Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States. a. Show the effect of the frost on Maya’s budget constraint. b. Show the effect of the frost on Maya’s optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants. c. Show the effect of the frost on Maya’s optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.
> Ariana Grande has just finished recording her latest CD. Her record company’s marketing department determines that the demand for the CD is as follows: The company can produce the CD with no fixed cost and a variable cost of $5 per CD.
> Give an example of how discrimination might persist in a competitive market.
> Do the forces of economic competition tend to exacerbate or ameliorate racial discrimination?
> What difficulties arise in deciding whether a group of workers has a lower wage because of discrimination?
> How might education raise a worker’s wage without raising the worker’s productivity?
> In what sense is education a type of capital?
> Why are coal miners paid more than other workers with similar amounts of education?
> If the population of the United States suddenly grew because of a large wave of immigration, what would happen to wages? What would happen to the rents earned by the owners of land and capital?
> What kinds of behavior do the antitrust laws prohibit?
> Give two examples other than oligopoly that can be explained by the logic of the prisoners’ dilemma.
> How does the number of firms in an oligopoly affect the outcome in the market?
> A firm in a competitive market receives $500 in total revenue and has marginal revenue of $10. What is the average revenue, and how many units were sold?
> Compare the quantity and price of an oligopoly to those of a perfectly competitive market.
> Compare the quantity and price of an oligopoly to those of a monopoly.
> If a group of sellers could form a cartel, what quantity and price would they try to set?
> How might advertising with no apparent informational content still convey information to consumers?
> How might advertising reduce economic well-being? How might advertising increase economic well-being?
> What gives the government the power to regulate mergers between firms? From the perspective of society’s welfare, give one reason that a merger might be good and one reason that a merger might be bad.
> Define natural monopoly. What does the size of a market have to do with whether an industry is a natural monopoly?
> Are market supply curves typically more elastic in the short run or in the long run? Explain.
> Under what conditions will a firm exit a market? Explain.
> Under what conditions will a firm shut down temporarily? Explain.
> Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + 1/2q2 Marginal cost: MC = q where q is an individual firm’s quantity produced. The market demand curve for this product is Demand: QD = 120 – P where P is the
> Explain the difference between a firm’s revenue and its profit. Which do firms maximize?
> What are the main characteristics of a competitive market?
> What is marginal product, and what is meant by diminishing marginal product?
> What is the relationship between a firm’s total revenue, total cost, and profit?
> What is the marginal tax rate on a lump-sum tax? How is this related to the efficiency of the tax?
> Give two arguments why wealthy taxpayers should pay more taxes than poor taxpayers.
> Explain whether each of the following events increases, decreases, or has no effect on long-run aggregate supply. a. The United States experiences a wave of immigration. b. Congress raises the minimum wage to $15 per hour. c. Intel invents a new and more
> Purchasing-power parity holds between the nations of Ectenia and Wiknam, where the only commodity is Spam. a. In 2020, a can of Spam costs 4 dollars in Ectenia and 24 pesos in Wiknam. What is the exchange rate between Ectenian dollars and Wiknamian pesos
> A case study in the chapter analyzed purchasing power parity using the prices of Big Macs in several countries. Here are data for a few more countries: a. For each country, compute the predicted exchange rate in terms of the local currency per U.S. dolla
> Assuming a tax rate of 40 percent, compute the before-tax real interest rate and the after-tax real interest rate for each of the following cases. a. The nominal interest rate is 10 percent, and the inflation rate is 5 percent. b. The nominal interest ra
> The Tax Reform Act of 1986 eliminated the deductibility of interest payments on consumer debt (mostly credit cards and auto loans) but maintained the deductibility of interest payments on mortgages and home equity loans. What do you think happened to the
> Let’s consider the effects of inflation in an economy composed of only two people: Bob, a bean farmer, and Rita, a rice farmer. Bob and Rita both always consume equal amounts of rice and beans. In 2019, the price of beans was $1 and the price of rice was
> Between January 2012 and January 2019, U.S. employment increased by 17.3 million workers, but the number of unemployed workers declined by only 6.3 million. How are these numbers consistent with each other? Why might one expect a reduction in the number
> Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain. a. Your family takes out a mortgage and buys a new house. b. You use your $20
> A dozen eggs cost $0.88 in January 1980 and $1.77 in January 2018. The average hourly wage for production and nonsupervisory workers was $6.57 in January 1980 and $22.36 in January 2018. a. By what percentage did the price of eggs rise? b. By what percen
> A small nation idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: a. Using a method similar to the CPI, compute the percentage change in the overall price level. Use 2020 as the base year
> Suppose that people consume only three goods, as shown in this table: a. What is the percentage change in the price of each of the three goods? b. Using a method similar to the CPI, compute the percentage change in the overall price level. c. If you were
> The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2020, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2021, they spend a total of $225 for 7
> Consider the following data on the U.S. economy: a. What was the growth rate of nominal GDP between 1998 and 2018? b. What was the growth rate of the GDP deflator between 1998 and 2018? c. What was real GDP in 1998 measured in 2012 prices? d. What was re
> Below are some data from the land of milk and honey. a. Compute nominal GDP, real GDP, and the GDP deflator for each year, using 2020 as the base year. b. Compute the percentage change in nominal GDP, real GDP, and the GDP deflator in 2021 and 2022 from
> Three friends are choosing a TV show to watch. Here are their preferences: a. If the three friends try using a Borda count to make their choice, what would happen? b. Monica suggests a vote by majority rule. She proposes that they first choose between NC
> Are the following statements true or false? Explain in each case. a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.” b. “Certain talented people have a comparative advant
> The Affordable Care Act signed into law by President Obama in 2010 included the following two provisions: i. Insurance companies must offer health insurance to everyone who applies and charge them the same price regardless of a person’s preexisting healt
> State whether each of the following statements is true or false. Explain your answers. a. “All Giffen goods are inferior goods.” b. “All inferior goods are Giffen goods.
