Many universities and corporations offer a health and wellness program that helps their employees improve or maintain their health and get paid (a relatively small amount) for doing so. The programs vary but typically consist of employees completing a health assessment, receiving a program for healthy living, and monitoring their monthly health activities. a. Why would universities and corporations pay employees to improve or maintain their health? b. How does health insurance affect the incentive of employees to improve or maintain their health? c. Would a wellness program increase or decrease the health insurance premiums that an insurance company would charge the university or corporation to provide insurance coverage? Briefly explain.
> State government Medicaid programs provide medical insurance to poor and disabled people. Under federal law, the programs must provide reimbursements to people who use any prescription drug that has been approved as effective by the U.S. Food and Drug Ad
> When the price of pizza falls in the Super Bowl example on pages 327–328, both the income effect and the substitution effect cause you to want to consume more pizza. If pizza were an inferior good, how would the analysis be changed? In this case, is it p
> How does the fact that consumers apparently value fairness affect the pricing decisions that businesses make?
> The principal–agent problem arises almost everywhere in the business world, and it also crops up even closer to home. Discuss the principal–agent problem that exists in the college classroom. Who is the principal? Who is the agent? What potential conflic
> How does perfect competition lead to allocative and productive efficiency?
> In recent years, companies have used fracking, or hydraulic fracturing, in drilling for oil and natural gas that previously could not be profitably recovered. According to an article in the New York Times, “horizontal drilling has enabled engineers to in
> Assume that the following graph illustrates the market for a breast cancer–fighting drug, without which breast cancer patients cannot survive. What is the consumer surplus in this market? How does it differ from the consumer surplus in
> What is an externality? Give an example of a positive externality, and give an example of a negative externality.
> Both smartwatches and smartphones use applications, or “apps,” which are software that consumers can download and use to play games, check stock market prices, and read news stories, among many other activities. Particularly useful apps are called “kille
> In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the author’s state: We find evidence that Economics is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for size o
> LaToya is buying corn chips and soda. She has 4 bags of corn chips and 5 bottles of soda in her shopping cart. The marginal utility of the fourth bag of corn chips is 10, and the marginal utility of the fifth bottle of soda is also 10. Is LaToya maximizi
> An Associated Press article noted that some groups have filed law suits over what the groups describe as “overzealous licensing schemes, in occupations such as hair braiders, yoga teachers and casket makers.” a. What effect might such government licensi
> Tom and Jacob are college students. Each of them will probably get married later and have two or three children. Each knows that if he studies more in college, he’ll get a better job and earn more money. Earning more will enable them to spend more on the
> In the following graph, is the consumer surplus larger with demand curve D1 or demand curve D2? Briefly explain. Compare the producer surplus with demand curve D1 and with demand curve D2. Price D2 D, Quantity
> A review of Kappo Masa, a popular restaurant in New York City, notes, “The markup that New York restaurants customarily add to retail wine and sake prices is about 150 percent. The average markup at Kappo Masa is 200 percent to 300 percent.” Even 150 per
> Suppose that the curves in the following graph represent two demand curves for traditional chicken wings (basket of six) at Buffalo Wild Wings. What would cause a movement from point A to point B on D1? Name two variables that if their values were to cha
> Suppose the U.S. president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. Imagine that you are the president’s economic advisor and need to prepare a report discussing the relevant f
> What is meant by allocative efficiency? What is meant by productive efficiency? Briefly discuss the difference between these two concepts.
> What is marginal benefit? Why is the demand curve referred to as a marginal benefit curve?
