Questions and Answers of Economics Today The Micro View

At Christmas and birthdays, aunts, uncles, grandparents, and parents give gifts to their college-aged loved ones. In 1993 Joel Waldfogel, an economist at Yale University, surveyed several thousand
Most universities allow students to use university network printers in student labs when they are working on the university network. This is considered part of their tuition or part of technology
If you did a survey in your economics class, not all students would agree with the statement “I am rational.” To show that the rationality assumption is accurate nonetheless, an increasing number
Children who gain weight eat more calories than they use up each day. The ones who gain weight the fastest eat relatively more high-calorie foods such as hamburgers, French fries, and other fast
It is worth examining the idea that changes in incentives cause people to change their behavior. In recent years, the cost of some types of high-speed Internet service has declined to as little as
In recent years, the U.S. government’s Food and Drug Administration (FDA) has required many pharmaceutical companies to use higher-cost production techniques (with more quality controls) to produce
During the past few years, the government of Greece has implemented gradual increases in several tax rates. The government has raised the top basic income tax rate applied to households to 42%, which
Suppose that you plan to take a trip from San Diego to San Francisco and you have never made this trip before. You could use Google Maps and it would tell you to get on Interstate 5 going north until
Consider the following estimates from the early 2020s of shares of income to each group. Use graph paper or a hand-drawn diagram to draw rough Lorenz curves for each country. Which has the most
Why might we anticipate, other things being equal, that measured wealth inequality eventually will decrease as the baby boom generation gradually passes away?
Why do you suppose that behavioral researchers typically find evidence that people who had access to fewer books or heard fewer book readings when young tend to fall within the group of lower-income
Given the rather grim statistics on the future of Social Security, what should you be doing as a consequence?
How might an incorrect diagnosis or incomplete treatment lead to readmission that could considerably raise the expenses associated with treating a patient’s underlying health care problem?
How might the fact that many in-kind health care services that the government can deliver to people in their homes can be provided by nurses instead of physicians also help reduce the expenses of
At some point in your life, you may be mobility restricted such that it is not easy for you to travel to see a physician. To obtain health care services, what might be your options?
What is the net additional income actually received by an average low- to moderate-income person who chooses to earn an additional pre-income-tax, pre-lost-benefits dollar by working? Explain briefly.
Imagine that you are living in poverty and therefore benefit from numerous anti-poverty programs. You are offered a relatively good job. Are there any reasons why you might turn it down?
Why do you suppose that some critics of the plastic-bag ban argue that the adverse effects of deforestation caused by increased production of paper bags also should be added to the marginal cost of
Why do you suppose that in light of the fact that European firms are increasing the use of AI systems in their emissions planning, some European policymakers also have begun to employ those same AI
You have been named head resource manager in a small country with abundant supplies of cobalt. The politicians who hired you have promised the nation more jobs in that industry, which is 100 percent
Critics of the idea of legalizing private rhino ranching and trade in rhino horns worry that it could generate an additional increase in demand for the horns. Is it possible that the overall
Can you think of any transaction costs that would hinder efforts to address common property problems associated with a forest by assigning property rights to plots of lands containing trees that make
If your house is located in a forested area, what is the optimal amount of forest maintenance that you should undertake?
If carbon-dioxide-emission restrictions are working, what would you expect to see happen to our climate?
You have just been elected governor of a mountain state with a small population and relatively little industry. Would you ask your state legislature to implement the equivalent of the European
Some critics of the North American Free Trade Agreement (NAFTA) suggest that firms outside NAFTA nations sometimes shift unassembled inputs to Mexico, assemble the inputs into final goods there, and
Suppose that the application of AI technologies to production of a large array of goods and services causes some items that currently are not traded internationally to become exported and imported
Why do you suppose that a number of Midwesterners in the United States experience gains from trade by growing and exporting corn to such far-distant nations as Egypt, Japan, and South Korea?
Why do you suppose that the standardization of the dimensions of shipping containers particularly played a crucial role in enabling shippers to reduce their expenses?
Who do you suppose arguably stands to lose the most when governments of American and European nations impose tariffs on imports of key dietary foodstuffs such as wheat and corn?
Although California Olive Ranch’s methods for producing olive oil heavily utilize machinery, why might being able to specialize and export olive oil induce U.S. firms using those methods to hire
Assume that your family owns and operates a small olive oil production enterprise in a western state. Assume further that you have just been named manager. Your family-run enterprise employs farm
How might making rules of origin overly detailed and complex have a trade-reducing effect?
Under what personal circumstances would you support and vote for senators and representatives who are in favor of increasing the number of regional trade agreements?