> Darius buys only milk and cookies. a. In year 1, Darius earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. Draw Darius’s budget constraint. b. Now suppose that all prices increase by 10 percent in year 2 and that Darius’s salary increase
> Raj consumes only cheese and crackers. a. Could cheese and crackers both be inferior goods for Raj? Explain. b. Suppose that cheese is a normal good for Raj while crackers are an inferior good. If the price of cheese falls, what happens to Raj’s consumpt
> Suppose there are two possible income distributions in a society of ten people. In the first distribution, nine people have incomes of $60,000 and one person has an income of $20,000. In the second distribution, all ten people have incomes of $50,000. a.
> Table 2 shows that income inequality in the United States has increased since 1970. Some factors contributing to this increase were discussed in Chapter 19. What are they?
> Imagine that someone offered you a choice: You could spend four years studying at the world’s best university, but you would have to keep your attendance there a secret. Or you could be awarded an official degree from the world’s best university, but
> College students sometimes work as summer interns for private firms or the government. Many of these positions pay little or nothing. a. What is the opportunity cost of taking such a job? b. Explain why students are willing to take these jobs. c. If you
> Some economists believe that the U.S. economy as a whole can be modeled with the following production function, called the Cobb–Douglas production function: Y = AK1/3L2/3, where Y is the amount of output, K is the amount of capital, L is the amount of la
> There is often litter along highways but rarely in people’s yards. Provide an economic explanation for this fact.
> Re-read the Counterpoint box that claims that how a business responds publicly to complaints or criticisms can easily descend into cliché. How valid are such views, and what could companies do to prevent their replies becoming meaningless?
> Banking customers often suffer digital banking failures and shutdowns, either because of security alerts or because the bank’s systems have failed. What is the damage to a bank’s reputation when such problems occur and how can the bank both learn from th
> Lucy is the COO of an outsourcing business that provides ‘back-office’ services to a range of companies. She believes that: Everything we do can be broken down into a process. It may be more straightforward in a manufacturing business, but the concept of
> Re-read the case example on Four Seasons and Zara. In terms of being either ‘better’ or ‘different’, how would you classify IKEA, the most successful furniture retailer ever, and Amazon, with whose website (almost) everyone is familiar? Justify your judg
> Some organizations believe that the well-known approaches to improvement (such as TQM, etc.) are, in fact, pre-packaged ‘solutions’ made up by selecting from a set of common ingredients. So, does this mean that anyone can simply pick out whatever element
> A transport services company provides a whole range of services to railway operators. Its reputation for quality is a valuable asset in its increasingly competitive market. We are continually looking for innovation in the way we deliver our services beca
> Think about the last time you used a high-customer-contact service such as a clinic, a hotel, or a restaurant. Sketch the service process, and try to determine which elements were subject to high levels of control. Were there any elements of the service
> Re-read the case example ‘If one customer wants it, maybe more do?’, on the Heywood Hill book- shop and its subscription service. In what way is this service different from the algorithm-driven recommendations that are used by many online retailers, such
> A conventional method of judging the effectiveness of any process is to assess the quality of its output, the speed with which it responds, the dependability of its response, its flexibility and its cost/efficiency. How could these aspects of performance
> Using the diagram shown in Figure 14.4, how would you characterize the development of retail banking services from conventional branch banking, through the use of call centers, to internet banking and mobile banking apps?
> If Rosemary goes ahead and builds a car park, how many car or bus spaces should it have?
> In the case example of the Ice hotel, where did the inspiration for the service come from? What lessons does this example have for the service innovation processes of other service organizations?
> Re-read the case example on Singapore Zoo. The chief executive of Singapore Zoo is keen to continue developing the zoo. Try to develop a new service concept for the zoo.