> Late in the semester, a friend tells you, “I was going to drop my psychology course so I could concentrate on my other courses, but I had already put so much time into the course that I decided not to drop it.” What do you think of your friend’s reasonin
> Maya spends her $50 budget on two goods, cans of tuna and bottles of ginger ale. Initially, the marginal utility per dollar she spends on tuna is equal to the marginal utility per dollar she spends on ginger ale. Then the price of ginger ale decreases, w
> Two economists at the Brookings Institution argue that “new firms rather than existing ones have accounted for a disproportionate share of disruptive and thus highly productivity enhancing innovations in the past—the automobile, the airplane, the compute
> The publisher of a magazine gives his staff the following information: The publisher tells the staff, “Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the
> In a study at a large state university, students were randomly assigned roommates. Researchers found that, on average, males assigned to roommates who reported drinking alcohol in the year before entering college earned GPAs one-quarter point lower than
> A student makes the following argument: “When a market is in equilibrium, there is no consumer surplus. We know this because in equilibrium, the market price is equal to the price consumers are willing to pay for the good.” Briefly explain whether you ag
> Suppose that the following table shows the quantity demanded of UGG boots at five different prices in 2016 and 2017: Name two different variables that if their values were to change would cause the quantity demanded of UGG boots to change from 2016 to
> What are the main sources of comparative advantage?
> A column in the Wall Street Journal listed “trying to forecast what stocks will do next” as one of the three mistakes investors make repeatedly. Briefly explain why trying to forecast stock prices would be a mistake for the average investor. Source: Morg
> What is a demand schedule? What is a demand curve?
> McDonald’s typically serves breakfast until only 10:30 a.m. on weekdays and 11:00 a.m. on weekends. In 2015, the company began to experiment with serving breakfast all day at various locations in San Diego. Several owners of McDonald’s restaurants, howev
> Joe has $55 to spend on apples and oranges. Given the information in the following table, is Joe maximizing utility? Briefly explain. Total Price Quantity Utility Marginal Utility of Last Únit Apples $0.50 50 1,000 20 Oranges $0.75 40 500 30
> Wealthy investors often invest in hedge funds. Hedge fund managers use investors’ money to buy stocks, bonds, and other investments with the intention of earning high returns. But an article in the New York Times notes, “Even professionals have a problem
> According to an article in the Economist, historian David Faure has argued that the Chinese economy failed to grow rapidly during the nineteenth century because “family run companies … could not raise sufficient capital to exploit the large-scale opportu
> In 1916, the Ford Motor Company sold 500,000 Model T Fords at a price of $440 each. Henry Ford believed that he could increase sales of the Model T by 1,000 cars for every dollar he cut the price. Use this information to calculate the price elasticity of
> John Cassidy, a writer for the New Yorker, wrote a blog post arguing against New York City’s having installed bike lanes. Cassidy complained that the bike lanes had eliminated traffic lanes on some streets as well as some on-street parking. A writer for
> A Wall Street Journal article noted that as manufacturers began to produce more 4K television sets, their production costs declined. a. Use a demand and supply graph to show the effect of these falling costs on consumer surplus in the marker for 4K telev
> State whether each of the following events will result in a movement along the demand curve for McDonald’s Big Mac hamburgers or whether it will cause the curve to shift. If the demand curve shifts, indicate whether it will shift to the left or to the ri
> Use the following production possibilities frontier for a country to answer the questions. a. Which point or points are unattainable? Briefly explain why. b. Which point or points are efficient? Briefly explain why. c. Which point or points are ineffic
> Distinguish between a firm’s explicit costs and its implicit costs and between a firm’s accounting profit and its economic profit.
> Instacart is an Internet startup that offers home delivery of groceries. It buys the groceries in regular brick-andmortar supermarkets, marks up the prices it pays, and then charges consumers the higher prices in exchange for making home deliveries. Acco
> Jay Bhattacharya and Kate Bundorf of Stanford University have found evidence that people who are obese and who work for firms that provide health insurance receive lower wages than workers at those firms who are not obese. At firms that do not provide he
> Joe has $16 to spend on Twinkies and Ho-Hos. Twinkies have a price of $1 per pack, and Ho-Hos have a price of $2 per pack. Use the information in these graphs to determine the number of Twinkies and Ho-Hos packs Joe should buy to maximize his utility. Br
> Evaluate the following argument: I would like to invest in the stock market, but I think that buying shares of stock in a corporation is too risky. Suppose I buy $10,000 of Twitter stock, and the company ends up going bankrupt. Because as a stockholder I
> In the fall of 2006, Pace University in New York raised its annual tuition from $24,751 to $29,454. Freshman enrollment declined from 1,469 in the fall of 2005 to 1,131 in the fall of 2006. Assuming that the demand curve for places in the freshman class
> A firm that is first to market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. For example, the ballpoint pens made by the Reynolds International Pen Company often leaked. What e
> Every year at the beginning of flu season, many people, including the elderly, get a flu shot to reduce their chances of contracting the flu. One result is that people who do not get a flu shot are less likely to contract the flu. a. What type of externa
> Suppose that a frost in Florida reduces the size of the orange crop, which causes the supply curve for oranges to shift to the left. Briefly explain whether consumer surplus will increase or decrease and whether producer surplus will increase or decrease
> A number of industry analysts believe that smartphone prices will decline over the next few years. If these forecasts are correct, what will be the effect on the demand for smartwatches? Briefly explain. Sources: Phil Goldstein, “IDC: Smartphone Shipmen
> Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. a. Use a production possibilities frontier
> Would you expect a centrally planned economy to be better at productive efficiency or allocative efficiency? Be sure to define productive efficiency and allocative efficiency in your answer.
