Questions and Answers of Foundations Of Economics

Use the table, which shows an economy’s total production and the prices of the final goods it produced in 2020 and 2021, to work Problems.The base year is 2020. Calculate real GDP in 2020 and 2021.
Use the table, which shows an economy’s total production and the prices of the final goods it produced in 2020 and 2021, to work Problems.Calculate the percentage increase in real GDP in 2021.
The Commerce Department reported that in December 2015, retail sales rose by 0.2, net exports decreased, inventories held by businesses rose by 0.1 percent, and total sales by businesses fell by 0.6
Investors snapping up US homes at record levels With confidence in the housing market and low mortgage interest rates, U.S. investors are buying new and existing homes at a record high rate.Where do
China GDP growth slows to 27-year low China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of
Read Eye on Full Employment then work the following exercises.• Compare the duration of unemployment in 2019 with that in 2000 and explain whether the difference was most likely the result of
The BLS count Jody as being unemployed if she _______.A. Had a job last month but not this monthB. Doesn’t have a job because the U.S. factory where she worked cannot compete with cheap Chinese
Use the following information gathered by a BLS labor market survey of four households to work Problems.• Household 1: Candy worked 20 hours last week setting up her Internet shopping business. The
In July 2020, in the economy of Sandy Island, 10,000 people were employed and 1,000 were unemployed. During August 2020, 80 people lost their jobs and didn’t look for new ones, 20 people quit their
Describe the trends and fluctuations in the unemployment rate in the United States from 1949 through 2019. In which periods was the unemployment rate above average and in which periods was it below
Describe how the labor force participation rate in the United States changed between 1960 and 2019. Contrast and explain the different trends in the labor force participation rates of women and men.
US jobless rate at lowest since 1969 The U.S. unemployment rate fell from 3.8 percent to 3.6 percent in April, its lowest level for more than 49 years. The economy added jobs in construction and
US jobless rate at lowest since 1969 The U.S. unemployment rate fell from 3.8 percent to 3.6 percent in April, its lowest level for more than 49 years. The economy added jobs in construction and
The metro areas with the lowest and highest unemployment In June 2019, Ames, Iowa, had one of the lowest unemployment in the United States at 2.3 percent of the workforce. At the other end of the
The metro areas with the lowest and highest unemployment In June 2019, Ames, Iowa, had one of the lowest unemployment in the United States at 2.3 percent of the workforce. At the other end of the
On a graph, show the demand for Elixir water and Elixir Spring’s marginal revenue curve. What are Elixir’s profit-maximizing price, output, and economic profit?Elixir Spring produces a unique and
How does Microsoft set the price of Windows and would it be in the firm’s self-interest to set a different price for a version stripped of IE?Microsoft: We're not gouging Europe on Windows 7
A firm is a natural monopoly if ________.A. It can produce the good at a price below its competitor’s priceB. It can produce a larger quantity of the good than other firms couldC. The government
What is the price each type of customer is charged and how many haircuts an hour does Bobbie’s sell? What is the increase in Bobbie’s economic profit that results from price
Compare Elixir’s profit maximizing price with the marginal cost of producing the profit-maximizing output. At the profit-maximizing price, is the demand for Elixir water inelastic or elastic?Elixir
Calculate Big Top’s profit-maximizing price, output, and economic profit if it charges a single price for all tickets.Big Top is the only circus in the nation. The table sets out the demand
Suppose that there are 1,000 springs, all able to produce this water at zero marginal cost and with zero fixed costs. Compare the equilibrium price and quantity produced with the price and quantity
Who benefits from Bobbie’s price discrimination? Is the quantity of haircuts efficient?Bobbie’s Hair Care is a natural monopoly. The table shows the demand schedule (the first two columns) and
Why might Microsoft offer the full version of Windows 7 to European customers at a lower upgrade price?Microsoft: We're not gouging Europe on Windows 7 pricing Regulators in the European Union have
