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dynamic macroeconomics

Macroeconomics For Today 7th Edition Irvin B. Tucker - Solutions

8. Suppose the equilibrium price set by supply and demand is lower than the price ceiling set by the government. The eventual result will bea. a shortage.b. that quantity demanded is equal to quantity supplied.c. a surplus.d. a black market.
7. Which of the following is least likely to result from rent controls set below the equilibrium price for rental housing?a. Shortages and black markets will result.b. The existing rental housing will deteriorate.c. The supply of rental housing will increase rapidly.d. People will demand more
6. If the federal government wants to raise the price of cheese, it willa. take cheese from government storage and sell it.b. encourage farmers to research ways to produce more cheese.c. subsidize purchases of farm equipment.d. encourage farmers to produce less cheese.
5. An increase in the wage paid to grape pickers will cause thea. demand curve for grapes to shift to the right, resulting in higher prices for grapes.b. demand curve for grapes to shift to the left, resulting in lower prices for grapes.c. supply curve for grapes to shift to the left, resulting in
4. An increase in consumers’ incomes increases the demand for oranges. As a result of the adjustment to a new equilibrium, there is a (an)a. leftward shift of the supply curve.b. downward movement along the supply curve.c. rightward shift of the supply curve.d. upward movement along the supply
13. In Exhibit 11, which of the following might cause a shift from S1 to S2?a. A decrease in input pricesb. An improvement in technologyc. An increase in input pricesd. An increase in consumer income
12. A public good may be defi ned as any good or service thata. allows users to collectively consume benefi ts.b. must be distributed to all citizens in equal shares.c. is never produced by government.d. is described by answers (a) and (c) above.
11. Which of the following is the best example of a public good?a. Pencilsb. Educationc. Defensed. Trucks
10. Pollution from cars is an example ofa. a harmful opportunity cost.b. a negative externality.c. a production dislocation.d. none of the above.
3. Consider the market for chicken. An increase in the price of beef willa. decrease the demand for chicken, resulting in a lower price and a smaller amount of chicken purchased in the market.b. decrease the supply of chicken, resulting in a higher price and a smaller amount of chicken purchased in
2. Which of the following statements is true?a. An increase in demand, with no change in supply, will increase the equilibrium price and quantity.b. An increase in supply, with no change in demand, will decrease the equilibrium price and the equilibrium quantity.c. A decrease in supply, with no
1. Suppose prices for new homes have risen, yet the number of homes sold has also risen. We can conclude thata. the demand for new homes has risen.b. the law of demand has been violated.c. new fi rms have entered the construction industry.d. construction fi rms must be facing higher costs.
10. Which of the following are public goods?a. Air bagsb. Pencilsc. Cycle helmetsd. City streetlightse. Contact lenses
9. Why are public goods not produced in suffi cient quantities by private markets?
8. Explain the impact of external costs and external benefi ts on resource allocation.
7. Suppose coal-burning fi rms are emitting excessive pollution into the air. Suggest two ways the government can deal with this market failure.
6. Consider this statement: “Government involvement in markets is inherently ineffi cient.”Do you agree or disagree? Explain.
5. Suppose a market is in equilibrium and both demand and supply curves increase. What happens to the equilibrium price if demand increases more than supply?
4. What are the advantages and disadvantages of the price system?
3. Using market supply and demand analysis, explain why labor union leaders are strong advocates of raising the minimum wage above the equilibrium wage.
2. Use a graph to show the impact on the price of Japanese cars sold in the United States if the United States imposes import quotas on Japanese cars. Now draw another graph to show how the change in the price of Japanese cars affects the price of American-made cars in the United States. Explain
1. Market researchers have studied the market for milk, and their estimates for the supply of and the demand for milk per month are as follows:Price per gallon Quantity demanded(millions of gallons)Quantity supplied(millions of gallons)$10.00 100 500 8.00 200 400 6.00 300 300 4.00 400 200 2.00 500
4. Which proposal do you think best serves the interest of a member of Congress? Why?
3. Which proposal do you think best serves the interests of consumers?Why?
2. Which proposal do you think best serves the interests of small dairy farmers? Why?
1. Draw a supply and demand graph to illustrate the problem described in the case study, and prescribe your own solution.
10. As shown in Exhibit A-7, assume that the quantity of good X exchanged results in triangle CDE. This would be caused by ________ resources being used by producers to produce good X.a. too manyb. too fewc. an optimal amount ofd. asymmetric
9. As shown in Exhibit A-7, assume that the quantity of good X exchanged results in triangle EIH. This would be caused by __________ resources being used by producers to produce good X.a. too manyb. too fewc. an optimal amount ofd. asymmetric
8. Suppose in Exhibit A-7 that exchange in the market for good X yields triangle ABE. This means that which of the following conditions exists in the market?a. Only consumer surplusb. Only producer surplusc. Deadweight lossd. Maximum consumer plus producer surplus
7. In Exhibit A-7, suppose fi rms devote resources suffi cient to produce 4,000 units of good X per month. The result is a deadweight loss of triangle:a. ABE.b. CDE.c. EGE.d. EDE.
