Question: Suppose that the government of China is

> Why is a firm in a purely competitive labor market a wage taker? What would happen if it decided to pay less than the going market wage rate?

> Complete the following labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market. a. How many workers will the firm hire if the market wage rate is $27.95? $19.95? Explain why the firm will not hire

> Suppose that marginal product tripled while product price fell by one-half in Table 16.1. What would be the new MRP values in Table 16.1? What would be the net impact on the location of the resource demand curve in Figure 16.1?

> In 2009 General Motors (GM) announced that it would reduce employment by 21,000 workers. What does this decision reveal about how GM viewed its marginal revenue product (MRP) and marginal resource cost (MRC)? Why didn’t GM reduce employment by more than

> A firm is considering three possible one-year investments, which we will name X, Y, and Z. • Investment X would cost $10 million now and would return $11 million next year, for a net gain of $1 million. • Investment Y would cost $100 million now and woul

> Construct a game-theory matrix involving two firms and their decisions on high versus low advertising budgets and the effects of each on profits. Show a circumstance in which both firms select high advertising budgets even though both would be more profi

> A firm faces the following costs. Its total cost of capital = $1,000; its price paid for labor = $12 per labor unit; and its price paid for raw materials = $4 per raw-material unit. a. Suppose the firm can produce 5,000 units of output this year by comb

> Contrast the older and the modern views of technological advance as they relate to the economy. What is the role of entrepreneurs and other innovators in technological advance? How does research by universities and government affect innovators and techno

> How does the economist’s use of the term “rent” differ from everyday usage? Explain: “Though rent need not be paid by society to make land available, rental payments are very useful in guiding land into the most productive uses.”

> Faceblock, Gargle+, and MyMace are rival firms in an oligopoly industry. If kinked-demand theory applies to these three firms, Faceblock’s demand curve will be: a. More elastic above the current price than below it. b. Less elastic above the current pri

> Consider whether the promises and threats made toward each other by duopolists and oligopolists are always credible (believable). Look at the figure below. Imagine that the two firms will play this game twice in sequence and that each firm claims the f

> Why do oligopolies exist? List five or six oligopolists whose products you own or regularly purchase. What distinguishes oligopoly from monopolistic competition?

> True or False: The term developing country (DVC) is applied to rich nations like the United States and Germany because their economies are always growing quickly by developing new technologies.

> Brenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm’s MRP for bricklayers is $22.25 per hour for each of the first seven bricklayers, $18.50 for an eighth brick layer, and $17.75 for a ninth bricklayer. Given

> Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000 workers at one steel plant were paid $20 per hour and in addition received heal

> Explain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying the long-run increase in average real-wage rates in the United States?

> True or False: Economists are unanimous that foreign aid greatly helps DVCs.

> Cindy is a baker and runs a large cupcake shop. She has already hired 11 employees and is thinking of hiring a 12th. Cindy estimates that a 12th worker would cost her $100 per day in wages and benefits while increasing her total revenue from $2,600 per d

> A delivery company is considering adding another vehicle to its delivery fleet, all the vehicles of which are rented for $100 per day. Assume that the additional vehicle would be capable of delivering 1500 packages per day and that each package that is d

> What is the significance of resource pricing? Explain how the factors determining resource demand differ from those determining product demand. Explain the meaning and significance of the fact that the demand for a resource is a derived demand. Why do re

> Listed below are several possible actions by firms. Write “INV” beside those that reflect invention, “INN” beside those that reflect innovation, and “DIF” beside those that reflect diffusion. a. An auto manufacturer adds “heated seats” as a standard fea

> Suppose a firm expects that a $20 million expenditure on R&D this year will result in a new product that will increase its profit next year by $1 million. a. What is the expected rate of return on this R&D expenditure? b. Suppose the firm can get a bank

> What is meant by technological advance, as broadly defined? How does technological advance enter into the definition of the very long run? Which of the following are examples of technological advance, and which are not: an improved production process; en

> Which of the following apply to oligopoly industries? Select one or more answers from the choices shown. a. A few large producers. b. Many small producers. c. Strategic behavior. d. Price taking.

> Assume a DVC and an IAC presently have real per capita outputs of $500 and $5000, respectively. If both nations have a 3 percent increase in their real per capita outputs, by how much will the per capita output gap change?