Blue Rose Inc. is the only flower grower to have cracked the secret of making a blue rose. Figure 16.2 shows the demand for blue roses and the marginal cost of producing a blue rose. What is Blue
When Big Top maximizes profit, what is the consumer surplus and producer surplus and is the circus efficient? Explain why or why not.Big Top is the only circus in the nation. The table sets out the
A monopoly ________.A. Can choose its price and output and always has the option of price discriminatingB. Is a price taker and by offering a range of discounts can price discriminateC. That produces
At the market equilibrium, no children under 10 years old attend the circus. Big Top offers children under 10 a discount of 50 percent. How will this discount change the consumer surplus and producer
A single-price monopoly maximizes profit by producing the quantity at which _____.A. Its total revenue will be as large as possibleB. Marginal revenue equals marginal cost and setting the price equal
If Big Top is regulated to produce the efficient output, what is the quantity of tickets sold, what is the price of a ticket, and what would be the consumer surplus?Big Top is the only circus in the
A monopoly sets its price such that demand for the good produced is ______.A. Unit elasticB. InelasticC. ElasticD. Either elastic or inelastic, but never unit elastic
A single-price monopoly is ______.A. Inefficient because it converts consumer surplus to producer surplusB. Inefficient because it produces too small an output and creates a deadweight lossC.
If PREPA is unregulated and maximizes profit, show in your graph the price, quantity, economic profit, consumer surplus, and deadweight loss.The Puerto Rico Electric Power Authority (PREPA) is a
Draw a graph to illustrate the circus market if regulators set a price cap that enables Big Top to break even. Show the deadweight loss in your graph.Big Top is the only circus in the nation. The
If Big Top is regulated to charge a price equal to average total cost, what is the quantity of tickets sold, the price of a ticket, and economic profit?Big Top is the only circus in the nation. The
A monopoly that price discriminates ______.A. Benefits buyers because it offers the good at a variety of pricesB. Gains because it converts consumer surplus to economic profitC. Uses resources more
If PREPA is unregulated and it gives householders a 50 percent discount for second and third connections, describe how its economic profit, consumer surplus, and deadweight loss would change.The
Governments regulate natural monopoly by capping the price at _____.A. Marginal revenue and allowing the monopoly to maximize profitB. Marginal cost so that the monopoly is efficient and makes zero
If PREPA is regulated in the social interest, show in your graph the price, quantity, economic profit, consumer surplus, and deadweight loss.The Puerto Rico Electric Power Authority (PREPA) is a
If PREPA is subject to a price cap regulation that enables it to break even, show in your graph the price, quantity, economic profit, consumer surplus, and deadweight loss.The Puerto Rico Electric
Why is the U.S. Postal Service not a natural monopoly? Explain why it could be efficient to keep it in operation with a subsidy.Unfair postal competition With the rise of e-mail, the volume of snail
Draw a graph to illustrate the U.S. Postal Service’s price, quantity produced, consumer surplus, producer surplus, and deadweight loss.Unfair postal competition With the rise of e-mail, the volume
Read Eye on Microsoft and explain how Window’s price, quantity bought, consumer surplus, producer surplus, and deadweight loss would change if Microsoft was able to sell ads that appear every time
At the shutdown point, the firm ________.A. Incurs an economic loss equal to total variable costB. Makes zero economic profitC. Incurs a loss equal to total fixed costD. Stops production to decrease
In perfect competition, all the following situations arise except ________.A. Firms produce an identical good or serviceB. Each firm chooses the price at which to sell the good it producesC. Firms
In what type of market is each good or service in the following list sold? Explain your answers.• Wheat• Jeans• Printer cartridges• Toothpaste• Gym membership in a town with one gym
Read Eye on Record Stores and explain why Amazon entered the market for recorded music and why independent record stores exited.
A firm that is producing the quantity at which marginal cost exceeds both average total cost and the market price will increase its economic profit by _______.A. Producing a larger quantityB. Raising
Explain why in a perfectly competitive market, the firm is a price taker. Why can’t the firm choose the price at which it sells its good?