6. Which of the following statements is correct?a. Total surplus is the sum of consumer and producer surplus.b. Deadweight loss is the net loss of both consumer and producer surplus.c. Deadweight loss is a measure of market ineffi ciency.d. All of the above.
5. Total surplus equalsa. consumer surplus 1 producer surplus 2 deadweight loss.b. consumer surplus 2 producer surplus 2 deadweight loss.c. consumer surplus 2 producer surplus 1 deadweight loss.d. consumer surplus 1 producer surplus.
4. Deadweight loss results froma. equilibrium.b. underproduction.c. overproduction.d. none of the above are correct.e. Either (b) or (c).
3. In an effi cient market, deadweight loss isa. maximum.b. minimum.c. constant.d. zero.
2. Suppose Gizmo Inc. is willing to sell one gizmo for $10, a second gizmo for $12, a third for $14, and a fourth for $20, and the market price is$20. What is Gizmo Inc.’s producer surplus?a. $56.b. $24.c. $20.d. $10.
1. If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and the market price is $5, then Bill’s consumer surplus isa. $24.b. $18.c. $9.d. $6.
20. In Exhibit 14, if the market price of good X is initially $1.50, a movement toward equilibrium requiresa. no change, because an equilibrium already exists.b. the price to fall below $1.50 and both the quantity supplied and the quantity demanded to fall.c. the price to remain the same, but the
19. In Exhibit 14, if the market price of good X is initially $0.50, a movement toward equilibrium requiresa. no change, because an equilibrium already exists.b. the price to fall below $0.50 and both the quantity supplied and the quantity demanded to rise.c. the price to remain the same, but the
18. In Exhibit 14, if the price of good X moves from$1.00 to $2.00, the new market condition will puta. upward pressure on price.b. no pressure on price to change.c. downward pressure on price.d. no pressure on quantity to change.
17. In Exhibit 14, at a price of $2.00, the market for good X will experience aa. shortage of 150 units.b. surplus of 100 units.c. shortage of 100 units.d. surplus of 200 units.
16. In the market shown in Exhibit 14, the equilibrium price and quantity of good X area. $0.50, 200.b. $1.50, 300.c. $2.00, 100.d. $1.00, 200.
15. Assume that the equilibrium price for a good is$10. If the market price is $5, aa. shortage will cause the price to remain at $5.b. surplus will cause the price to remain at $5.c. shortage will cause the price to rise toward$10.d. surplus will cause the price to rise toward$10.Exhibit 14 Supply
14. If Qd = quantity demanded and Qs = quantity supplied at a given price, a shortage in the market results whena. Qs is greater than Qd.b. Qs equals Qd.c. Qd is less than or equal to Qs.d. Qd is greater than Qs.
13. Assuming soybeans and tobacco can be grown on the same land, an increase in the price of tobacco, other things being equal, causes a (an)a. upward movement along the supply curve for soybeans.b. downward movement along the supply curve for soybeans.c. rightward shift in the supply curve for
12. Suppose autoworkers receive a substantial wage increase. Other things being equal, the price of autos will rise because of a (an)a. increase in the demand for autos.b. rightward shift of the supply curve for autos.c. leftward shift of the supply curve for autos.d. reduction in the demand for
11. An improvement in technology causes a (an)a. leftward shift of the supply curve.b. upward movement along the supply curve.c. fi rm to supply a larger quantity at any given price.d. downward movement along the supply curve.
10. Yesterday seller A supplied 400 units of good X at $10 per unit. Today seller A supplies the same quantity of units at $5 per unit. Based on this evidence, seller A has experienced a (an)a. decrease in supply.b. increase in supply.c. increase in the quantity supplied.Copyright 2010 Cengage
9. An increase in consumer income, other things being equal, willa. shift the supply curve for a normal good to the right.b. cause an upward movement along the demand curve for an inferior good.c. shift the demand curve for an inferior good to the left.d. cause a downward movement along the supply
8. Assuming steak is a normal good, a decrease in consumer income, other things being equal, willa. cause a downward movement along the demand curve for steak.b. shift the demand curve for steak to the left.c. cause an upward movement along the demand curve for steak.d. shift the demand curve for
7. Assuming steak and potatoes are complements, a decrease in the price of steak willa. decrease the demand for steak.b. increase the demand for steak.c. increase the demand for potatoes.d. decrease the demand for potatoes.