> Consider a “punishment” variation of the two-firm oligopoly situation shown in Figure 13.3 in the chapter. Suppose that if one firm sets a low price while the other sets a high price, then the firm setting the high price can fine the firm setting the low

> What are the three major cost-reducing features of the Singapore health care system? Which one do you think has the largest effect on holding down the price of medical care in Singapore? What element of the Singapore system is shared by the Whole Foods a

> List and discuss five policies that DVC governments might undertake to promote economic development and expansion of income per capita in their countries?

> What were the objections made by opponents of the PPACA?

> How does the PPACA attempt to ensure affordable insurance for the poor?

> Go to Table 1 in the Last Word and compute the ratio of average wealth to median wealth for each of the 7 years. What trend do you find? What is your explanation for the trend? The Federal estate tax redistributes wealth in two ways: by encouraging chari

> Why is the PPACA’s attempt to extend insurance coverage to all Americans so costly? How does the PPACA attempt to obtain the funds needed to extend insurance coverage to all Americans?

> Why have tech firms near monopolies in their own sectors sought to compete with tech firms that have extremely strong, near-monopoly positions in other sectors?

> What was the central point that Bastiat was trying to make in his imaginary petition of the candlemakers?

> What are health savings accounts (HSAs)? How might they reduce the over-consumption of health care resulting from traditional insurance? How might they introduce an element of price competition into the health care system?

> Use a demand and supply model to explain the impact of occupational segregation or “crowding” on the relative wage rates and earnings of men and women. Who gains and who loses from the elimination of occupational segregation? Is there a net gain or a net

> What are the four categories used by the World Bank to classify nations on the basis of national income per capita? Identify two nations for each of the four categories.

> What groups benefit and what groups lose from the U.S. sugar subsidy program?

> Which of the following statements are true? Which are false? Explain why the false statements are untrue. a. More immigrants arrive to the United States each year illegally than legally. b. The majority of legal immigrants are men. c. Over half the new

> Can backward induction be readily applied when a sequential game is presented as a payoff matrix?

> Explain the differences among microcredit, conditional cash transfers, and unconditional cash transfers. Then explain how effective each policy has been.

> American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota on apparel imports from China. Which policy would Chinese apparel manufacturers prefer? a. Tariff. b. Quota.

> What is offshoring of white-collar service jobs and how does that practice relate to international trade? Why has offshoring increased over the past few decades? Give an example (other than that in the textbook) of how offshoring can eliminate some Ameri

> What are a. Preferred provider organizations and b. Health maintenance organizations? In your answer, explain how each is designed to alleviate the overconsumption of health care.

> Males under the age of 25 must pay far higher auto insurance premiums than females in this age group. How does this fact relate to statistical discrimination? Statistical discrimination implies that discrimination can persist indefinitely, while the tast

> On what basis were the airlines found guilty of violating antitrust laws in the Airline Tariff Publishing case? What was the remedy? By contrast, why might it be hard to prosecute algorithmic collusion, which also uses prices posted electronically?

> Does a progressive tax system by itself guarantee that resources will be redistributed from the rich to the poor? Explain. Is the tax system in the United States progressive, regressive, or proportional? Does the tax-spending system in the United States

> Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the year. Assuming no inflation, what is the real interest rate? What would the interest rate be if the $250 of interest had been discounted at the time the lo

> An American company wants to buy a television from a Chinese company. The Chinese company sells its TVs for 1,200 yuan each. The current exchange rate between the U.S. dollar and the Chinese yuan is $1 = 6 yuan. How many dollars will the American company

> If in a given year the indexes of prices received and paid by farmers were 120 and 165, respectively, what would the parity ratio be? Explain the meaning of that ratio.

> Which of the following best describes the United States’ level of health care spending as compared to that of other nations? a. The lowest of all nations. b. A bit lower than average. c. Average. d. A bit higher than average. e. The highest of all nation

> Why might a firm charged with violating the Clayton Act, Section 7, try arguing that the products sold by the merged firms are in separate markets? Why might a firm charged with violating Section 2 of the Sherman Act try convincing the court that none of

> Distinguish between the benefits-received and the ability-to-pay principles of taxation. Which philosophy is more evident in our present tax structure? Justify your answer. To which principle of taxation do you subscribe? Why?