The table to the right shows the demand schedule for Sara’s Scones. Calculate Sara’s marginal revenue for each quantity demanded. Compare Sara’s marginal revenue and price. In what type of
How does competition among online music retailers influence economic profit?
A firm will shut down in the short run if at the profit-maximizing quantity, ___________.A. Total revenue is less than total costB. Marginal revenue is less than average fixed costC. Average total
At a market price of $50 a batch, what quantity does Lin’s produce and what is the firm’s economic profit in the short run?The market for cookies is perfectly competitive. The table to the right
At a market price of $35.20 a batch, what quantity does Lin’s produce and what is the firm’s economic profit in the short run?The market for cookies is perfectly competitive. The table to the
At a market price of $21 a toy, what quantity does the firm produce in the short run and does the firm make a positive economic profit, a zero economic profit, or an economic loss?Figure 15.5 shows
In what type of market is each of the following goods and services sold? Explain your answers.• Breakfast cereals• Smartphones• The only restaurant in a small town• Oranges• Air travel in a
Create Lin’s short-run supply schedule and make a graph of Lin’s short run supply curve. Explain why only part of Lin’s short-run supply curve is the same as its marginal cost curve.The market
Suppose that the restaurant industry is perfectly competitive. Joe’s Diner is always packed in the evening but rarely has a customer at lunchtime. Why doesn’t Joe’s Diner close—temporarily
At a market price of $12 a toy, how many toys does the firm produce and what is its economic profit in the short run? How will the number of firms in the market change in the long run?Figure 15.5
In the short run, the profit-maximizing firm will ________.A. Break even if marginal revenue equals marginal costB. Make an economic profit if marginal cost is less than average total costC. Incur an
A firm’s short-run supply curve is the same as _____ if it produces the good.A. Its marginal revenue curveB. The upward-sloping part of its marginal cost curveC. Its marginal cost curve above
A permanent increase in demand ______ economic profit in the short run and some firms will ____ in the long run.A. Does not change; exit the marketB. Increases; enter the marketC. Increases; raise
At what market prices would the firm shut down temporarily? What is the market price of a toy in long-run equilibrium? How many firms will be in the toy market in the long run? Explain your
At a market price of $83 a batch, what quantity does Lin’s produce and what is the firm’s economic profit in the short run? Do firms enter or exit the market and what is Lin’s economic profit
Perfect competition is efficient because all the following conditions hold except ________.A. Total product is maximizedB. Firms maximize profit and produce on their supply curvesC. Consumers get a
Draw a graph to describe the maple syrup market and the cost and revenue of one maple syrup producer in 2016, assuming that all producers are making a positive economic profit because of the actions
Draw graphs of the U.S. strawberry market in long-run equilibrium before the pollution crackdown: one of the U.S. market and one of a California grower. Now show the short-run effects of the
Starting with the industry making a positive economic profit, explain how the maple syrup market and the profit of an individual producer will change in the long run.Quebec losing hold over maple
If the demand for maple syrup increases, what will happen to price, quantity, and the economic profit of a producer in the short run and in the long run?Quebec losing hold over maple syrup industry
Read Eye on Record Stores and explain how Internet retailing of recorded music changed the constraints faced by small traditional record stores. Why did many record stores exit rather than shut down
Why it would be efficient to repair more bridges every year and why we don’t do so.