6. Assuming coffee and tea are substitutes, a decrease in the price of coffee, other things being equal, results in a (an)a. downward movement along the demand curve for tea.b. leftward shift in the demand curve for tea.c. upward movement along the demand curve for tea.d. rightward shift in the
5. Assuming beef and pork are substitutes, a decrease in the price of pork will cause the demand curve for beef toa. shift to the left as consumers switch from beef to pork.b. shift to the right as consumers switch from beef to pork.c. remain unchanged, because beef and pork are sold in separate
4. Which of the following will cause a movement along the demand curve for good X?a. A change in the price of a close substituteb. A change in the price of good Xc. A change in consumer tastes and preferences for good Xd. A change in consumer income
3. Which of the following is the result of a decrease in the price of tea, other things being equal?a. A leftward shift in the demand curve for teab. A downward movement along the demand curve for teac. A rightward shift in the demand curve for tead. An upward movement along the demand curve for tea
2. The law of demand states that the quantity demanded of a good changes, other things being equal, whena. the price of the good changes.b. consumer income changes.c. the prices of other goods change.d. a change occurs in the quantities of other goods purchased.
1. If the demand curve for good X is downward sloping, an increase in the price will result ina. an increase in the demand for good X.b. a decrease in the demand for good X.c. no change in the quantity demanded for good X.d. a larger quantity demanded for good X.e. a smaller quantity demanded for
12. Explain the statement “People respond to incentives and disincentives” in relation to the demand curve and supply curve for good X.
11. There is a shortage of college basketball and football tickets for some games, and a surplus occurs for other games. Why do shortages and surpluses exist for different games?
10. The U.S. Postal Service is facing increased competition from firms providing overnight delivery of packages and letters.Additional competition has emerged because communications can be sent by email, fax machines, and text messaging. What will be the effect of this competition on the market
9. If a new breakthrough in manufacturing technology reduces the cost of producing DVD players by half, what will happen to thea. supply of DVD players?b. demand for DVD players?c. equilibrium price and quantity of DVD players?d. demand for DVDs?
8. Explain why the market price may not be the same as the equilibrium price.
7. Explain the effect of the following situations:a. Population growth surges rapidly.b. The prices of resources used in the production of good X increase.c. The government is paying a $1-per-unit subsidy for each unit of a good produced.d. The incomes of consumers of normal good X increase.e. The
6. Predict the direction of change for either supply or demand in the following situations:a. Several new companies enter the cell phone industry.b. Consumers suddenly decide SUVs are unfashionable.c. The U.S. Surgeon General issues a report stating that tomatoes prevent colds.d. Frost threatens to
5. Use supply and demand analysis to explain why the quantity of word processing software exchanged increases from one year to the next.
4. Draw graphs to illustrate the difference between a decrease in quantity supplied and a decrease in supply for condominiums. Give a possible reason for change in each graph.
3. Suppose oil prices rise sharply for years as a result of a war in the Persian Gulf region.What happens and why to the demand fora. cars.b. home insulation.c. coal.d. tires.
2. Draw graphs to illustrate the difference between a decrease in the quantity demanded and a decrease in demand for Mickey Mantle baseball cards. Give a possible reason for change in each graph.
1. Some people will pay a higher price for brand-name goods. For example, some people buy Rolls Royces and Rolex watches to impress others. Does knowingly paying higher prices for certain items just to be a “snob”violate the law of demand?
15. In Exhibit 6, which of the following points on the production possibilities curve are fullemployment production points?a. A, B, C, Db. A, B, C, D, Uc. E, U, Wd. B, C, D, Ue. A, B, C, U
14. In Exhibit 6, to move from U to B, the opportunity costa. would be 4 units of consumption goods.b. would be 2 units of capital goods.c. would be zero.d. would be 5 units of capital goods.e. cannot be estimated.
13. In Exhibit 6, which of the following points on the production possibilities curve are effi cient production points?a. A, B, C, Ub. A, B, C, D, Uc. E, U, Wd. B, C, D, Ue. A, B, C, D
12. From the information in Exhibit 6, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?a. A, B, C, E, Ub. A, B, C, D, Wc. E, U, Wd. B, C, D, Ue. A, B, C, E Exhibit 6 Production Possibilities Curve 76 54 32 10 1
11. A nation can accelerate its economic growth bya. reducing the number of immigrants allowed into the country.b. adding to its stock of capital.c. printing more money.d. imposing tariffs and quotas on imported goods.
10. Education and training that improve the skill of the labor force are represented on the production possibilities curve by a (an)a. movement along the curve.b. inward shift of the curve.c. outward shift of the curve.d. movement toward the curve from an exterior point.
