5 Steps To A 5 AP Macroeconomics 2014-2015 2015 Edition Eric Dodge - Solutions

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For much of the last 20 years, China’s GDP has grown around 10% per year but in recent years has fallen to around 6% per year, which is still much higher than the average U.S. growth rate in recent years of about 2% per year. Why would a slowdown in China’s GDP growth be a significant concern
Suppose that a new method of calculating GDP allows for reductions in GDP as a result of the severity of environmental degradation in a country. If this method is used, which of the following countries might experience the greatest adjustment to their GDP calculation: India, Germany, or Iceland?
Among the major spending categories that make up GDP, why is gross private domestic investment (GPDI) much more volatile than personal consumption expenditures over the business cycle? In your response, provide two examples of an investment purchase that may be put on hold during a recession that
GDP and GNP are two different measures of the overall value of production in an economy. Suppose that a country’s GDP is much greater than its GNP. What does that mean in terms of investment in and out of the country?
Critics of the way GDP is measured argue that it fails to fully account for“intangibles” in knowledge-based goods. For example, the value of books are counted in the year they were produced, but when those books are lent out in a library or resold in the used book market, it does not add to GDP
As a percentage of GDP, government spending tends to increase during recessions and decrease during times of economic expansion. Explain why government spending tends to change depending on the phase of the business cycle and how that affects spending as a percentage of GDP.
Explain how it is possible for an economy in the recovery phase of the business cycle to have a lower GDP and a higher unemployment rate than when it was in the recession phase of the business cycle.
What does GDP per capita measure? Why is it not a precise measure of a typical person’s standard of living in a country?
Explain why GDP can be computed using either the expenditures or income approach.
Why does GDP accounting include only the final value of goods and services produced? What would be the problem if intermediate products were included?
Describe the circular flow diagram. Why must all income equal spending in the economy?
Explain the key problem with the way the NBER dates recessions and recoveries?
How are business cycles defined? Describe the four phases of business cycles.
Suppose the U.S. government places a price ceiling on the sale of gasoline at $2 per gallon, as shown in the accompanying figure.1 Would a shortage or surplus result? How large is it?2 Calculate the effects of this policy in terms of the changes in consumer surplus and producer surplus.3 How much
Consider the market shown in the following graph.The graph plots Quantity in thousands ranging from 0 to 12 in increments of 2 along the horizontal axis, and Price in dollars ranging from 0 to 30 in increment of 5 along the vertical axis. A supply curve S with a positive slope intersects a demand
In 2018, Governor Baker of Massachusetts signed a bill to raise the state’s minimum wage to $15 per hour by 2023 (“Massachusetts Governor Signs Bill Raising Minimum Wage to $15,” The Hill, June 29, 2018). Proponents argue that this policy helps the working poor who hold full-time jobs yet are
Over the past few years, several U.S. states have either legalized recreational marijuana or at least decriminalized its use (“Would Legalizing Marijuana Help the Economy?,” Debate.org). Proponents argue that legalizing the use of marijuana would help the economy by boosting economic activity
The U.S. Department of Labor reports that of the roughly 150 million people employed, just over half are paid by the hour, but fewer than 5% earn the minimum wage or less; 95% of wage earners earn more. And of those earning the minimum wage or less, 25% are teenagers living at home. If so few
In cities around the country, the government provides assistance to families with low incomes to rent apartments at prices capped by the U.S. Department of Housing and Urban Development (HUD), essentially setting a price ceiling on apartments. These designated apartments tend to rent quickly, and
Government and employer subsidies to reduce the price of health insurance have important benefits to the individual in terms of improved health. In addition, society overall can benefit from higher levels of health care coverage. Provide three examples of external benefits that may result from
Over the past decade, many American candy companies, including The Hershey Company, Brach’s Confections, and Ferrara Candy Company, opened factories in Mexico and Canada to produce candy that is then shipped back to the United States for sale. Although lower wages in Mexico might explain part of
Luigi’s is the only pizzeria in a small town in northern Alaska. It is constantly busy, but there is never a wait for a table. One of Luigi’s friends suggests that he would earn much more money if he raised his menu prices by 25% because no one is likely to open a new pizzeria in the near
An increasing number of charities have turned to online auctions as a way to raise money by selling unique experiences donated by celebrities (such as a meet-and-greet with a celebrity before a concert or a walk-on role on a television show). Why would the use of auctions lead to a better outcome
Why does the quantity of public college education determined in a free market(without government intervention) represent a market failure?
If a price floor is reduced toward equilibrium but not below it, explain what happens to the total surplus and deadweight loss.
Why does an effective price ceiling appear below the equilibrium rather than above it?
Explain why deadweight loss can occur with a price below equilibrium even when some consumers benefit from it.