An increase in the rent that a firm pays for its factory does not increase______.A. Total costB. Fixed costC. Marginal costD. Average fixed cost
The first table shows the demand schedule for electricity from a coal-burning utility. The second table shows the utility’s cost of producing electricity and the external cost of the pollution
Explain how Whole Foods’ decision will change the deadweight loss created by plastic straws.Whole foods to become first national supermarket to ban plastic straws Whole Foods is set to completely
An un-regulated paint factory that pollutes a river results in ______ and _____.A. Over-production; a price that exceeds the marginal benefit of the good.B. Under-production; a price that equals the
Classify each of the items in the list as a private good, a public good, a common resource, or a club good. Explain each classification.• New Year’s Eve celebrations in Times Square, New York•
Read Eye on the U.S. Infrastructure then work the problem:a. What type of good is a highway bridge?b. Why might a bridge be provided by government rather than privately?c. Why might it be efficient
What quantity of spraying would a private control program provide? What is the efficient quantity of spraying?Use the table, which provides data about a dandelion control program. Quantity (square
A good is ________ if it is possible to prevent someone from enjoying its benefits and such a good might be a ________ good.A. Rival; privateB. Excludable; publicC. Excludable; privateD.
For each public good in the list, is there a free-rider problem? If not, how is the free-rider problem avoided?• New Year’s Eve celebrations in Times Square, New York• A city’s sewer
The table sets out total benefit of a public good for Wendy, Sara, and Tom, the only people in the society. If the government provided 3 units of the public good, calculate the marginal social
Two political parties, the Conservers and the Eradicators, fight an election in which the only issue is the quantity of spraying to undertake. The Conservers want no spraying and the Eradicators want
A free-rider problem arises if a good is ________.A. Nonrival and nonexcludableB. Nonrival and excludableC. Rival and nonexcludableD. Rival and excludable
The marginal social benefit of a public good is ________.A. The quantity demanded by all the people at a given priceB. The amount that all the people are willing to pay for a given quantityC. The
Use the figure to work Problem shows the marginal social benefit and marginal social cost of a waste disposal system in a city of 1 million people.What is the efficient capacity of the system and how
Use the figure to work Problem shows the marginal social benefit and marginal social cost of a waste disposal system in a city of 1 million people.If voters are well informed about the costs and
The efficient quantity of a public good is most likely to be delivered by____.A. An election contest between two parties that want different quantitiesB. Highly trained bureaucratsC. Efficient
All the following can achieve an efficient use of a common resource except ________.A. A production quota equal to the marginal external costB. Individual transferable quotas that total the efficient
Stalling complaints about fixed GM cars In 2014, GM recalled 2.6 million vehicles to repair a safety defect in their ignition switches. Some of the recalled vehicles stalled and locked up, but a
Suppose that there are two national football leagues: The Time League and The Bonus for Win League. The players have private information about their effort. In The Time League, players receive a
In the market for used cars with no warranties, ________ lemons are bought and the equilibrium is a _______ equilibrium.A. Too few; separatingB. Too many; separatingC. Only; poolingD. No; pooling
Is there a moral hazard problem in a transaction between Mary and an insurance company? Explain why or why not.Mary is an 18-year-old student, who recently bought a used car. Mary is looking to buy
Oilers, Jets top NHLers’ no-trade lists ESPN asked 10 player agents to name their top three most frequent no trade teams. The top three, in order, were the Edmonton Oilers, the Winnipeg Jets, and
In a used-car market in which dealers offer cars with warranties, _______.A. There is private informationB. A separating equilibrium does not occurC. A lemon problem does not ariseD. The market is
If health insurance is optional, would healthy people be more likely or less likely to buy insurance?President Obama campaigned on a health-care reform plan that did not include mandatory health
What are the problems that Medicare and Medicaid address and what problems do they cause?
The health-care system in the United States costs per person ______ what it costs in other rich countries and U.S. health outcomes rank ______.A. Double; lowerB. Half; higherC. Double; higherD. Half;
What is the cost of health care in the United States compared to that in Canada and major European countries? Do health outcomes correlate with health-care costs? Can you think of explanations for
U.S. healthcare per person costs twice that of other rich countries. Does the United States overprovide? Do other countries underprovide? What economic concepts do you need to answer? What data might
If U.S. healthcare were delivered like basic education is, how would the healthcare system compare to that in Canada? Would it be efficient?

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