> An article in the Wall Street Journal notes that although U.S. oil production has increased rapidly in recent years, the increase has still amounted to only 5 percent of world production. Still, that increase has been “enough to help trigger a price coll
> Are the cross-price elasticities of demand between the following pairs of products likely to be positive or negative? Briefly explain. a. Iced coffee and iced tea b. French fries and ketchup c. Steak and chicken d. Blu-ray players and Blu-ray discs
> Suppose that Jill and Joe are the only two people in the small town of Andover. Andover has land available to build a park of no more than 9 acres. Jill and Joe’s demand schedules for the park are as follows: The supply curve is as fol
> Suppose the current equilibrium price of a quarter-pound hamburger is $5, and 10 million quarter-pound hamburgers are sold per month. After the federal government imposes a tax of $0.50 per hamburger, the equilibrium price of hamburgers rises to $5.20, a
> Briefly explain whether you agree with the following assertion: “Microeconomics is concerned with things that happen in one particular place, such as the unemployment rate in one city. In contrast, macroeconomics is concerned with things that affect the
> What is anchoring? How might a firm use anchoring to influence consumer choices so as to increase sales?
> While running for the 2016 Democratic nomination for president, Vermont Senator Bernie Sanders opposed the Trans- Pacific Partnership in part because he believed that as a result of the agreement, “the U.S. will lose more than 130,000 jobs to Vietnam and
> One leading explanation for odd pricing is that it allows firms to trick buyers into thinking they are paying less than they really are. If this explanation is correct, in what types of markets and among what groups of consumers would you be most likely
> According to an article in the Wall Street Journal, “Companies in Standard & Poor’s 500 stock index elected the smallest number of new directors last year in 10 years.” Is having members of boards of directors serve for longer periods likely to be good n
> What arguments do economists and policymakers who believe that the federal government should have a larger role in the health care system make in criticizing the ACA?
> In the following graph, the demand for hot dog buns has shifted to the right because the price of hot dogs has fallen from $2.20 to $1.80 per package. Calculate the cross-price elasticity of demand between hot dogs and hot dog buns. Price (dollars p
> The merry-go-round in Ross Park, a public park in Binghamton, New York, was first installed in 1920 and has been periodically refurbished by the city in the years since. There is no entry fee to visit the park or to ride the merry-goround. Is the merry-g
> After a federal court judge had found Apple guilty of conspiring with book publishers to raise e-book prices, the Department of Justice recommended that the judge order Apple not to sign agency pricing model contracts with publishers for five years. The
> As explained in the chapter, economic efficiency is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production. Using this explanation of economic efficiency, explain why a tax create
> According to an article in the Wall Street Journal, a decline in demand for ethanol, which is made from corn, has reduced the demand for corn. Many U.S. farmers can use the same acreage to grow either corn or soybeans. Use a demand and supply graph to an
> Briefly explain whether each of the following is primarily a microeconomic issue or a macroeconomic issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold b. The effect of higher income taxes on the total amount of consumer spe
> Does using rules of thumb increase or decrease the likelihood of a consumer making an optimal choice? Briefly explain.
