Question: Use supply and demand curves to depict

> Which of the following are benefits of international trade? Choose one or more answers from the choices shown. a. A more efficient allocation of resources. b. A higher level of material well-being. c. Gains from specialization. d. Promoting competition.

> Evaluate the effectiveness of artificial trade barriers, such as tariffs and import quotas, as a way to achieve and maintain full employment throughout the U.S. economy. How might such policies reduce unemployment in one U.S. industry but increase it in

> Why is each of these statements somewhat misleading? a. “Illegal immigrants take only jobs that no American wants.” b. “Deporting 100,000 illegal immigrants would create 100,000 job openings for Americans.”

> Briefly discuss the demand and supply factors that contribute to rising health costs. Specify how a. Asymmetric information b. Fee-for-service payments c. Defensive medicine d. Medical ethics might cause health care costs to rise.

> Do you agree or disagree? Explain your reasoning. “There need be no trade-off between equality and efficiency. An ‘efficient’ economy that yields an income distribution that many regard as unfair may cause those with meager incomes to become discouraged

> Explain the economic effects of price supports. Explicitly include environmental and global impacts in your answer. On what grounds do economists contend that price supports cause a misallocation of resources?

> Mexico has daily (rather than hourly) minimum wage laws. In 2016, the daily minimum wage in Mexico was about 73 pesos per day, and the exchange rate between Mexican pesos and U.S. dollars was about 17 pesos per dollar. a. In 2016, what was the Mexican m

> “The social desirability of any particular firm should be judged not on the basis of its market share but on the basis of its conduct and performance.” Make a counterargument, referring to the monopoly model in your statement.

> To fund its wars against Napoleon, the British government sold consol bonds. They were referred to as “perpetuities” because they would pay £3 every year in perpetuity (forever). If a citizen could purchase a consol for £25, what would its annual interes

> How does Henry George’s proposal for a single tax on land relate to the elasticity of the supply of land? Why are there so few remaining advocates of George’s proposal?

> Look back at Figure 2. In the union sector, the union’s ability to raise wages from Wn to Wu decreases total employment from N1 to N2. Thus N1 – N2 workers are displaced from the union sector and will seek employment in the nonunion sector. But suppose t

> What is meant by a progressive tax? A regressive tax? A proportional tax? Comment on the progressivity or regressivity of each of the following taxes, indicating in each case where you think the tax incidence lies: a. The federal personal income tax; b.

> Should a nation’s income be distributed to its members according to their contributions to the production of that total income or according to the members’ needs? Should society attempt to equalize income or economic opportunities? Are the issues of equi

> Explain how featherbedding and other restrictive work practices can reduce labor productivity. Why might strikes reduce the economy’s output less than the loss of production by the struck firms?

> True or false. When a labor market consists of a single monopsony buyer of labor interacting with a single monopoly seller of labor (such as a trade union), the resulting quantity of labor that is hired will always be inefficiently low.

> Assume a firm is a monopsonist that can hire its first worker for $6 but must increase the wage rate by $3 to attract each successive worker (so that the second worker must be paid $9, the third $12, and so on). a. Draw the firm’s labor supply and marg

> Describe wage determination in a labor market in which workers are unorganized and many firms actively compete for the services of labor. Show this situation graphically, using W1 to indicate the equilibrium wage rate and Q1 to show the number of workers

> Alice runs a shoemaking factory that utilizes both labor and capital to make shoes. Which of the following would shift the factory’s demand for capital? You can select one or more answers from the choices shown. a. Many consumers decide to walk barefoot

> Suppose that a monopoly firm finds that its MR is $50 for the first unit sold each day, $49 for the second unit sold each day, $48 for the third unit sold each day, and so on. Further suppose that the first worker hired produces 5 units per day, the seco

> What factors determine the elasticity of resource demand? What effect will each of the following have on the elasticity or the location of the demand for resource C, which is being used to produce commodity X? Where there is any uncertainty as to the out

> The long-run downward trend in commodity prices is consistent with the idea that: a. We are quickly running out of resources. b. Resource demands have been increasing faster than resource supplies. c. Birthrates will soon increase due to the falling cos

> An additional unit of Old Product X will bring Cindy an MU of 15 utils; an additional unit of New Product Y will bring Cindy an MU of 30 utils; and an additional unit of New Product Z will bring Cindy an MU of 40 utils. If a unit of Old Product X costs $

> Consider the effect that corporate profit taxes have on investing. Look back at Figure 15.4. Suppose that the r line is the rate of return a firm earns before taxes. If corporate profit taxes are imposed, the firm’s after-tax returns will be lower (and t

