Question: Tammy Hall is the mayor of a

> Identify following arguments about economic growth as being either anti-growth or pro-growth. a. Growth means worker burnout and frantic schedules. b. Rising incomes allow people to buy more education, medical care, and recreation. c. The Earth has only

> Assume that the total value of the following items is $600 billion in a specific year for Upper Mongoose: net exports = $50 billion; value of new goods and services produced in the underground economy = $75 billion; personal consumption expenditures = $3

> The following table shows nominal GDP and an appropriate price index for a group of selected years. Compute real GDP. Indicate in each calculation whether you are inflating or deflating the nominal GDP data. Nominal GDP, Price Index Real GDP, Year B

> Suppose that in 1984 the total output in a single-good economy was 7,000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume that in 2005 the price per bucket of chicken was $16 and that 22,000 buckets

> Using the following national income accounting data, compute (a) GDP, (b) NDP, and (c) NI. All figures are in billions. Compensation of employees U.S. exports of goods and services $194.2 17.8 Consumption of fixed capital 11.8 Government purchases 5

> Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and the income approaches. The resu

> Why might citizens interested in maximizing economic efficiency be happy to invest their government with the right to coerce them in at least some situations?

> Cite three examples of recent decisions that you made in which you, at least implicitly, weighed marginal cost and marginal benefit.

> What is the purpose of charging different groups of customers different prices? Supplement the three broad examples in the Last Word with two additional examples of your own. Hint: Think of price discounts based on group characteristics or time of purcha

> Research has found that an increase in the price of beer would reduce the amount of marijuana consumed. Is cross elasticity of demand between the two products positive or negative? Are these products substitutes or complements? What might be the logic be

> The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1, and +.5, respectively. Interpret these coefficients. What does it mean if an income elasticity coefficient is negative?

> What effect would a rule stating that university students must live in university dormitories have on the price elasticity of demand for dormitory space? What impact might this in turn have on room rates?

> If in some country personal consumption expenditures in a specific year are $50 billion, purchases of stocks and bonds are $30 billion, net exports are -$10 billion, government purchases are $20 billion, sales of second-hand items are $8 billion, and gro

> Explain why the choice between 1, 2, 3, 4, 5, 6, 7, and 8 “units,” or 1,000, 2,000, 3,000, 4,000, 5,000, 6,000, 7,000 and 8,000 movie tickets, makes no difference in determining elasticity in Table 6.1.

> 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 corr

> True or False. The median voter model explains why politicians so often stake out fringe positions that appeal only to a small segment of the electorate. Why?

> Suppose there are only five people in a society and each favors one of the five highway construction options listed in Table 4.4 (“No new construction” is one of the five options). Explain which of these highway option

> Explain the paradox of voting through reference to the accompanying table, which shows the ranking of three public goods by voters Jay, Dave, and Conan: Rankings Public Good Jay Dave Conan Courthouse 2nd choice 1st choice 3d choice School 3d choice 2

> Political advertising is often directed at winning over so-called swing voters, whose votes might go either way. Suppose that two political parties-the Freedom Party and the Liberty Party-disagree on whether to build a new road. Polling shows that of 1

> Look back at Figures 1a and 1b, which show the costs and benefits to voters Adams, Benson, and Conrad of two different public goods that the government will produce if a majority of Adams, Benson, and Conrad support them. Suppose that Adams, Benson, and

> Consider a corrupt provincial government in which each housing inspector examines two newly built structures each week. All the builders in the province are unethical and want to increase their profits by using substandard construction materials, but th

> Lorena likes to play golf. The number of times per year that she plays depends on both the price of playing a round of golf as well as Lorena’s income and the cost of other types of entertainment—in particular, how mu

> Currently, at a price of $1 each, 100 popsicles are sold per day in the perpetually hot town of Rostin. Consider the elasticity of supply. In the short run, a price increase from $1 to $2 is unit elastic (Es = 1.0). So how many popsicles will be sold ea

> Assume that a grower of flower bulbs sells its annual output of bulbs to an Internet retailer for $70,000. The retailer, in turn, brings in $160,000 from selling the bulbs directly to final customers. What amount would these two transactions add to perso

> What is the formula for measuring the price elasticity of supply? Suppose the price of apples goes up from $20 to $22 a box. In direct response, Goldsboro Farms supplies 1,200 boxes of apples instead of 1,000 boxes. Compute the coefficient of price elast