> Political commentator B. Bruce-Briggs once wrote the following in the Wall Street Journal: “This is not to say that the case for international free trade is invalid; it is just irrelevant. It is an ‘if only everybody … argument… . In the real world almos
> Briefly explain how international trade increases a country’s consumption.
> The following is from an article in USA Today: In what some call a worldwide corporate governance movement, shareholders are pushing for stronger corporate-governance laws, teaming with investors from different countries and negotiating behind the scenes
> Briefly discuss how economists explain the rapid increases in health care spending.
> When lettuce prices doubled, from about $1.50 per head to about $3.00, the reaction of one consumer was quoted in a newspaper article: “I will not buy [lettuce] when it’s $3 a head,” she said, adding that other green vegetables can fill in for lettuce. “
> What is the tragedy of the commons? How can it be avoided?
> Does who is legally responsible for paying a tax—buyers or sellers—make a difference in the amount of tax each pays? Briefly explain.
> Writer Mathew Yglesias disagrees with critics who claim that Amazon has a monopoly in the e-book market: “Amazon doesn’t have any kind of monopoly… . One important hint … can be found in its quarterly financial reports. That’s where you find out about a
> Suppose the demand for smart watches increases rapidly during 2016. At the same time, six more firms begin producing smart watches. A student remarks that, because of these events, we can’t know for certain whether the price of smart watches will rise or
> Is every economic issue either strictly microeconomic or strictly macroeconomic? Briefly explain.
> Define behavioral economics. What are the three common mistakes that consumers often make? Give an example of each mistake.
> Who gains and who loses when a country imposes a tariff or a quota on imports of a good?
> What is the difference between a firm’s assets and its liabilities? Give an example of an asset and an example of a liability.
> What was the source of the problems encountered by many financial firms during the crisis of 2007–2009?
> In the United States, what has been the trend in health care spending as a percentage of GDP? Compare the increases in health care spending per person in the United States with the increases in health care spending per person in other high-income countri
> Define the income elasticity of demand. How does the income elasticity of a normal good differ from the income elasticity of an inferior good. Is it possible to tell from the income elasticity of demand whether a product is a luxury good or a necessity g
> What is free riding? How is free riding related to the need for public goods?
> What do economists mean by an efficient tax?
> If, over time, the demand curve for a product shifts to the right more than the supply curve does, what will happen to the equilibrium price? What will happen to the equilibrium price if the supply curve shifts to the right more than the demand curve? Fo
> Between them, Zillow and Trulia have a very large share of the market for online real estate listings. Real estate brokers who want to advertise their services next to online listings of houses for sale have few other choices. Zillow and Trulia have cons
> Briefly discuss the difference between microeconomics and macroeconomics.
> What does it mean to be economically rational?
> What is a tariff? What is a quota? Give an example, other than a quota, of a nontariff barrier to trade.
> Define the following terms: a. Asymmetric information b. Adverse selection c. Moral hazard d. Principal–agent problem
> What is the Sarbanes-Oxley Act? Why was it passed?
> What is the Patient Protection and Affordable Care Act (ACA)? Briefly list its major provisions.
> Define the cross-price elasticity of demand. What does it mean if the cross-price elasticity of demand is negative? What does it mean if the cross-price elasticity of demand is positive?
> Define rivalry and excludability and use these terms to discuss the four categories of goods.
> What is meant by tax incidence?
> Draw a demand and supply graph to show the effect on the equilibrium price in a market in the following situations. a. The demand curve shifts to the right. b. The supply curve shifts to the left.
> An editorial in the Economist magazine discusses the fact that in most countries—including the United States—it is illegal for individuals to buy or sell body parts, such as kidneys. a. Draw a demand and supply graph for the market for kidneys. Show on y
> Food service firms buy meat, vegetables, and other foods and resell them to restaurants, schools, and hospitals. US Foods and Sysco are by far the largest firms in the industry. In 2015, these firms were attempting to combine or merge to form a single fi
> Suppose that initially the gasoline market is in equilibrium, at a price of $2.50 per gallon and a quantity of 45 million gallons per month. Then a war in the Middle East disrupts imports of oil into the United States, shifting the supply curve for gasol