9. Along a production possibilities curve, an increase in the production of one good can be accomplished only bya. decreasing the production of another good.b. increasing the production of another good.c. holding constant the production of another good.d. producing at a point on a corner of the
8. Using a production possibilities curve, unemployment is represented by a point locateda. near the middle of the curve.b. at the top corner of the curve.c. at the bottom corner of the curve.d. outside the curve.e. inside the curve.
7. Any point inside the production possibilities curve is a (an)a. effi cient point.b. unfeasible point.c. ineffi cient point.d. maximum output combination.
6. On a production possibilities curve, a change from economic ineffi ciency to economic effi ciency is obtained bya. movement along the curve.b. movement from a point outside the curve to a point on the curve.c. movement from a point inside the curve to a point on the curve.d. a change in the
5. If a farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to$100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less thana. $12.50 per pound.b. $20 per pound.c. $80 per pound.d. $100 per pound.
4. On a production possibilities curve, the opportunity cost of good X in terms of good Y is represented bya. the distance to the curve from the vertical axis.b. the distance to the curve from the horizontal axis.c. the movement along the curve.d. all of the above.
3. Opportunity cost is thea. purchase price of a good or service.b. value of leisure time plus out-of-pocket costs.c. best option given up as a result of choosing an alternative.d. undesirable sacrifi ce required to purchase a good.
2. A student who has one evening to prepare for two exams on the following day has the following two alternatives:Score in Score in Possibility Economics Accounting A 95 80 B 80 90 The opportunity cost of receiving a 90, rather than an 80, on the accounting exam is represented by how many points on
1. Which of the following decisions must be made by all economies?a. How much to produce? When to produce?How much does it cost?b. What is the price? Who will produce it?Who will consume it?c. What to produce? How to produce it? For whom to produce?d. None of the above.
12. The present choice between investing in capital goods and producing consumer goods now affects the ability of an economy to produce in the future. Explain
11. Draw a production possibilities curve for a hypothetical economy producing capital goods and consumer goods. Suppose a major technological breakthrough occurs in the capital goods industry and the new technology is widely adopted only in this industry. Draw the new production possibilities
10. Suppose, unfortunately, your mathematics and economics professors have decided to give tests two days from now and you can spend a total of only twelve hours studying for both exams. After some thought, you conclude that dividing your study time equally between each subject will give you an
9. Interpret the phrases “There is no such thing as a free lunch” and “A free lunch is possible” in terms of the production possibilities curve.
8. Why does a production possibilities curve have a bowed-out shape?
7. The following table shows the production possibilities for pies and fl owerboxes. Fill in the opportunity cost (pies forgone) of producing the fi rst through the fi fth fl owerbox.Combination Pies Flowerboxes Opportunity cost A 30 0 B 26 1 C 21 2 D 15 3 E 8 4 F 0 5
6. The following is a set of hypothetical production possibilities for a nation.Combination Automobiles(thousands)Beef(thousands of tons)A 0 10 B 2 9 C 4 7 D 6 4 E 8 0a. Plot these production possibilities data.What is the opportunity cost of the fi rst 2,000 automobiles produced? Between which
5. Attending college is expensive, time consuming, and it requires effort. So why do people decide to attend college?
4. Which of the following decisions has the greater opportunity cost? Why?a. A decision to use an undeveloped lot in Tokyo’s fi nancial district for an apartment building.b. A decision to use a square mile in the desert for a gas station.
3. Explain verbally the statement “There is no such thing as a free lunch” in relation to scarce resources.
2. Suppose a retailer promotes its store by advertising a drawing for a “free car.” Is this car free because the winner pays zero for it?
1. Explain why scarcity forces individuals and society to incur opportunity costs. Give specifi c examples.
12. Which of the following pairs is the most likely to exhibit a direct relationship?a. The price of gasoline and the amount of gasoline that people purchaseb. Cholesterol levels and the likelihood of developing heart diseasec. Outdoor temperature and heating oil salesd. Annual income and weekly
11. Which of the following pairs is the most likely to exhibit an inverse relationship?a. The amount of time you study and your grade point averageb. People’s annual income and their expenditure on personal computersc. Baseball players’ salaries and their batting averagesd. The price of a
10. When an inverse relationship is graphed, the resulting line or curve isa. horizontal.b. vertical.c. upward sloping.d. downward sloping.
9. What is used to illustrate an independent relationship between two variables?a. An upward-sloping curveb. A downward-sloping curvec. A hill-shaped curved. A horizontal or vertical line
8. A change in a third variable not on either axis of a graph is illustrated by aa. horizontal or vertical line.b. movement along a curve.c. shift of a curve.d. point of intersection.

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