> Danny “Dimes” Donahue is a neighborhood’s 9-year-old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.50 each, he sells 100. At a price of $1.00 each, he sells 300. Is demand elastic or inelastic

> Suppose that the total revenue received by a company selling basketballs is $600 when the price is set at $30 per basketball and $600 when the price is set at $20 per basketball. Without using the midpoint formula, can you tell whether demand is elastic

> Investigate how demand elasticities are affected by increases in demand. Shift each of the demand curves in Figures 6.2a, 6.2b, and 6.2c to the right by 10 units. For example, point a in Figure 6.2a would shift rightward from location (10 units, $2) to (

> Look at the demand curve in Figure 6.2a. Use the midpoint formula and points a and b to calculate the elasticity of demand for that range of the demand curve. Do the same for the demand curves in Figures 6.2b and 6.2c using, respectively, points c and d

> Select all of the following that are true. To an economist, a coercive government can be useful in order to: a. Reallocate resources in order to improve efficiency. b. Fight negative externalities. c. Ensure low gasoline prices. d. Provide a low-risk e

> Consider a specific example of the special-interest effect and the collective-action problem. In 2012, it was estimated that the total value of all corn‐production subsidies in the United States totaled about $3 billion. The population of the United Sta

> Suppose that there are 1 million federal workers at the lowest level of the federal bureaucracy and that above them there are multiple layers of supervisors and supervisors-of-supervisors. Assume that each higher level is one-tenth the size of the one b

> “The problem with our democratic institutions is that they don’t correctly reflect the will of the people! If the people-rather than self-interested politicians or lobbyists-had control, we wouldn’t have to worry about government taking actions that don

> “Majority voting ensures that government will produce only those public goods for which benefits exceed costs.” Why?

> Suppose that annual output in year 1 in a 3-good economy is 3 quarts of ice cream, 1 bottle of shampoo, and 3 jars of peanut butter. In year 2, the output mix changes to 5 quarts of ice cream, 2 bottles of shampoo, and 2 jars of peanut butter. If the pri

> Explain how affirmative and negative majority votes can sometimes lead to inefficient allocations of resources to public goods. Is this problem likely to be greater under a benefits‐received or an ability‐to‐pay tax system? Use the information in Figures

> Draw a production possibilities curve with public goods on the vertical axis and private goods on the horizontal axis. Assuming the economy is initially operating on the curve, indicate how the production of public goods might be increased. How might the

> Draw a supply and demand graph and identify the areas of consumer surplus and producer surplus. Given the demand curve, what impact will an increase in supply have on the amount of consumer surplus shown in your diagram? Explain why.

> Suppose the cross elasticity of demand for products A and B is +3.6 and for products C and D is -5.4. What can you conclude about how products A and B are related? Products C and D?

> In 2015, Paul Gauguin's painting When Will You Marry sold for $300 million. Portray this sale in a demand and supply diagram and comment on the elasticity of supply. Comedian George Carlin once mused, “If a painting can be forged well enough to fool some

> How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? a. Price falls and demand is inelastic. b. Price rises and demand is elastic. c. Price rises and supply is elastic. d.

> Calculate total-revenue data from the demand schedule in review question 1. Graph total revenue below your demand curve. Generalize about the relationship between price elasticity and total revenue.

> What are the major determinants of price elasticity of demand? Use those determinants and your own reasoning in judging whether demand for each of the following products is probably elastic or inelastic: (a) bottled water; (b) toothpaste; (c) Crest to

> Suppose that the total revenue received by a company selling basketballs is $600 when the price is set at $30 per basketball and $600 when the price is set at $20 per basketball. Without using the midpoint formula, identify whether demand is elastic, ine

> How do the concepts of pork-barrel politics and logrolling relate to the items listed in the Last Word?

> Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of

> Critique: “Thank goodness we have so many government regulatory agencies. They keep Big Business in check.”

> ___________________ occur when politicians commit to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures. a. Budget deficits b. Debt Crises c. Loan guarantees d. Unfunded

> A few hundred U.S. sugar makers lobby the U.S. government each year to make sure that it keeps taxing imported sugar at a high rate. They do so because the policy drives up the domestic price of sugar and increases their profits. It is estimated that the

> To an economist, any government program is too big if an analysis of that program finds that MB _______ MC. a. Is greater than b. Is less than c. Is equal to d. Is less than twice as large as e. Is more than twice as large as

> Think back to the gold standard period.  If the United States suffered a recession, to what degree could it engage in expansionary monetary policy?

