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Principles of Economics 7th edition Fred M. Gottheil - Solutions
Why do some economists argue in favor of antitrust laws? What assumptions do they make concerning economies of scale?
What is the difference between the courts` use of the per se criterion and the rule of reason criterion in deciding whether firms violate antitrust laws?
Outline the principal legislation enacted by Congress since 1890 to monitor and control monopoly in the U.S. economy.
"There's no way you`ll get your bear if there's no bullet in your gun." How does this saying apply to the Antitrust Division of the Department of Justice?
If you wait long enough, monopolies disappear. Explain.
Who regulates the regulators? Is it a problem?
At the core of the externalities issue is the lack of clarity concerning property rights. Discuss.
Randy Seals believes that if government relied on voluntary contributions instead of taxing people, it would be more acceptable and just as effective in obtaining revenues. Discuss.
Everyone knows that cigarette smoking is harmful to your health. But is it also harmful to people who live or work among smokers? Discuss this issue in terms of the third-party economic externalities created and their relationship to the market's ability to allocate resources efficiently.
Describe the following in terms of generating positive, negative, or zero externalities: (a) a foot of snowfall in mid-January; (b) living a mile away from an international airport; (c) your neighbor painting a mural on the side of his house that faces yours; (d) your neighbor's watchdog, who is
Describe why externalities generate market failure.
What is a public good? How does it differ from a near-public good?
Why do economists believe government failure is inevitable?
Whether you're a dog lover or not, make the case for leash laws.
The market for flu shots during late fall is shown in the following table:Suppose the community derives a positive externality of $10 for every flu shot administered. What is the extent of market failure in this situation? What price and quantity does the market generate, and what price and
The market for oil-based paint is shown in the following table:Suppose the production of the paint creates a negative externality of $10 for each unit of paint, which is the cost of repairing the damage to the environment caused by the paint-generated pollution. What is the extent of market failure
Let's create a somewhat more complicated situation. The market for beeswax candles is shown in the following table:Suppose the community derives a positive externality of $10 per box. The bees pollinate the flowers, which adds value to the community's appearance. But at the same time, they are a
Canadians are worried. Many of their bright and educated young people head south to the United States to find employment. Why would they do that?
When the price of houses increases, the wage rates for housing construction workers increase. What is the connection?
What is the relationship between the law of diminishing returns and the downward slope of the marginal physical product curve?
Suppose the Chris Corpora Coal Mining Company currently employs 17 workers at $14.50 per hour, which is the prevailing wage rate in the perfectly competitive market for miners. Suppose also that the marginal revenue product of the seventeenth worker is $12.50. What should the firm do? Why? What
Farm workers' MRP in Canada keeps falling even though they keep producing more output. Explain.
Why might a farm worker in Zambia earn less than a farm worker in Canada?
Suppose Eastern European economies, following the collapse of Soviet power in Europe, begin to demand more farm goods from Canada. What impact, if any, would you expect this new demand to have on farm wage rates in Canada?
Suppose Zambian farmers begin to use more insecticides and chemical fertilizers. What impact would such uses, if successfully adopted, have on Zambian farm wage rates?
Recall the analysis of pollution costs in the previous chapter. How would pollution considerations--cleanup costs resulting from increased use of insecticides and chemical fertilizers in Zambia--affect Zambian farm wage rates? Hint: Consider price changes resulting from shifts in the supply curve
What is the relationship between a firm's marginal labor cost and the industry's supply curve of labor?
Suppose yesterday was your lucky day. You won $7 million in the Kentucky State Lottery, and the Charles Edwards Coal Mining Company (where you work) raised the wage rate from $12.50 to $17.50 per hour. How would you respond to these pieces of news? What would happen to the quantity of labor you
Two good friends, Mojo Nixon and Natalie Mer chant, grew up together, went to the same schools, ranked identically in IQ testing, excelled in every subject, and went on to earn Ph.D.'s. Natalie became a professor of finance; Mojo became a professor of English. Both teach at the same college.