On Wednesday, the exchange rate between the euro and the U.S. dollar was $1.12 per euro, and the exchange rate between the Canadian dollar and the U.S. dollar was U.S. $0.76 per Canadian dollar. What
How might the fact that 30 to 60 percent of other nations’ holdings of various bonds and other financial assets are denominated in dollars also contribute to non-U.S. derived demand for and supply
Who ultimately has to finance the higher payments that the African governments must make to obtain dollars to pay foreign holders of their public debts?
How can individuals or firms holding large quantities of multiple currencies be exposed to foreign exchange risks even if they are not actively trading currencies in foreign exchange markets from day
Why does the HKMA’s capability of keeping the exchange rate fixed as demand for Hong Kong dollars drops depend on having a sufficient number of U.S. dollars in reserves to continue buying Hong Kong
Let’s say that you are going to take a month’s trip to a Latin American country that has a relatively stable economy. Are you better off exchanging your dollars for that nation’s currency as
What do you suppose happened to Venezuelan import spending following the massive bolivar devaluation? Explain your reasoning.
Assume that you have been hired as an economist for the Venezuelan government. What recommendations might you make to improve that country’s situation?
At a college basketball game with only 25 seconds left, the home team, which is behind by 1 point, steals the ball and calls time-out. As the home team’s band director gets ready to play part of
In 2008, the price of gasoline rose to over $4.00 per gallon, and diesel climbed to more than $5.00 per gallon. At the same time there was a presidential election in which this development became one
In the 1990s, it was discovered that taxol, a chemical found in the bark of Pacific yew trees in the Pacific Northwest, was effective in treating ovarian cancer, which afflicts 10,000 women each
Do all attempts at saving plants or animals involve an opportunity cost?
What is the cost of going to college? The obvious costs are the costs of tuition, fees, and textbooks. The obvious costs of going to college do not include room and board because these costs will be
Small-business entrepreneur-headed companies employing 500 or fewer workers account for about 99.7 percent of all U.S. businesses and employ nearly half of U.S. workers. Entrepreneurs’ efforts to
Every year motorists spend about 3.7 billion hours waiting in gridlocked traffic. Policymakers commonly argue that the explicit cost of time spent in traffic jams—at least $6 billion spent on the
Every year individuals who earn income must complete a tax return and send to the government. In more recent years, free-file tax preparation services have been created so individuals can file taxes
San Francisco and other cities are examining congestion pricing, which has been successfully used in European and Asian cities, to reduce traffic congestion. In London, for example, drivers were
The U.S. government began subsidizing U.S. cotton farmers in the twentieth century to allow them to stay in business. The purpose was to insulate them from fluctuating market prices that could
A British health minister once claimed that the demand for health care is infinite because everyone is in a losing battle against death. This is not so for American dentistry, however. As aggregate
In the summer of 2008, the price of oil reached a peak of $147 a barrel, with gasoline reaching more than $4.00 per gallon in much of the United States. The global financial crisis struck in
In the 1960s, manufacturers of hair dye aired TV commercials claiming that “Blondes Have More Fun” and “Gentlemen Prefer Blondes.” For years thereafter, purchases of blonde hair colorings
Beginning in 2004, the prices of liquid crystal displays (LCDs), which are key components in many electronic devices, fell significantly. As LCD prices fell, Thailand-based manufacturers of
In recent years, streaming services have gained popularity among many consumers. They offer multiple benefits over traditional cable TV, such as reduced commercials, recommender algorithms, and the
The increase in oil prices in the 2000s contributed to an increase in U.S. spending on imports. It also raised the earnings of residents of oil-exporting nations, including the 11 countries that make
In July 2008, the price of oil increased to $147 per barrel. By October, it had fallen to around $60 per barrel. OPEC saw the price of their major export, oil, decrease by 60 percent in a few months.
Sugar production in Jamaica amounts to a little more than a third of the country’s exports. The country could sell its sugar in the European Union (EU) at a price three times higher than the world
In most U.S. ports, docking fees, which are fees charged to ship owners for the right to dock, load and unload passengers or freight, are set by government agencies. In recent years, the demand for
What effect do you expect the price ceiling combined with an increase in demand for dock space has had?
Having a computer that is so out-of-date that it cannot be adapted or at least easily adapted to modern software can create problems for owners. Most states have laws against throwing computers away
In many states, including Florida, it is illegal to engage in price gouging. Florida’s law penalizes a seller for any “gross disparity between the quoted price of a ‘necessity item’ such as
Lisa Walker spent a year in Sierra Leone, West Africa, as a Peace Corps volunteer, and she kept a diary of her experiences. One thing she wrote about was what happened when the government-imposed
Nicotine has been used as a psychoactive drug by the native peoples of the Americas for approximately 8,000 years. Five hundred years ago, Christopher Columbus introduced tobacco to Europeans, who
What other goods or services follow the same analysis as the ones presented here?