> Suppose that a government wants to reduce its economy’s dependence on coal and decides as a result to tax coal mining companies $1 per ton for every ton of coal that they mine. Assuming that coal mining companies treat this tax as an increase in extracti

> Consider an oligopoly industry whose firms have identical demand and cost conditions. If the firms decide to collude, then each one will want to produce the amount of output that it would if it were: a. A monopolistic competitor. b. A pure competitor. c

> Examine the following game tree. Fred and Sally are planning on running competing restaurants. Each must decide whether to rent space or buy space. Fred goes first at decision node F. Sally goes second at either decision node S1 or decision node S2 (depe

> Answer the following questions, which relate to measures of concentration: a. What is the meaning of a four-firm concentration ratio of 60 percent? 90 percent? What are the shortcomings of concentration ratios as measures of monopoly power? b. Suppose t

> True or False: A DVC that has little in the way of natural resources is destined to remain poor.

> Assume that a very tiny and very poor DVC has income per capita of $300 and total national income of $3 million. How large is its population? If its population grows by 2 percent next year while its total income grows by 3 percent, what will be its new i

> Explain how the absolute per capita income gap between rich and poor nations might increase, even though per capita income (or output) is growing faster in DVCs than in IACs.

> Suppose that a country has a trade surplus of $50 billion, a balance on the capital account of $10 billion, and a balance on the current account of -$200 billion. The balance on the capital and financial account will be: a. $7,200 billion. b. $1,200 bill

> China had a $214 billion overall current account surplus in 2012. Assuming that China’s net debt forgiveness was zero in 2012 (its capital account balance was zero), by how much did Chinese purchases of financial and real assets abroad exceed foreign pur

> Suppose that the current (first) generation consists of 1 million people, half of whom are women. If the total fertility rate is 1.3 and the only way people die is of old age, how big will the fourth generation (the great-grandchildren) be? How much smal

> Explain: “U.S. exports earn supplies of foreign currencies that Americans can use to finance imports.” Indicate whether each of the following creates a demand for or a supply of European euros in foreign exchange markets: a. A U.S. airline firm purchases

> Distinguish between nominal and real interest rates. Which is more relevant in making investment and R&D decisions? If the nominal interest rate is 12 percent and the inflation rate is 8 percent, what is the real rate of interest?

> In Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a

> The accompanying hypothetical production possibilities tables are for New Zealand and Spain. Each country can produce apples and plums. Plot the production possibilities data for each of the two countries separately. Referring to your graphs, answer the

> Distinguish among land-, labor-, and capital-intensive goods, citing an example of each without resorting to book examples. How do these distinctions relate to international trade? How do distinctive products, unrelated to resource intensity, relate to i

> The primary reason people immigrate to the United States is: a. To escape political or religious oppression back home. b. To reunite with family members. c. To improve earnings and living standards. d. None of the above.

> Differences in productivity are usually the major force behind differences in wages and unit labor costs. Suppose that a single unskilled worker at a pottery factory in Mexico can produce 1 mug per hour. By comparison, suppose that a single unskilled wor

> In what respect is the economic decision to move across international borders an investment decision? Why do economic migrants move to some countries but not to others? Cite an example of an explicit cost of moving; an implicit cost of moving. How do dis

> Which of the following make a person less likely to have health insurance? Select one or more answers from the choices shown. a. Working for a larger firm. b. Being a low-wage worker. c. Being employed. d. Having excellent health. e. Being chronically i

> The Federal tax code allows businesses but not individuals to deduct the cost of health insurance premiums from their taxable income. Consider a company named HeadBook that could either spend $5000 on an insurance policy for an employee named Vanessa or

> What are the “twin problems” of the health care industry as viewed by society? How are they related?

> Describe Thomas Malthus’ theory of human reproduction. Does it make sense for some species—say bacteria or rabbits? What do you think makes humans different?

> What is meant by investment in human capital? Use this concept to explain a. Wage differentials and b. The long-run rise of real wage rates in the United States.

> Some part of income inequality is likely to be the result of discrimination. But other factors responsible for inequality include (select as many as apply): a. Differences in abilities and talents. b. Differences in education and training. c. Different

> Imagine an economy with only two people. Larry earns $20,000 per year while Roger earns $80,000 per year. As shown in the following figure, the Lorenz curve for this two-person economy consists of two line segments. The first runs from the origin to poin

> Assume that Al, Beth, Carol, David, and Ed receive incomes of $500, $250, $125, $75, and $50, respectively. Construct and interpret a Lorenz curve for this five-person economy. What percentage of total income is received by the richest quintile and by th

> Suppose that both wheat and corn have an income elasticity of .1. a. If the average income in the economy increases by 2 percent each year, by how many percentage points does the quantity demanded of wheat increase each year, holding all other factors c

> What relationship, if any, can you detect between the facts that farmers’ fixed costs of production are large and the supply of most agricultural products is generally inelastic? Be specific in your answer.