If the United States and Mexico agree to free movement of workers across their borders, wage rates in some U.S. labor markets would fall, but wage rates in some Mexican labor markets would rise. Explain.
Suppose the price of leather gloves is $12. Graph a demand curve for leather-glove laborers from the following data concerning their total physical product:
Show what happens to the demand curve for labor when the price of gloves falls to $6. What happens when the price increases to $20?
Consider the following perfectly competitive labor market.How many laborers would be hired? At what wage rate?
The following tables show the demand and supply schedules in U.S. and Canadian labor markets: Canada United StatesWhat is the wage differential between Canada and the United States? What kinds of changes (directional) would you expect to occur in both the supply of and demand for labor in both
Monopolies earn monopoly profit. What is it that monopsonies earn? How is it derived?
If you were a union organizer, how would you go about persuading workers to join the union? You can assume they are familiar with the economic concepts discussed in this chapter.
How do unions change the supply curve of labor, and what effect does it have on the quantity of labor supplied and on the wage rate?
Why do unions strike? Do strikes always benefit workers?
Discuss the trade-offs unions face negotiating for higher wage rates and levels of employment.
Compare closed and union shops. If you were an employed union member, which type of shop would you prefer? Why? If you were a job seeking nonunion worker, which type of shop would you prefer? Why?
Compare craft and industrial unions. If you were a night security guard employed at Ford Motor Company during the 1920s, would it be likely that you would be a union member? Why or why not?
What acts are regarded as the most significant pieces of prolabor legislation?
(a) Labor unions are no longer male dominated. Discuss. (b) Women have other issues they would like to see put on the union agenda. Discuss.
The following table represents the David Narcizo Drum Company's supply curve of labor:Calculate the marginal labor cost corresponding to each wage rate and graph the MLC curve it forms.
The following table represents the David Narcizo Drum Company's MRP:Calculate the number of workers the firm will hire. What wage rate will workers receive?
Fill in the table and answer the following questions.a. How many workers will the firm hire? b. What wage rate will workers receive? c. What is the firm's return to monopsony power? d. Draw a graph that depicts the monopsony labor market of the table.
If you know how wage rates are determined, you should know how interest rates are determined. The same tools apply. Discuss.
You have many options concerning what to do with your income. You could spend it or save it or do some of both. What would motivate you to increase the quantity you save? How does your saving behavior relate to the loanable funds market?
The market for loanable funds is described in the following demand and supply schedule.Suppliers of loanable funds would prefer 14 per cent to any other interest rate in the table. But 14 percent is not what they will receive. Why not? Explain fully.
Graph the loanable funds market of question 3. Suppose the government imposes an interest rate ceiling of 12 percent. What consequences would the ceiling have on the loanable funds market?
What factors change the rate of interest?
What arguments justify people living off interest derived income?
What explains differential rent?
You don't have to work to be productive. Explain.
Suppose you were interested in buying the New York Yankees. If the Yankees generated an annual income of $30 million and if the rate of interest was 10 percent, what would be the present value of the New York Yankees? If the rate of interest fell to 5 percent, would you have to pay more, less, or
Winning an Olympic gold might generate more gold than the medal. Explain.
If the coal mining firms were able to get together and cut miners' wage rates in half, many coal miners would quit the mines. On the other hand, if major-league owners were able to get together and cut baseball salaries in half, very few of the ballplayers would quit baseball. Why?
When Sears decides to move from its downtown location to a shopping mall on the outskirts of town, some people suffer loss of rent, while others end up getting more rent. Why?
The souvenir shop next to Wrigley Field in Chicago sells sports banners for $5 each. The owner pays $1,000 monthly rent. Two blocks away from the baseball stadium, a souvenir shop sells the same banners for $3 each. The owner there pays $600 rent. Is the price of the banner at the shop next to the
Calculate, using the following table, the marginal revenue product of capital for each of the five quantities of loanable funds when the price of eggs is $0.10 per egg.
