Economic Foundations Of Law 3rd Edition Stephen J. Spurr - Solutions

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What is meant by market forces?A The interaction of demand and supply B The interaction of firms and the government C The power of producers D The power of the state
How are resources allocated in a market economy?A By directives B By the price mechanism C By directives or the price mechanism D By directives and the price mechanism
What encourages firms to produce what consumers demand?A The chance to earn a high profit B The chance to experience high unit costs of production C The desire to attract new firms into the industry D The desire to keep revenue as low as possible
What are the three questions faced by all economies?A What to produce, when to produce it and who receives it B What to produce, how to produce it and who receives it C Where to produce, how to produce and when to produce D Where to produce, when to produce and why to produce
In late 2016 an Australian firm announced that it would be starting a project to use the power of waves off the coast in Cornwall in the UK to generate electricity. More entrepreneurs are becoming interested in making use of wave power which is a free good.More labour is likely to be employed in
luxury goods D zero goods
The diagram below shows a country producing at point X. What is the opportunity cost of moving production to point Y?A 34. basic goods B 17. luxury goods C 12. basic goods and
consumer goods
consumer goods D a reduction of
consumer goods C a reduction of
consumer goods B a reduction of
when the PPC shifts to the right the diagram below?A a reduction of
What is the change in the opportunity cost of increasing the output of capital goods from 20. to
What could have caused the change in the shape of the production possibility curve (PPC)shown below?A advances in technology in the clothing industry B an increase in the size of a country’s labour force C a change in consumer preferences towards clothing D more resources being devoted to
What does a production possibility curve show?A the amount of capital and labour in a country B the output of two products that can be produced with given resources C the popularity of the two products D the price of the two products that are produced with given resources
A man presently works as a builder. His previous jobs included working as a farm labourer and a street trader. His next best-paid job is that of a carpenter, but he would rather choose to work as a gardener, if he was not a builder. What will be the opportunity cost of him working as a builder?
A woman owns a TV which she bought for $300. She is considering buying a better model for $450. Her neighbour offers her $200 for her TV. What is the opportunity cost of her rejecting this offer?A $100 B $200 C $300 D $450
Which type of factor of production can be described as a ‘natural resource’?A capital B entrepreneur C labour D land
Which of the following is an example of the factor of production ‘capital’?A the money a farmer has borrowed to buy livestock B the money a farmer has saved in the bank C a farm worker D a tractor
As an economy becomes richer, what happens to resources and wants?Resources Wants A decrease decrease B decrease increase C increase decrease D increase increase
What gives rise to the problem of scarcity?A a lack of money B an uneven distribution of income C capital equipment being greater than labour D wants exceeding resources
basic goods
luxury goods D
luxury goods C
basic goods B
to 35 A
Using the diagram, determine the opportunity cost of increasing the output of luxury goods from
TV programmes D TV programmes take more resources to produce them than films
films and
The diagram shows a country’s PPC. What can be concluded from the shape of the PPC?A All resources are equally good at producing films and TV programmes B Resources cannot be switched between producing films and TV programmes C The country is able to produce
Which points in the diagram are attainable?A R and S B V and W C R, S, T and U D T, U, V and W
A country experiences a fall in unemployment. How would this be shown on a PPC diagram?A A movement of the production point away from the curve B A movement of the production point towards the curve C A shift of the PPC to the left D A shift of the PPC to the right
On his birthday, Kamran receives $200 from his aunt, $50 of which he decides to save. He is taken out by his father for lunch. His father pays the bill. Kamran spends the afternoon playing football. Which of these activities involves an opportunity cost? Eating the free lunch Playing football
What are the characteristics of a free good?