> Suppose Zeeland pegs its currency, the zee, at 1 zee = 36 grains of gold while Aeeland pegs its currency, the aeellar, at 1 aellar = 10 grains of gold. a. What would the exchange rate be between the zee and the aellar? b. How many aellars could you get

> True or False: Computers and increased global competition have retarded economic growth in recent decades.

> Suppose that just by doubling the amount of output that it produces each year, a firm’s per-unit production costs fall by 30 percent. This is an example of: a. Economies of scale. b. Improved resource allocation. c. Technological advance. d. The demand

> Compare and contrast the market monetarist 5-percent target for nominal GDP growth with the older, simpler monetary rule advocated by Milton Friedman.

> Refer to Figure 26.1b and assume that price is fixed at $37,000 and that Buzzer Auto needs 5 workers for every 1 automobile produced. If demand is DM and Buzzer wants to perfectly match its output and sales, how many cars will Buzzer produce and how many

> Explain: “Politicians would make more rational economic decisions if they weren’t running for reelection every few years.”

> You have just been elected president of the United States, and the present chairperson of the Federal Reserve Board has resigned. You need to appoint a new person to this position, as well as a person to chair your Council of Economic Advisers. Using Tab

> Explain the difference between “active” discretionary fiscal policy advocated by mainstream economists and “passive” fiscal policy advocated by new classical economists. Explain: “The problem with a balanced-budget amendment is that it would, in a sense,

> Use the equation of exchange to explain the rationale for a monetary rule. Why will such a rule run into trouble if V unexpectedly falls because of, say, a drop in investment spending by businesses?

> State and explain the basic equation of monetarism. What is the major cause of macroeconomic instability, as viewed by monetarists?

> Craig and Kris were walking directly toward each other in a congested store aisle. Craig moved to his left to avoid Kris, and at the same time Kris moved to his right to avoid Craig. They bumped into each other. What concept does this example illustrate?

> Briefly describe the difference between a so-called real business cycle and a more traditional “spending” business cycle.

> How might relationships between so-called insiders and outsiders contribute to downward wage inflexibility?

> What is an efficiency wage? How might payment of an above-market wage reduce shirking by employees and reduce worker turnover? How might efficiency wages contribute to downward wage inflexibility, at least for a time, when aggregate demand declines?

> According to mainstream economists, what is the usual cause of macroeconomic instability? What role does the spending-income multiplier play in creating instability? How might adverse aggregate supply factors cause instability, according to mainstream ec

> Real GDP equals _________ times _________. LO4 a. Average hours of work; quantity of capital. b. Average hours of work; allocative efficiency. c. Labor input; labor productivity. d. Natural resources; improvements in technology.

> Assume that a national restaurant firm called BBQ builds 10 new restaurants at a cost of $1 million per restaurant. It outfits each restaurant with an additional $200,000 of equipment and furnishings. To help partially defray the cost of this expansion,

> Suppose that the equation for the SLM is Y = 0.05 + 0.04X, where Y is the average expected rate of return, 0.05 is the vertical intercept, 0.04 is the slope, and X is the risk level as measured by beta. What is the risk-free interest rate for this SML? W

> Suppose initially that two assets, A and B, will each make a single guaranteed payment of $100 in 1 year. But asset A has a current price of $80 while asset B has a current price of $90. a. What are the rates of return of assets A and B at their current

> Consider an asset that costs $120 today. You are going to hold it for 1 year and then sell it. Suppose that there is a 25 percent chance that it will be worth $100 in a year, a 25 percent chance that it will be worth $115 in a year, and a 50 percent chan

> Suppose that a risk-free investment will make three future payments of $100 in one year, $100 in two years, and $100 in three years. If the Federal Reserve has set the risk-free interest rate at 8 percent, what is the proper current price of this investm

> Suppose that you desire to get a lump sum payment of $100,000 two years from now. Rounded to full dollars, how many current dollars will you have to invest today at a 10 percent interest to accomplish your goal?

> Suppose that you invest $100 today in a risk-free investment and let the 4 percent annual interest rate compound. Rounded to full dollars, what will be the value of your investment 4 years from now?