Using the following graph, show what happens to consumer surplus when a new technology reduces the cost of production. Price Po e 1 0 Q Quantity Do
Describe how consumer surplus and producer surplus are measured.
The following figure shows the supply and demand for strawberries. Answer the questions that follow.The graph plots a supply curve labeled S 0 with a positive slope, which extends between (7, 0.75) and (50, 5) approximately and a demand curve labeled D 0 with a negative slope, which extends between
A popular tradition when traveling to Hawaii is to receive a lei, a wreath of flowers to welcome guests. Although a lei can be made of flowers, leaves, nuts, or even candy and money, orchids remain the most popular flower used to create them. Suppose that supply and demand in the orchid lei market
In 2014, self-balancing scooters (known as hoverboards) saw a huge spike in sales as their popularity rose and more companies started producing them. In 2015, a safety risk was exposed when it was reported that over 100 incidences of hoverboards catching fire or exploding occurred, causing
In January 2018, the online ticket market StubHub reported record high average prices for Super Bowl tickets as the Minnesota Vikings advanced through the playoffs and was one game away from playing in the Super Bowl in their home stadium in Minneapolis. However, when the Vikings lost to the Eagles
Over the past decade, cruise ship companies have dramatically increased the number of mega-ships (those that carry 3,000 passengers or more), increasing the supply of cruises. At the same time, the popularity of cruising has increased among consumers, increasing demand. Explain how these two
Disneyland has an exclusive members-only club called Club 33 where celebrities and wealthy Disney fans dine on fine food. Although annual membership fees are reported to be upwards of $30,000, there is still a 14-year waiting list to join. How would this market for memberships be represented in a
Several medical studies have shown that drinking red wine in moderation is good for the heart. How would such a study affect the public’s demand for wine? Would it have an impact on the type of grapes planted in new vineyards?
Using the accompanying figures, answer the following questions On the Demand panel:Show an increase in demand and label it D1 Show a decrease in demand and label it D2 Show an increase in quantity demanded.Show a decrease in quantity demanded.What causes demand to change?What causes quantity
Suppose the price of monthly data plans required to access the Internet anywhere using a tablet computer falls. How would this affect the market for tablet computers?
Suppose that high temperatures and a lack of rain in Wisconsin causes a shortage of cranberries, leading to a rise in cranberry prices. Explain how this would affect the equilibrium price and quantity for other products that use cranberries, such as cranberry sauce and cranberry juice?
Suppose the market for tomatoes is in equilibrium and events occur that simultaneously shift both the demand and supply curves to the right. Is it possible to determine how the equilibrium price and/or quantity would change? Explain.
Explain how an increase in the price of organic onions can affect the supply of organic tomatoes that use the same land to grow. How will this affect the equilibrium price and quantity of organic tomatoes?
If incomes are rising in an economy, why would we see a decrease in demand for certain goods?
Assume there is a positive relationship between aging and cholesterol levels. As the world population ages, will the demand for cholesterol drugs increase, decrease, or remain the same? Would this cause a change in demand or a change in quantity demanded?
Provide an example of a factor that might increase the demand for frozen slushies.What might decrease the demand for frozen slushies?
Product prices give consumers and businesses a lot of information besides just the price. What kinds of information?
The following table shows the potential output combinations of oranges and jars of prickly pear jelly (from the flower of the prickly pear cactus) for Florida and Arizona.
Iceland and Denmark both produce skis and sleds. Iceland can produce 3 skis or 6 sleds using one day of labor, while Denmark can produce 4 skis or 12 sleds using one day of labor. Which country has an absolute advantage in producing skis?Sleds? Which country has a comparative advantage in producing
In 2017, a $500 million private-public initiative was announced for the purpose of boosting STEM (science, technology, engineering, and math) education, as the United States continues to fall behind other industrialized nations in student achievement in these fields. How would spending on STEM
In 2017, Hurricane Harvey caused more than $100 billion in damage to homes, businesses, and farms in Texas and Louisiana. The production capacity of this region was subsequently affected for several months. Explain how such a natural disaster can affect a region’s PPF. How might it affect
China’s rising middle class has resulted in a surge of luxury food imports such as lobsters from the United States. China’s demand for U.S. lobsters is so great that fishermen in Maine (where most U.S. lobsters are caught) have a tough time filling orders. Explain how China’s increased demand
If specialization and trade as discussed in this chapter lead to a win-win situation in which both countries gain, why is there often opposition to trade agreements and globalization?
Why is it that the United States uses heavy street-cleaning machines driven by one person to clean the streets, while China and India use many people with brooms to do the same job?
The United States has an absolute advantage in making many goods, such as short-sleeved golf shirts. Why do Indonesia and Bangladesh make these shirts and export them to the United States?