D $120 000
B $40 000 C $45
a year. What is the opportunity cost of going to the university for him?A $15
a year. After he graduates he expects to find a job paying him $40
A person decides to go to the university for three years, to study economics. If he had not gone, he could have taken up a job which would have paid him $15
What is meant by ‘opportunity cost’?A The best alternative forgone B The cost of the item selected C The cost of exploring business opportunities D The labour used in producing the product
Which factor of production is the most mobile?A Capital B Enterprise C Labour D Land
of these replace worn out capital goods. What is the net investment made?A 500 B 2500 C 3000 D 3500
A country produces 3000 new capital goods in a week.
Which type of factor of production is a road?A Capital B Enterprise C Labour D Land
Which factor of production’s function is to make decisions and take risks?A Capital B Enterprise C Labour D Land
Which of the following is a free good?A Inoculation provided without charge by the state B Products given away by a supermarket to attract customers C Recycled paper D Wind coming in from the sea
Why will scarcity continue to be a problem in the future?A Prices will rise B The quantity of resources will decline C Wants will continue to increase D World population will fall
Why does scarcity exist?A Each year workers tend to produce less than previously B Machines wear out with time C There are not sufficient resources to produce all the products people want D There is a limit to people’s wants
Suppose two workers employed by Z Co., A and B, will each receive some on-the-job training. The cost of training each worker, which includes the cost of instruction and the worker’s reduced productivity during the training period, is $20. Assume the training will be done in period 1, and each
Suppose capital gains of assets such as securities were taxed as they accrued rather than upon realization, i.e. when the assets were sold or exchanged. What problems would be solved by such a change in the law? What problems would be created?
Each of these projects yields a pre-tax income of $900,000 over the same span of years. Both these business activities are subject to normal depreciation. The taxable income generated by project 1 is taxed at a 50 percent rate, while the taxable income of project 2 is taxed at a more favorable rate
(Note. This problem requires use of the equilibrium or “arbitrage” condition for the purchase price of an asset that is subject to depreciation for income tax purposes.) There are two different business activities, projects 1 and
Write down and explain the equilibrium or “arbitrage” condition for the purchase price of an asset that is subject to depreciation for income tax purposes. Let X equal the amount of pre-tax income yielded by the asset in the future. t equals the tax rate, δ equals the discount rate that
Between 1981 and 1990 there was a general reduction in income tax rates, and themaximum marginal income tax rate declined from 70 percent to 28 percent. What was the effect on charitable giving by (a) high-income individuals, who generally take a deduction for charitable contributions as part of
Suppose that when an individual’s income is $80,000, his income tax is $20,000, and when his income is $90,000, his income tax is $26,000. Suppose also that the individual always consumes three-quarters of his disposable income (after-tax income). Compute(a) the individual’s marginal income tax
Explain in detail why private saving behavior between the United States and Canada began to diverge sharply around 1971.
There is a controversy concerning the effects on private savings of the growth of Social Security benefits since the 1930s. Explain.
What are all the consequences of the federal estate tax and state inheritance tax on the behavior of people?
Ms. Q has unsecured debt of $60,000, a $50,000 bank account, and a home that is worth 400,000, but is subject to a mortgage of 250,000 (thus an equity of $150,000). Assume costs of bankruptcy are $1000. Suppose she lives in Missouri, which has a homestead exemption of $500,000, and an exemption for
Ms. Z has unsecured debt of $80,000, a $50,000 bank account, and a home that is worth 400,000, but is subject to a mortgage of 300,000 (thus an equity of $100,000). Assume costs of bankruptcy are $2000. Suppose she lives in Missouri, which has a homestead exemption of $200,000, and an exemption for
What are the internal or external monitors that give managers of firms the incentive to do their utmost to ensure that the firm maximizes profits? Be specific.
Under Delaware corporation law, the majority shareholders of a corporation can force minority shareholders to sell their shares to the corporation. Is there any economic justification for giving such a right to the majority shareholders?