> Identify each of the following situations as something that either promotes growth or retards growth. a. Increasing corruption allows government officials to steal people’s homes. b. A nation introduces patent laws for the first time. c. A court order s

> True or False: Countries that currently have low real GDPs per capita are destined to always have lower living standards than countries that currently have high real GDPs per capita.

> In 1820 living standards in various places around the globe were _________ they are today. a. More widely varying than. b. Just as widely varying as. c. Less widely varying than.

> If real GDP grows at 7 percent per year, then real GDP will double in approximately _________ years. a. 70. b. 14. c. 10. d. 7.

> A mathematical approximation called the rule of 70 tells us that the number of years that it will take something that is growing to double in size is approximately equal to the number 70 divided by its percentage rate of growth. Thus, if Mexico’s real GD

> True or false. The law of diminishing marginal utility predicts the consumption behavior of addicts quite well.

> Suppose that with a budget of $100, Deborah spends $60 on sushi and $40 on bagels when sushi costs $2 per piece and bagels cost $2 per bagel. But then, after the price of bagels falls to $1 per bagel, she spends $50 on sushi and $50 on bagels. How many p

> Let MUA = z = 10 - x and MUB = z = 21 - 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B—that is, x + y = 10. Ho

> You are choosing between two goods, X and Y, and your marginal utility from each is as shown in the table below. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? Wh

> Columns 1 through 4 in the table below show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the prices of

> Suppose that Omar’s marginal utility for cups of coffee is constant at 1.5 utils per cup, no matter how many cups he drinks. On the other hand, his marginal utility per doughnut is 10 for the first doughnut he eats, 9 for the second he eats, 8 for the th

> John likes Coca-Cola. After consuming one Coke, John has a total utility of 10 utils. After two Cokes, he has a total utility of 25 utils. After three Cokes, he has a total utility of 50 utils. Does John show diminishing marginal utility for Coke or does

> Mylie’s total utility from singing the same song over and over is 50 utils after one repetition, 90 utils after two repetitions, 70 utils after three repetitions, 20 utils after four repetitions, -50 utils after five repetitions, and -200 utils after six

> In what way is criminal behavior similar to consumer behavior? Why do most people obtain goods via legal behavior as opposed to illegal behavior? What are society's main options for reducing illegal behavior?

> Rank each of the following three gift possibilities in terms of how much utility they are likely to bring and explain your reasoning.  A store-specific gift card worth $15, a $15 item from that specific store, and $15 of cash that can be spent anywh

> Suppose that Glitter Gulch, a gold mining firm, increased its sales revenues on newly mined gold from $100 million to $200 million between one year and the next. Assuming that the price of gold increased by 100 percent over the same period, by what numer

> A “mathematically fair bet” is one in which the amount won will on average equal the amount bet, for example when a gambler bets, say, $100 for a 10 percent chance to win $1,000 ($100 = .10 x $1,000). Assuming diminishing marginal utility of dollars, exp

> Answer the following questions, which relate to the aggregate expenditures model: LO8 a. If C is $100, Ig is $50, Xn is –$10, and G is $30, what is the economy’s equilibrium GDP? b. If real GDP in an economy is currently $200, C is $100, Ig is $50, Xn is

> Refer to the accompanying table in answering the questions that follow: a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? What will be the consequence of this gap? By

> Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Recall also

> Refer to columns 1 and 6 in the table for problem 5. Incorporate government into the table by assuming that it plans to tax and spend $20 billion at each possible level of GDP. Also assume that the tax is a personal tax and that government spending does

> Assume that, without taxes, the consumption schedule of an economy is as follows: a. Graph this consumption schedule and determine the MPC. b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all level

> The data in columns 1 and 2 in the accompanying table are for a private closed economy: a. Use columns 1 and 2 to determine the equilibrium GDP for this hypothetical economy. b. Now open up this economy to international trade by including the export an

> Suppose that a certain country has an MPC of .9 and a real GDP of $400 billion. If its investment spending decreases by $4 billion, what will be its new level of real GDP?

> By how much will GDP change if firms increase their investment by $8 billion and the MPC is .80? If the MPC is .67?

> Using the consumption and saving data in problem 1 and assuming investment is $16 billion, what are saving and planned investment at the $380 billion level of domestic output? What are saving and actual investment at that level? What are saving and plann