Describe how a country producing more capital goods than consumption goods ends up in the future with a PPF that is farther out than that of a country that produces more consumption goods and fewer capital goods.
Innovation and technology has allowed for new forms of biodegradable plastics to be created that are less harmful to the environment. How might such inventions impact production efficiency and allocative efficiency (if at all) of industries that use a lot of plastics, such as the construction and
How can a country that does not have an absolute advantage in producing goods still benefit from trade?
List three factors that can contribute to an economy’s growth.
How would unemployment be shown on the PPF?
Explain the important difference between a straight-line PPF and a PPF that is concave to (bowed away from) the origin.
In which of the three basic questions facing any society does technology play the greatest role?
When can an economy increase the production of one good without reducing the output of another?
At your local family fun center, miniature golf is $12 per person for unlimited rounds in a day, while each go-kart session is $8. If you played three rounds of miniature golf and rode the go-karts three times, what was the marginal cost of the third round of miniature golf? What was the marginal
Suppose your favorite band is on tour and coming to your area. Tickets are $100, and you take a day off from work for which you could have earned $60. What is your opportunity cost of going to the concert?
In 2018, Seattle and San Francisco passed laws banning the use of plastic disposable straws because they are harmful to the environment (because plastic does not easily biodegrade) and to marine life (which ingest straws that end up in the ocean). But opponents point out that such bans may result
The New York Times reported in an article titled “What the Top 1% of Earners Majored In” that 8.2% of Americans who majored in economics for their undergraduate degree are in the top 1% of salary earners. Only those who majored in pre-med had a higher percentage in the top 1%. What might be
Some colleges and universities charge tuition by the credit hour, while others charge tuition by the term, allowing students to take as many classes as they desire. How do these tuition structures affect the incentives students face when deciding how many classes to take? Provide an example of a
Because the U.S. government wants to reduce the nation’s reliance on fossil fuels, greater use of solar panels has been encouraged among households and businesses. However, the cost of installing solar panels can be prohibitively expensive for most people. Because people follow incentives, what
Most amusement parks in the United States charge a fixed price for admission, which includes unlimited roller coaster rides for the day. Some people attempt to ride the roller coasters as often as possible in order to maximize the value of their admission. Why is riding a roller coaster at an
The black rhinoceros is extremely endangered. Its horn is considered a powerful aphrodisiac in many Asian countries, and a single horn fetches many thousands of dollars on the black market, creating a great incentive for poachers. Unlike other stories of endangered species, this one might have a
Stores depend on feedback from their customers as a way to improve their business practices and to market their products. To encourage customers to offer feedback, stores will sometimes offer an incentive, such as a discount on a future purchase or additional reward points in a frequent shopper
Many companies offer employees health savings accounts (HSAs) instead of traditional health care plans. HSAs provide each employee with money (usually between $500 and $1,000 per year) that can be used for any health care expense but then requires employees to cover a much higher portion of
Why do markets typically lead to an efficient outcome for buyers and sellers?
What is the incentive to spend four years of one’s life and tens of thousands of dollars to earn a college degree?
You normally stay at home on Wednesday nights and study. Next Wednesday night, your best friend is having his big 21st birthday party. What is the opportunity cost of going to the party?
What is the difference between a positive question and a normative question?
Does your going to college have anything to do with expanding choices or reducing scarcity? Explain.
What is wrong with the statement “Economics is everything to do with money”?