(a) A number of studies have shown that, when there is a takeover of one corporation by another, there is a substantial increase in value of stock for shareholders of the acquired corporation, but little or no effect on the value of the stock of the acquiring corporation. Explain these effects of a
Ralph Nader has argued that large corporations should be required to incorporate under a uniform federal corporation law, rather than under the law of an individual state. He contends that, under the current system, there is a “competition in laxity,” i.e., states compete among each other by
Explain why the corporation is generally considered to be the form of business organization that is best suited for raising large amounts of capital. Explain in detail the characteristics of the corporation which are useful for this purpose.
Consider a system of private law enforcement whereby private enforcers would receive a payment for each criminal conviction they obtained. What would be the advantages or disadvantages ofsuch a system, compared with the currentsystem of public enforcement?
Suppose 20 percent of the owners of automobiles in a city, who originally have no antitheft devices in their vehicles buy Lojack for their vehicles. How would this be expected to affect the rate of automobile theft in the long run? How would it make a difference if a thief (a) could, or (b) could
Explain the likely consequences of governmental action to increase the punishment of sellers of drugs, if the group purchasing the drugs (a) has an inelastic demand, or (b) has an elastic demand.
In the state of Maryland, during the years 1995–1998, 63 percent of all motoristssearched by state police were African-American, but only 18 percent of all motorists on the road were African-American. Does this evidence by itself prove racial discrimination on the part of the police? If not, why
“Criminal law is less of a deterrent for high-income individuals than for low-income individuals. Since high-income individuals can hire better lawyers, their expected punishment for a crime is lower.” Evaluate this statement.
Explain why horse thieves were hanged in the American west in the nineteenth century, i.e., why the punishment was so severe.
The economic analysis of crime offers an explanation for why premeditated murder is punished more severely than murder committed in the heat of the moment. What is that explanation?
Debby Smith, a real estate agent, is working to sell the house of Bob Norris. The value of Debby’s time is $50 per hour. She gets a commission equal to 6 percent of the sales(A). Assume Debby is interested only in maximizing her own profit. What will the house be sold for? Hint: consider the
Susan Thompson, a real estate agent, is working to sell the house of Geoff Gillis. The value of Susan’s time is $50 per hour. She gets a commission equal to 6 percent of the sales price of the house. The table below shows the relationship between the number of possible hours she can work to sell
Suppose plaintiffs request a preliminary injunction against the dispersal of blackbirds infesting an airport, and defendants claim that the airport will have to be closed unless they can proceed with the dispersal immediately. The judge determines that (1)there is a 40 percent probability that the
Suppose Mr. Smith plans to sue X Co. for $500,000. Mr. Smith believes that if the case goes to trial, there is an 80 percent chance that he will win. X Co. believes the probability that Mr. Smith will win is 40 percent. The costs of litigation are $100,000 for Mr. Smith, and $150,000 for X Co. Will
Students A and B are taking a course in economic analysis of law. Student A has attended every class, read all the assigned materials, taken careful and comprehensive notes, and revised them. Student B has skipped most classes and done none of the reading. A week before the final exam, student B
Suppose a cruise ship sank, resulting in the deaths of many passengers. The cruise line is then sued for negligence in 100 separate lawsuits by the victims or their survivors. What would be the collateral estoppel effect of the outcome of the first litigation? Consider both possibilities: (a) the
Explain whether collateral estoppel would be applied in the following situations: (a) A sues B, A loses; then E sues B. B wants to apply collateral estoppel against E, to avoid being sued again on the issues which were involved in the first lawsuit. (b) After a catastrophic hotel fire, the hotel is
“Doubling the number of judges in Wayne County courts should reduce the time to trial by approximately one-half.” Comment on this statement.
Suppose the value of the time of Mr. Jones, a lawyer, is $100 per hour. Mrs. Smith will hire Mr. Jones to represent her in a personal injury case in which she is suing to recover damages. The amount of damages which will be recovered for her depends on the amount of time invested in the case by Mr.
What functions are performed by the contingent legal fee? Why is it not universally used, for all types of legal cases, and by all types of legal clients?
