
> Why are shortages or surpluses more likely with preset prices, such as those on tickets, than flexible prices, such as those on gasoline?
> Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Suppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to es
> Real (inflation-adjusted) tuition costs were nearly constant during the 1960s despite a huge increase in the number of college students as the very large Baby Boom generation came of age. What does this suggest about the supply of higher education durin
> Ted and Fred are the owners of a gas station. They invested $150,000 each and pay an employee named Lawrence $35,000 per year. This year revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss? a. Lawrenc
> What is meant by the term “creative destruction”? How does the emergence of MP3 (or iPod) technology relate to this idea?
> In the accompanying graph, is the slope of curve AA’ positive or negative? Does the slope increase or decrease as we move along the curve from A to A’? Answer the same two questions for curve BB’.
> Because investment and capital goods are paid for with savings, higher savings rates reflect a decision to consume fewer goods for the present in order to be able to invest in more goods for the future. On average, households in China save 40 percent of
> What are economic resources? What categories do economists use to classify them? Why are resources also called factors of production? Why are they called inputs?
> Use marginal cost/marginal benefit analysis to determine if the following statement is true or false: “The optimal amount of pollution abatement for some substances, say, dirty water from storm drains, is very low; the optimal amount of abatement for oth
> Look at Tables 4.1 and 4.2, which show, respectively, the willingness to pay and willingness to accept of buyers and seller of bags of oranges. For the following questions, assume that the equilibrium price and quantity will depend on the indicated chang
> The LoJack car recovery system allows the police to track stolen cars. As a result, they not only recover 90% of LoJack-equipped cars that are stolen but also arrest many auto thieves and shut down many “chop shops” that take apart stolen vehicles to get
> What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? a. Small automobiles become more fashionable. b. The price of large automobiles rises (with the price of small autos remaining the same
> When asked for investment advice, humorist Will Rogers joked that people should "buy land. They ain't making any more of the stuff." Explain his advice in terms of the supply and demand model.
> Label each of the follow scenarios with the correct combination of price change and quantity change. In some scenarios, it may not be possible from the information given to determine the direction of a particular price change or a particular quantity cha
> Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below. a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? b.
> What do economists mean when they say “price floors and ceilings stifle the rationing function of prices and distort resource allocation”?
> Franklin, John, Henry, and Harry have decided to pool their financial resources and business skills in order to open up and run a coffee shop. They will share any profits or losses that the business generates and will be personally responsible for making
> Some large hardware stores such as Home Depot boast of carrying as many as 20,000 different products in each store. What motivated the producers of those individual products to make them and offer them for sale? How did the producers decide on the best c
> The accompanying graph shows curve XX’ and tangents at points A, B, and C. Calculate the slope of the curve at these three points. 50 (12, 50) ,a c' (16, 50) B 40 30 A (2, 10) (26, 10) 10 Graph for Problem 7 O 2 4 6 8 10 12 14 16 18
> What are the two major ways in which an economy can grow and push out its production possibilities curve? a. Better weather and nicer cars. b. Higher taxes and lower spending. c. Increases in resource supplies and advances in technology. d. Decreases in
> Referring to the table give below: suppose improvement occurs in the technology of producing forklifts but not in the technology of producing automobiles. Draw the new production possibilities curve. Now assume that a technological advance occurs in prod
> How does the slope of a budget line illustrate opportunity cost and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes?
> Suppose there are three buyers of candy in a market: Tex, Dex, and Rex. The market demand and the individual demands of Tex, Dex, and Rex for candy are given in the table below. a. Fill in the table for the missing values. b. Which buyer demands the lea
> Potatoes cost Janice $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. If she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subseque
> What should be done to restore the reputation of the CAI?
> Why would CAI want to keep Mortenson in a “visionary” capacity?
> From a business ethics perspective, which was worse, the conduct of the CAI board or the conduct of Mortenson himself? Why?
> Do people have the right to seek assistance in dying?
> What might the phrase “right to die” mean?
> Does being near the end of one’s life make the decision to end it justified?
> Critics of Milgram’s research have argued that the physical separation between the participant and the teacher in one room and the learner in the other made it easier for the participant to inflict the shocks. Do you think that made a difference? Why or
> If Mortenson’s claims have misled donors, should the CAI return the money? Why or why not?
> How does the conduct of the CAI board relate to this case?
> Would the CSR policies of an organization influence your decision to use their products or services? Why or why not?
> How could this issue of patient privacy have been handled in a more ethical manner?
> Based on the evidence presented in this case study, was Mortenson’s work at the CAI an example of deliberate fraud or mismanagement? Defend your position.
> Do people have the right to give assistance in dying?
> The participants were introduced to the learners as equal participants in the study—that is, volunteers just like them. Do you think that made a difference in the decision to keep increasing the voltage? Why?
> Divide into two groups and prepare arguments for and against the following behavior: One rainy evening I wandered into a shop, where I left my name-brand umbrella in a basket near the door. When I was ready to leave, my umbrella was gone. There were seve
> Divide into two groups and prepare arguments for and against the following behavior: My friend works for a company that manages fund-raising events for nonprofit organizations—mostly gala benefits and auctions. Since these events all take place in the sa