Two rival firms operate in an oligopoly and, once a year, choose an advertising strategy. The firms can choose between an expensive television and radio advertising campaign (costly ads) or an inexpensive direct-mail advertising campaign (cheap ads). Television and radio cost more but reach more
Assume the following about the market for cigarettes:• Cigarettes are sold in a competitive market.• Cigarettes have no close substitute.• The demand for cigarettes is price inelastic.Suppose now that the government imposes a per unit excise tax on producers of cigarettes.(A) Using a
Salmon and tuna are substitutes in perfectly competitive markets that are experiencing long-run equilibrium.(A) Suppose that an unforeseen change in the weather patterns of the Pacific Ocean dramatically reduces the salmon population while leaving the tuna populations unaffected.In a correctly
Because of the free-rider effect, the private marketplace tends to(A) provide the allocatively efficient amount of a public good.(B) produce too much of a public good, requiring the government to intervene and tax the production of it.(C) produce a public good in the amount where the marginal
Which of the following scenarios is the best example of a positive externality?(A) Your neighbor has a swimming pool and throws loud late-night parties.(B) Your neighbor has a swimming pool and allows you free access.(C) Your neighbor has a swimming pool and the powerful chlorine odor blows into
The U.S. government collects tax revenue, buys military equipment from many private firms, and uses this equipment to provide national defense to all Americans. This is a good example of(A) a natural monopoly.(B) an excise tax on military equipment.(C) a regressive tax.(D) a public good.(E)
The local market for bankers is currently in equilibrium. Which of the following increases the local wage paid to bankers?(A) Internet banking at home is becoming more popular.(B) More college students are majoring in finance and economics, majors that make them attractive as bank employees.(C) The
Suppose the state requires hairdressers and manicurists to pass a series of exams to be certified cosmetologists. How does this policy change the supply of cosmetologists, the equilibrium wage, and the price of a manicure?SUPPLY OF PRICE OF COSMETOLOGISTS WAGE MANICURES(A) Decrease Increase
A cartel is often the result of(A) perfectly competitive firms that agree to produce a homogenous product.(B) oligopoly competitors that agree to restrict output to maximize joint profits.(C) a monopoly that has been regulated by the government.(D) a natural monopoly that has evolved into a
The price of labor is $5 and the price of capital is $10 per unit. Using the table below, what is the least-cost combination of labor and capital that should be hired to produce 18 units of output?MARGINAL MARGINAL UNITS OF PRODUCT OF UNITS OF PRODUCT OF LABOR LABOR CAPITAL CAPITAL 1 6 1 8 2 4 2 6
A monopsony employer hires labor up to the point where(A) Wage = Marginal factor cost.(B) Marginal factor cost = Marginal product of labor(C) Marginal factor cost = Marginal revenue product of labor(D)Wage = Marginal revenue product of labor(E) Wage = Price of the good produced by the labor
Which of the following increases the demand for interstate truck drivers?(A) An increase in the wage of truck drivers(B) An increase in the supply of truck drivers(C) An increase in the price of diesel fuel, which is used to power semitrucks(D) A decrease in the demand for interstate shipping(E) A
Which of the following would improve the efficiency of a monopoly market?(A) The government regulates the monopolist to produce the output where marginal revenue equals marginal cost.(B) The government provides additional legal barriers to entry.(C) The government subsidizes the monopolist so that
If the government wishes to regulate a natural monopoly so that it earns a normal profit, it sets(A) Price = Marginal cost.(B) Marginal revenue = Marginal cost.(C) Price = Average total cost.(D) Price = Marginal revenue.(E) Marginal revenue = Average total cost.
Deadweight loss in industries with market power is a result of(A) profit-maximizing output occurs where price equals marginal revenue.(B) profit-maximizing output occurs where price exceeds marginal cost.(C) profit-maximizing output occurs where price equals marginal cost.(D) profit-maximizing
The monopolistically competitive price is above marginal revenue because(A) firms have differentiated products.(B) firms are price takers.(C) firms produce a homogenous product.(D) the market is allocatively efficient.(E) profits are normal in the long run.
Which of the following are shared by perfectly competitive firms and monopolistically competitive firms?I. Barriers to entry II. Normal profits in the long run III. Excess capacity IV. A homogenous product(A) I only(B) II only(C) III only(D) II and IV only(E) I, II, and III only
The production of chicken often results in offending odors that are picked up by the wind and blown over rural communities. This is an example of a ______ externality, the result of which are spillover ______ and an _______ of resources to chicken production.(A) negative, costs, underallocation(B)
Oligopoly has at times been the subject of government antitrust regulation. Which of the following is a reason for this government regulation?(A) Price is approximately equal to marginal cost.(B) Price is approximately equal to average total cost.(C) Deadweight loss lessens over time.(D) Consumer
Which of the following statements are true of consumer utility-maximizing behavior?I. Utility from consumption of good X is maximized when the marginal utility is equal to zero.II. Total utility from consumption of good X rises at a decreasing rate.III. The consumer spends limited income until the
The top six firms in an oligopolistic industry have market shares of 25%, 25%, 15%, 10%, 6%, and 3%. Many smaller firms split the rest of the market. What is the value of the fourfirm concentration ratio?(A) 65%(B) 54%(C) 75%(D)34%(E) 50%
Consumer surplus in the monopolist market is equal to the area(A) abce.(B) abcf.(C) P5cd.(D) 0Q1aP1.(E) P1P5ca.
If this firm were a profit-maximizing monopolist, the price, output, and profit would be PRICE OUTPUT PROFIT(A) P5 Q1 Q1 ¥ (c–b)(B) P5 Q1 Q1 ¥ P1(C) P4 Q2 Q2 ¥ (P4–P1)(D) P1 Q1 Q1 ¥ (P5–P1)(E) P3 Q3 Q3 ¥ P3

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5 Steps To A 5 AP Macroeconomics 2014-2015 2015 Edition Eric Dodge - Solutions

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