> If the current market price rises, does current extraction increase or decrease? What if the future market price rises? Do these changes in current extraction help to ensure that the resource is extracted and used when it is most valuable?

> True or false. As a capitalist economy, the vast majority of U.S. national income flows to the owners of capital.

> What are the major economic functions of the interest rate? How might the fact that many businesses finance their investment activities internally affect the efficiency with which the interest rate performs its functions?

> A principal is worried that her agent may not do what she wants. As a solution, she should consider: a. Commissions. b. Bonuses. c. Profit sharing. d. All of the above.

> Many of the lowest-paid people in society--for example, short-order cook--also have relatively poor working conditions. Hence, the notion of compensating wage differentials is disproved.” Do you agree? Explain.

> Why might a firm making a large economic profit from its existing product employ a fast-second strategy in relationship to new or improved products? What risks does it run in pursuing this strategy? What incentive does a firm have to engage in R&D when r

> True or false. Potential rivals may be more likely to collude if they view themselves as playing a repeated game rather than a one-time game.

> Why is there so much advertising in monopolistic competition and oligopoly? How does such advertising help consumers and promote efficiency? Why might it be excessive at times?

> Suppose that the price elasticity for hip replacement surgeries is 0.2. Further suppose that hip replacement surgeries are originally not covered by health insurance and that at a price of $50,000 each, 10,000 such surgeries are demanded each year. a. S

> Which of the following policies would economists consider to be actions that a DVC government might take that would improve growth prospects? Select one or more of the following: a. Helping to extend the banking system to the rural poor. b. Passing high

> Because real capital is supposed to earn a higher return where it is scarce, how do you explain the fact that most international investment flows to the IACs (where capital is relatively abundant) rather than to the DVCs (where capital is very scarce)?

> Diagram a market in which the equilibrium dollar price of 1 unit of fictitious currency zee (Z) is $5 (the exchange rate is $5 =Z1). Then show on your diagram a decline in the demand for zee. a. Referring to your diagram, discuss the adjustment options

> Suppose that a Swiss watchmaker imports watch components from Sweden and exports watches to the United States. Also suppose the dollar depreciates, and the Swedish krona appreciates, relative to the Swiss franc. Speculate as to how each would hurt the Sw

> Suppose that the opportunity-cost ratio for watches and cheese is 1C ≡1W in Switzerland but 1C ≡4W in Japan. At which of the following international exchange ratios (terms of trade) will Switzerland and Japan be willing to specialize and engage in trade

> Why is a quota more detrimental to an economy than a tariff that results in the same level of imports as the quota? What is the net outcome of either tariffs or quota for the world economy?

> True or False. Research indicates that immigration causes large decreases in the average American wage.

> What is a “brain drain” as it relates to international migration? If emigrants are highly educated and received greatly subsidized education in the home country, is there any justification for that country to levy a “brain drain” tax on them? Do you see

> Ralph will consume any health care service just as long as its MB exceeds the money he must pay out of pocket. His insurance policy has a zero deductible and a10 percent copay, so Ralph only has to pay 10 percent of the price charged for any medical proc

> List the special characteristics of the U.S. health care market and specify how each affects health care problems.

> Why would increased spending as a percentage of GDP on, say, household appliances or education in a particular economy be regarded as economically desirable? Why, then, is there so much concern about rising expenditures as a percentage of GDP on health c

> In the taste-for-discrimination model, an increase in employer prejudice against African-American workers would cause the discrimination coefficient to and the demand curve for African-American labor to shift. a. Decrease; right. b. Decrease; left. c. I

> What factors have contributed to increased income inequality since 1975?

> Because consumers as a group must ultimately pay the total income received by farmers, it makes no real difference whether the income is paid through free farm markets or through price supports supplemented by subsidies financed out of tax revenue.” Do y

> In the 1980s, PepsiCo Inc., which then had 28 percent of the soft-drink market, proposed to acquire the Seven-Up Company. Shortly thereafter the Coca-Cola Company, with 39 percent of the market, indicated it wanted to acquire the Dr Pepper Company. Seven

> True or false. The incidence of property taxes that are levied on rented houses and apartments is high—meaning that they are paid almost entirely by the landlords, who are billed by the government for those taxes.