Is an attorney for one party entitled to obtain copies of the notes and legal memoranda written by the lawyer for the other side? Explain the rule of law, and provide an economic explanation for the rule.
(a) Suppose Mr. Green plans to sue Mr. Blue for $100,000. Mr. Green believes that if the case goes to trial, there is a 75 percent chance that he will win. However, Mr.Blue believes that the probability of Mr. Green’s winning is only 50 percent. The costs of a trial would be $5,000 for Mr. Green,
Suppose Mr. Smith plans to sue X Co. for $200,000. Both Mr. Smith and X Co. believe that if the case goes to trial, there is a 50 percent chance that Mr. Smith will win. For each party the costs of litigation would be $10,000. Will the case be litigated or settled out of court?
The Thompson family took their children to a resort in Northern Michigan. Their 9 yearold daughter, Sally, was so excited at the time they arrived that she ran across the street to reach the main entrance of the resort, but was struck by a car, which severely injured her. The Thompsons sued the
Suppose the owner of a paint factory is caught dumping toxic waste in a public landfill and is sued in a civil action under pollution laws. Assume the probability he is detected when he does this is 10 percent, and the average social cost of each violation is$200,000. Should he be liable for
How could the activities of physicians change if there were a substantial increase in medical malpractice liability in their area of medical practice? Try to think of all the possibilities.
What are the economic arguments that have been made against the current system of liability for medical malpractice, i.e., the arguments which suggest that the system is inefficient?
Under what circumstances is it important to have conduct covered by the law ofnegligence rather than strict liability?
A negligence case involved a young boy who was seriously injured when he sat on a vacuum drain at the bottom of a swimming pool. Suppose actual damages to the boy were $3 million. As a result of the accident the family was paid $1 million under a family accident insurance policy, which was provided
Mr. A through negligence causes an injury to Mrs. B, resulting in damages of $30,000 to her, part of which is medical expenses. The health insurance provided at no cost to Mrs. B by her employer pays for $10,000 of her expenses. Is Mr. A liable to Mrs. B for $30,000 or only $20,000? Explain what
Discuss whether the common law of rescue is efficient.
What is the economic justification for the rule of foreseeability in negligence law, i.e., the rule that there is no negligence unless it was foreseeable that the defendant’s action would result in an injury to the plaintiff? (Hint: consider the Learned Hand rule.)
Mr. A, while attempting to inflate the tube of his bicycle tire, causes the tube to burst loudly, which startles a neighbor, Ms. C, who was restraining her dog on a leash to prevent it from chasing a squirrel. After Ms. C lets go of the leash, the dog dashes across the street towards the squirrel,
A tractor pulling a group of college students on a “hay ride” turns on to a busy four-lane highway at night. (This action was negligent, since (a) the wagon carrying the hay had no tail lights, as required by law; and (b) it is generally illegal for this type of vehicle to travel on four-lane
A group of hikers decide to lie down and rest on some railroad tracks. The engineer of an oncoming train sees the hikers and blows the whistle but makes no effort to stop, reasoning that the train has the right of way. Is the railroad liable for the death of the hikers? Explain the common-law rule.
While A reclines on a bench in the park, B approaches him and then, without being asked, sings a medley of Broadway show tunes. A thoroughly enjoys the performance, but declines an invitation to throw coins into B’s cup. Does A have an obligation to compensate B? Explain why or why not.
Until 1834 slaves were used in the Turks and Caicos Islands to produce salt. The slaves occasionally managed to escape from the islands at night on ships moored in the harbor.Regulations in effect in 1767 provided that if the owner of a sail boat left its sails on at night, and the sailboat was
Margaret Brinig found that there was a large increase in the use of diamond rings for engagements in states after the abolition of the action for breach of promise to marry.What is her explanation of this? How does she explain the decline in demand for diamond engagement rings since about 1980?

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Economic Foundations Of Law 3rd Edition Stephen J. Spurr - Solutions

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