In recent years, soft drink sellers have introduced cans containing 7.5 ounces to sell alongside traditional 12-ounce cans. In addition to offering a smaller quantity of soda, they have also managed
Why do you think that most economists seek to study prices measured in terms of dollars per unit as measured by weight or volume rather than by prices per package or per container?
American Electric Power (AEP) owns power plants around the United States that together release about 3 percent of U.S. CO2 emissions every year. The company has entered into a voluntary agreement
In 2008, the Federal Reserve lowered interest rates and the federal government implemented a tax rebate program as the U.S. economy began to show signs of entering a recession. Later in the year, the
In his State of the Union address in 2003, President Bush supported the idea of changing from the use of internal combustion engines to fuel cells based on hydrogen as a way of reducing air pollution
After the events of September 11, 2001, the Office of Homeland Security was set up to try to coordinate the antiterrorism efforts of various agencies of the federal government. In 2002, the Homeland
In 1949, China officially became a “People’s Republic” in which all resources were owned by the government. For nearly 30 years, the Chinese government made all decisions concerning the
In 2002, a four-year-long lawsuit against Microsoft by the Department of Justice was settled. The Department of Justice alleged that Microsoft had illegally maintained a monopoly in the operating
To encourage U.S. travelers to use their facilities, various U.S. airports have installed Wi-Fi systems that allow travelers to use cellphones and tablets to access the Internet and e-mail accounts.
Rail services provide a means of transportation for many companies throughout the United States. However, they also impose negative externalities on the populations of the cities in which they run,
Why do you think that the federal government requires rail operators to mount expensive horns and sound them – at prescribed decibel levels – at all street crossings? Does this requirement also
Oregon is the only state that bases highway fees charged to truckers on the amount of weight carried per truck axle. Having more axles better distributes cargo weight and reduces pressure on the
According to the National Governors Association (NGA), failure to collect sales tax on online sales results in annual tax revenue losses of at least $35 billion. State governments are unable to apply
In most nations, income tax systems are progressive. Nevertheless, governments in several Eastern European nations have recently opted for proportional taxation. Most of these nations were formerly
Professionals such as doctors and lawyers who are self-employed pay a Social Security payroll tax rate of 12.4 percent on the first $118,500 of income or $14,694 in Social Security tax. If one of
Currently, in the U.S. consumers of gasoline pay a per-gallon tax rate for each gallon of gas purchased. As shown in the text, this tax reduces supply, which results in increased prices and decreased
The winner of the Nobel Prize for economics in 2006 was Edmund Phelps, who developed the concept of the natural rate of unemployment. His original argument was that the economy will not reach
Johnson is a self-employed painter. On most days, he paints room interiors alone. From time to time, however, he has taken on exterior house-painting jobs, which pay implicitly higher hourly rates.
Until the late nineteenth century, people in the United States were not acquainted with the word “unemployment.” The failure of able-bodied people to find work in a largely agricultural country
As a result of the recession that began in 2007 and continued into 2009, the unemployment rate rose to as high as 10 percent. By the time of the presidential and congressional elections of 2012, the
Around the turn of the century, wholesale and consumer prices fell in Japan. In 2002, for example, consumer prices fell by 0.4 percent. Short-term interest rates averaged around 0.1 percent. Assuming
The CPI is a fixed-quantity price index, meaning that each month the Bureau of Labor Statistics samples only prices rather than relative quantities purchased by consumers. The problem is that when
Why do you suppose that some economists have suggested that “irrational exuberance” – unjustified optimism about future economic performance – can contribute to business expansions?
Is Johnson currently part of the labor force and employed?
In the 1990s, there was widespread adoption of just-in-time inventory techniques by U.S. businesses, which are techniques that companies use to keep inventories from running out or building up beyond
Gross domestic product, or GDP, has become the most important measure of how well the economy performs. It is used by policymakers, economists, international agencies, and the media as the primary
Would the country actually have an increase in well-being as a result of the pollution and the clean-up activities?
Many developing countries depend on natural resources for much of their income and employment. When a forest is cut down in Costa Rica, the output is sold, and if we look only at GDP figures, the
In the United States, there are actually more trees in our forests than there were 50 years ago. Does this mean that we should be adding to our GDP figures for this increase in our forests?
Suppose that you are advising a presidential candidate in an election campaign. The incumbent president for the opposing party points out that GDP has risen in every quarter since she has been in
For years, the Western world has been regaled by impressive figures on the growth in the Chinese economy. Whereas the United States has been happy with growth rates of 3 and 4 percent per year, the
Why do government statisticians in the United States not face a similar problem?
Many economists argue that GDP, while a good measure of the economy’s performance, is not necessarily a good measure of the economy’s well-being. In response, some economists have suggested using

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