> How do the top two categories of federal employment differ from the top two categories of local and state employment?

> Recall the model of nonrenewable resource extraction presented in Figure 19.7. Suppose that a technological breakthrough means that extraction costs will fall in the future (but not in the present). What will this do to future profits and, therefore, to

> Entrepreneurs are the residual claimants at their respective firms. This means that they: a. Only get paid if there is any money left over after all the other factors of production have been paid. b. Must bear the financial risks of running their firms.

> Here is the deal: You can pay your college tuition at the beginning of the academic year or the same amount at the end of the academic year. You either already have the money in an interest-bearing account or will have to borrow it. Deal, or no deal? Exp

> Manny owns a local fast-food franchise. Angel runs it for him. So in this situation, Manny is the ____________ and Angel is the ________________. a. Free rider; entrepreneur. b. Agent; principal. c. Principal; agent. d. Producer; consumer.

> Suppose that the United States has a Gini ratio of 0.41 while Sweden has a Gini ratio of 0.31. Which country has a more equal distribution of income? a. The United States. b. Sweden. c. They are actually equal.

> Have you ever worked for the minimum wage? If so, for how long? Would you favor increasing the minimum wage by a dollar? By two dollars? By five dollars? Explain your reasoning.

> A software company in Silicon Valley uses programmers (labor) and computers (capital) to produce apps for mobile devices. The firm estimates that when it comes to labor, MPL = 5 apps per month while PL = $1,000 per month. And when it comes to capital, MP

> To save money, some fast food chains are now having their customers place their orders at computer kiosks. Will the kiosks necessarily reduce the total number of workers employed in the fast food industry?  

> Learning how to use software takes time. So once customers have learned to use a particular software package, it is easier to sell them software upgrades than to convince them to switch to new software. What implications does this have for expected rates

> Collusive agreements can be established and maintained by: a. Credible threats. b. One-time games. c. Empty threats. d. First-mover advantage.

> Why might price collusion occur in oligopolistic industries? Assess the economic desirability of collusive pricing. What are the main obstacles to collusion? Speculate as to why price leadership is legal in the United States, whereas price-fixing is not.

> Compare a hypothetical DVC with a hypothetical IAC. In the DVC, average per capita income is $500 per year. In the IAC, average per capita income is $40,000 per year. If both countries have a savings rate of 10 percent per year, the amount of savings per

> As it relates to the vicious circle of poverty, what is meant by the saying “Some DVCs stay poor because they are poor”? Change the box labels as necessary in Figure 28.3 to explain rapid economic growth in countries such as South Korea and Chile. What f

> Suppose that the Fed is fixing the dollar-pound exchange rate at $2.50 = £1. If the Fed's reserve of pounds falls by £500 million, by how much would the supply of dollars increase, all other things equal?

> Return to problem 3 and assume that the exchange rate is fixed at 110. In year 1, what would be the minimum initial size of the U.S. reserve of loonies such that the United States could maintain the peg throughout the year? What about the minimum initial

> In 2015, Forbes magazine listed Bill Gates, the founder of Microsoft, as the richest person in the United States. His personal wealth was estimated to be $76 billion. Given that there were about 322 million people living in the United States that year,

> Suppose that a delivery company currently uses one employee per vehicle to deliver packages. Each driver delivers 50 packages per day, and the firm charges $20 per package for delivery. a. What is the MRP per driver per day? b. Now suppose that a union

> Generally speaking, how is the dollar price of euros determined? Cite a factor that might increase the dollar price of euros. Cite a different factor that might decrease the dollar price of euros. Explain: “A rise in the dollar price of euros necessarily

> Suppose that the opportunity-cost ratio for fish and lumber is 1F ≡ 1L in Canada but 2F ≡ 1L in Iceland. Then should specialize in producing fish while should specialize in producing lumber. a. Canada; Iceland. b. Iceland; Canada.

> What is an export supply curve? What is an import demand curve? How do such curves relate to the determination of the equilibrium world price of a tradable good?

> Migration between North Korea and South Korea has been prohibited since the end of the Korean War in 1953. South Korea is now much richer than North Korea and has a much higher marginal product of labor and a much higher wage rate than North Korea. If wo