Calculate, using the following table, the missing rates of interest, annual revenues, and present values.
Calculate, using the following table, the total value of differential rent generated in the eco nomy when the market price per acre is $30.
How much wage-related rent is generated in each of the following cases?
How much wage-related rent is generated in the labor market when the equilibrium wage rate is $20?
From time immemorial, religious writers and philosophers have considered income inequality a troublesome fact of life and have offered ideas concerning that problem. Discuss.
Compare the arguments for greater income equality made by Rawls and Lerner.
Suppose an economy consists of five people whose combined income is $100,000. Their individual incomes are Leslie, $4,000; Lynn $8,000; Kristen, $18,000; Paul, $25,000; and Carol, $45,000. If the government creates a neg ative income tax system with a minimum income of $10,000 and a tax rate of 50
Use appropriate percentages to fill in the blank cells of the table that represents a set of data for a Lorenz curve.
Why would you expect the U.S. wealth distribu tion to be less equal than its income distribution?
What is a Lorenz curve? How does it illustrate income inequality?
What is the relationship between a Gini coefficient and a Lorenz curve?
The case for inequality can be made on the grounds that equality stymies economic growth. Explain.
The case for equality can be made on the grounds that it generates the greatest total utility for soci ety. Explain.
Suppose someone asked you to explain how an economy's performance is actually measured. What would you say?
The 1990s generated for the United States the longest prosperity phase of the twentieth century. What explains it? How did the economy fare in the first years of the twenty-first century?
Describe the phases of the business cycle. In what ways is the business cycle illustrated in Exhibit 1 like a roller-coaster ride? In what ways is it different?
What is the difference between nominal and real GDP?
What is a consumer price index? How is it constructed? Why does the index become increasingly unreliable over time?
What is aggregate demand? Draw an aggregate demand curve and explain its shape. What factors influence aggregate demand?
What is aggregate supply? Draw an aggregate supply curve and explain its shape. What factors influence aggregate supply?
What is demand-pull inflation? Draw a diagram illustrating such an inflation. Give an example.
What is cost-push inflation? What might cause it?
If the economy's macro-equilibrium position generates too high unemployment, what can the government do?
Calculate the GDP deflator for the following years for the Canadian economy, using 2001 as the base year.
Calculate the real GDP for the following years for the Australian economy, given data for nominal GDP and the GDP deflator (2001 is the base year).
Describe the clockwise and counterclockwise flows that make up the circular flow model of an economy.
Contrast the expenditure and income approaches to calculating GDP.
How does government fit into GDP accounting?
How does the problem of double counting arise in calculating GDP, and how is it corrected?
Distinguish between durable goods, nondurable goods, and services.
What is an investment good? Why are some investment goods unintended?
In what ways do NDP and national income pro vide more specific information about an econo my's performance than does GDP?
What are some of the limitations in using GDP as a measuring rod of our economic well-being?
If Madonna married her personal bodyguard, what effect might it have on national income?
Professor Kangoh Lee asks his students at Towson State University, "Suppose that in an economy, real consumption, real investment, and real government purchases remain the same from one year to another, while the real trade deficit increases. Can we conclude that real GDP must fall during the same
Use the following data to calculate GDP, GNP, NNP, national income, personal income, and personal disposable income.
Imagine a three-firm, three-stages-of-production economy that produces one final good: a desk. Calculate the value added at each stage of production.
What is the MPC? The MPS? What is the relationship between them?
How does autonomous consumption fit into the consumption equation?
Accepting the absolute income hypothesis, would you expect the MPC in the U.S. economy in 2011 to be higher, lower, or about the same as the MPC in the Haitian 2011 economy? Why? How would it compare to the MPC in the U.S. economy in 1950?
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