> When a video, taken by a fellow passenger, showed a bloodied and unconscious man being pulled off a United Airlines flight at O’Hare International Airport in Chicago, it caused a sensation on social media and other news outlets. The incident began when U
> A recent newspaper article13 criticized London arts venues for introducing ‘surge pricing’ by charging higher prices for blockbuster exhibitions at busy times. The piece said that venues such as the Royal Academy of Arts and the National Portrait Gallery
> One place where queues are not always enforced are bars, where people compete for attracting the attention of servers. People who jump the queue at the bar (even without meaning to) cause considerable frustration to customers who have been overlooked. Ho
> The idea of ‘pooling’ was described as increasing the efficiency of queuing. Why do you think that supermarkets do not use it?
> Re-read the case example ‘Demand fluctuation on London Underground’. How might Transport for London spread out demand from its peak periods?
> Suggest how the following three service operations might measure their capacity, outlining the problems in so doing: (a) A garden center that sells plants and gardening supplies; (b) A hospital; (c) An online fashion retailer.
> Construct a strategy map (strategic linkage model) for an organization with which you are familiar. How well do the objectives link with and support strategy? How well do the measures you use support your objectives?
> It is quite difficult to know exactly how long operators should be spending on each call. Sometimes a client really does need detailed advice or reassurance, at other times the call could be dealt with very quickly indeed. There’s a minimum amount of tim
> What would be the effects on the capacity management of the business of the three proposals for the future that Rosemary mentions (expanding the number of day visitors, promoting wedding packages and school visits)?
> A tour operator specializing in holidays for young people is concerned about the quality of service provided. Each month, the marketing manager reports on the number of complaints received. How could this be better reported to help the firm improve its s
> Common measures used by call centers are speed of response and call abandonment rate. Assess these measures as drivers of improvement.
> With many new ways of collecting data (most notably from social media), how can services make sure that all the data are useful?
> Re-read the case example of the Happy or not Company. Although the terminals have proved successful, what do you see as the disadvantages of adopting these terminals to gauge customer satisfaction?
> The Edinburgh Fringe, more accurately known as the Edinburgh Festival Fringe, is the world’s largest arts festival, lasting 25 days and featuring more. Than 55,000 performances of over 3,000 different shows across 317 venues. The scale
> The headquarters of a major creative agency offered a service to all its global subsidiaries, which included the preparation of a budget estimate that was submitted to potential clients when making a ‘pitch’ for new work. This service had been offered pr
> There have been a number of changes in medical process technology that have had a huge impact on the way healthcare operations manage themselves. In particular, telemedicine has challenged one of the most fundamental assumptions of medical treatment – wh
> In the case example ‘Robot receptionists? Robot careers?’ technology was used as a substitute for service people. What other advantages might such technologies bring?
> Re-read the case example on them should ice hospital. (a) Illustrate how hernia surgery has moved on from the time it was seen as difficult. (b) List some of the advantages of the move.
> When the management thinker and writer Charles Handy suffered a stroke, he had to spend time in hospital as he learned to walk, talk and even swallow again. He said that the experience taught him a valuable lesson about process objectives. As far as Mr.
> How does Tree grove currently cope with demand fluctuations, and what more could it do?
> Everyone wants children to be safe, for society to identify those who are ‘at risk’ and for those ‘in authority’ to put processes in place to ensure that no child ‘slips through the net’. The key challenge is that a large number of individuals and agenci
> Many retailers devise a policy on ethical sourcing, trying to stock items that conform to such things as workplace standards and business practices, health and safety conditions, human rights, legal systems, child labor, disciplinary practices, wages and
> Being a supplier in the airline catering business is tough. Meals must be of a quality that is appropriate for the class and type of flight, yet the airlines who are their customers are always looking to keep costs as low as possible, menus must change f
> Read the following statement by the chief service officer of an elevator maintenance company: We found ourselves unable to compete against the really big elevator manufacturers, yet we were great at providing maintenance services. Also the margin on new
> Re-read the case example ‘Vodafone brings back call-center jobs’. What are the advantages and dis- advantages of locating call centers in low-labor-cost areas?
> Re-read the case example on dark kitchens. (a) Why did this change to the home delivery network happen? (b) What points would you make if you had to make a case against the changes in the delivery network?
> Re-read the ‘Lunch delivery service of Mumbai’ case example: (a) What makes the Dab awale service so successful? (b) What do you see as the threats to the business as Indian society changes?
> Do you understand what are the principal underlying assumptions and values of your organization? To what extent do these assumptions and values support your service concept? Where there are mismatches, how might you engineer a reparative change to these
> Evaluate an organization’s website or annual report and assess the ‘language set’ in use. Also try to identify words and phrases that you would expect to see, but which are absent. After researching the language set, what can you say about the organizati
> Which elements of the cultural web can operations managers influence easily, and which might be more challenging? Interview a service operations manager and ask how they can influence their organization’s culture in order to provide better service.
> What are the main capacity constraints that Rosemary faces?
> Construct a cultural web for your university/college course. Which elements of the web help or hinder service delivery?