> How would you expect antitrust authorities to react to: a. A proposed merger of Ford and General Motors. b. Evidence of secret meetings by contractors to rig bids for highway construction projects. c. A proposed merger of a large shoe manufacturer and a

> Carrot Computers and its competitors purchase touch screens for their tablet computers from several suppliers. The six makers of touch screens have market shares of, respectively, 19 percent, 18 percent, 14 percent, 16 percent, 20 percent, and 13 percent

> Describe the major provisions of the Sherman and Clayton acts. What government entities are responsible for enforcing those laws? Are firms permitted to initiate antitrust suits on their own against other firms?

> Suppose George made $20,000 last year and that he lives in the country of Harmony. The way Harmony levies income taxes, each citizen must pay 10% in taxes on their first $10,000 in earnings and then 50% in taxes on anything else they might earn. So given

> Do you think the overall level of R&D would increase or decrease over the next 20 to 30 years if the lengths of new patents were extended from 20 years to, say, “forever”? What if the duration were reduced from 20 years to, say, 3 years?

> When using a supply-and-demand model to illustrate how land rents are set, economists typically draw the supply curve as a vertical line because: a. The supply of land is fixed. b. The supply of land is perfectly inelastic. c. The quantity supplied of l

> Suppose in Fiscalville there is no tax on the first $10,000 of income, but a 20 percent tax on earnings between $10,000 and $20,000 and a 30 percent tax on income between $20,000 and $30,000. Any income above $30,000 is taxed at 40 percent. If your incom

> What do economists mean when they say government purchases are “exhaustive” expenditures whereas government transfer payments are “non-exhaustive” expenditures? Cite an example of a government purchase and a government transfer payment.

> It would cost the town of Irondale $50 million to build a gas-powered generator that could produce a maximum of 5 megawatts of electricity at 15 cents per hour. Another alternative would be for Irondale to build a $100 million coal-fired generator that c

> A coal-fired power plant can produce electricity at a variable cost of 4 cents per kilowatt hour when running at its full capacity of 30 megawatts per hour, 16 cents per kilowatt hour when running at 20 megawatts per hour, and 24 cents per kilowatt hour

> Demographers have been very surprised that total fertility rates have fallen below 2.0, especially because most people in most countries tell pollsters that they would like to have at least two children. Can you think of any possible economic factors tha

> In the 1980s land prices in Japan surged upward in a “speculative bubble.” Land prices then fell for 11 straight years between 1990 and 2001. What can we safely assume happened to land rent in Japan over those 11 years? Use graphical analysis to illustra

> Suppose that the demand for loanable funds for car loans in the Milwaukee area is $10 million per month at an interest rate of 10 percent per year, $11 million at an interest rate of 9 percent per year, $12 million at an interest rate of 8 percent per ye

> Explain why economic rent is a surplus payment when viewed by the economy as a whole but a cost of production from the standpoint of individual firms and industries. Explain: “Land rent performs no ‘incentive function’ for the overall economy.”

> Suppose that you are president of a newly established local union about to bargain with an employer for the first time. List the basic areas you want covered in the work agreement. Why might you begin with a larger wage demand than you actually are willi

> Property developers who build shopping malls like to have them “anchored” with the outlets of one or more famous national retail chains, like Target or Nordstrom. Having such “anchors” is obviously good for the mall developers because anchor stores brin

> Suppose that a car factory initially hires 1500 workers at $30 per hour and that each worker works 40 hours per week. Then the factory unionizes, and the new union demands that wages be raised by 10 percent. The firm accedes to that request in collective

> Suppose that you own a 10-acre plot of land that you would like to rent out to wheat farmers. For them, bringing in a harvest involves $30 per acre for seed, $80 per acre for fertilizer, and $70 per acre for equipment rentals and labor. With these inputs

> What percentage of wage and salary workers are union members? Is this percentage higher, or is it lower, than in previous decades? Which of the factors explaining the trend do you think is most dominant?

> Because a perfectly competitive employer’s MRC curve is ______________, it will hire ____________ workers than would a monoposony employer with the same MRP curve. a. Upsloping; more. b. Upsloping; fewer. c. Flat; more. d. Flat; fewer. e. Downsloping; m

> Complete the following labor supply table for a firm hiring labor competitively: a. Show graphically the labor supply and marginal resource (labor) cost curves for this firm. Are the curves the same or different? If they are different, which one is highe

> 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?