Questions and Answers of Foundations Of Economics

Why can we be confident that the market for avocados is competitive and that a decrease in supply rather than the greed of avocado growers is the reason for the August 2018 rise in price?
Chinese hog farms ‘panic’ as swine virus shrinks herds China produces half the world’s pork, but 80 percent of China’s hog farms are not going to restock as a swine fever spreads. Farmers
Why the allocation of tickets is inefficient if the re-selling of tickets is made illegal.
Suppose that Congress caps executive pay at a level below the equilibrium.a. Explain how the quantity of executives demanded, the quantity supplied, and executive pay will change. Why is the outcome
A price floor influences the outcome of a market if it is ______.A. Set below the equilibrium priceB. Set above the equilibrium priceC. An incentive for buyers to increase demand for the goodD. An
Why a mismatch between intention and outcome is inevitable if a price regulation seeks to block the laws of supply and demand.
New York has the highest cigarette taxes in the country. The price of an average pack of cigarettes in New York City is $13. The combined state and city taxes are $5.85 a pack. The average income of
If a tax of $1 a can is imposed on the buyers of sugary drinks, the demand for sugary drinks ______ and the price that buyers pay ______.A. Doesn’t change; doesn’t changeB. Doesn’t change;
New York has the highest cigarette taxes in the country. The price of an average pack of cigarettes in New York City is $13. The combined state and city taxes are $5.85 a pack. The average income of
A tax on sugar will be paid by only ______.A. Buyers if the supply of sugar is perfectly elasticB. Sellers if the demand for sugar is perfectly inelasticC. Buyers if the demand for sugar is perfectly
Concerned about the political fallout from rising gas prices, the government cuts the tax on gasoline.Explain the effect of this tax cut on the price of gasoline and the quantity bought if, at the
New York has the highest cigarette taxes in the country. The price of an average pack of cigarettes in New York City is $13. The combined state and city taxes are $5.85 a pack. The average income of
If the government imposes a new tax on plastic bags, ______.A. Total surplus from bags shrinks by more than the amount of tax collectedB. Total surplus from bags shrinks by the amount of the tax
Concerned about the political fallout from rising gas prices, the government cuts the tax on gasoline.Explain the effect of this tax cut on the price of gasoline and the quantity bought if, at the
The supply of luxury boats is perfectly elastic, the demand for luxury boats is unit elastic, and with no tax on luxury boats, the price is $1 million and 240 luxury boats a week are bought. Now
The demand for labor is more elastic than the supply of labor. An income tax _____ the wage rate paid by employers and _______.A. Lowers; workers pay all the taxB. Raises; workers pay most of the
What is the market price of Internet service? If the government taxes Internet service $15 a month, what price would the buyer of Internet service pay? What price would the seller of Internet service
Figure 8.5 illustrates the market for chocolate bars. If a new tax of $1.50 a chocolate bar is imposed, what is the change in the quantity of chocolate bars bought, who pays most of the tax, and what
The supply of low-skilled workers in China is perfectly elastic. In 2011, when China cut the tax on these workers’ incomes from 5 percent to zero, _____.A. Employers cut the wage rate but hired the
Record U.S. corn crop, up 24%, is forecast The USDA reported that world corn production will be 9.9 percent greater than last year’s, while U.S. corn production will be 24 percent larger. The price
Some Seattle restaurants struggle with $15 minimum wage 5 years later Seattle voted to raise the minimum wage to $15 an hour nearly five years ago. It radically changed the way restaurants do
An effective production quota for peanuts with no imports of peanuts will ______.A. Lower the peanut growers’ costs, raise the market price of peanuts, and decrease consumer surplusB. Raise the
Who decides whether a movie is going to be a blockbuster? How do you think the creation of a blockbuster movie influences what, how, and for whom goods and services are produced?Jurassic World had
What are some of the components of marginal cost and marginal benefit that the producer of a movie faces?Jurassic World had world-wide box office receipts of $1.66 billion. The movie’s production
Jurassic World had world-wide box office receipts of $1.66 billion. The movie’s production budget was $150 million with additional marketing costs. A successful movie brings pleasure to millions,
Think about each of the items in the list and explain how they affect incentives and might change the choices that people make:• A hurricane hits Central Florida.• The World Series begins tonight
Are carbon prices working? Economists say that raising the cost of burning coal, oil, and gas is a cost effective way to lower carbon emissions, but most countries that have tried this solution
Which of the following is a positive statement?A. We should stop using corn to make ethanol because it is raising the cost of food.B. You will get the most out of college life if you play a sport
Are carbon prices working? Economists say that raising the cost of burning coal, oil, and gas is a cost effective way to lower carbon emissions, but most countries that have tried this solution
REI is paying its employees to take Black Friday, Thanksgiving off REI, the outdoor gear and apparel retailer, is paying employees to celebrate Thanksgiving 2015 by spending Black Friday outdoors
Are carbon prices working? Economists say that raising the cost of burning coal, oil, and gas is a cost effective way to lower carbon emissions, but most countries that have tried this solution
REI is paying its employees to take Black Friday, Thanksgiving offREI, the outdoor gear and apparel retailer, is paying employees to celebrate Thanksgiving 2015 by spending Black Friday outdoors with
The global economy has seen a fall in the number of landlines and rapid growth in the number of smartphones. In the United States, 51 percent of households have no landline and 95 percent have a
California added construction and manufacturing jobs. California added 25,000 jobs in March, particularly in construction and manufacturing. Construction jobs showed the most growth.Explain how you
China’s race to the top in income inequality China has lifted millions out of poverty, but inequality has also increased. In 2017, 8 million students graduated from Chinese universities, 10 times
Led by China, a new billionaire is created in Asia every other day Billionaire wealth in Asia increased 17 percent to $6 trillion in 2016. Led by China, the number of the region’s billionaires
Make a graph of the production possibilities frontier with HIV/AIDS cases treated on the x-axis and other goods and services on the y-axis before and after the advance in technology.More than 50
How does the opportunity cost of treating HIV/AIDS changes as the number of cases treated increases with no change in technology?More than 50 years after one of the most devastating viruses to affect
How has the opportunity cost of treating HIV/AIDS changed as the technology for treating it has advanced?More than 50 years after one of the most devastating viruses to affect mankind, HIV remains a
Why oil and gasoline prices are rising faster than expectedThe oil price has risen faster than expected because demand has been stronger than expected and U.S. sanctions on Iran and Venezuela have
OPEC and allies agree to cut oil production With oil prices stuck at a low of $60-a-barrel , major oil producers agree to cut crude production.Explain and illustrate on a graph of the oil market the
Chinese hog farms ‘panic’ as swine virus shrinks herds China produces half the world’s pork, but 80 percent of China’s hog farms are not going to restock as a swine fever spreads. Farmers
After a severe bout of foreclosures and defaults on home loans, banks made it harder for people to borrow. How does this change influence the demand for new homes, the supply of new homes, and the
Many Americans are selling their used cars and buying new fuel efficient hybrids. Other things remaining the same, in the market for used cars, ________ and in the market for hybrids ________.A.
China turns caviar into a cheap snack The price of caviar crashed from $24 an ounce in January 2012 to a bit less than $10 an ounce in November 2018. China has become a big producer and from 2012 to
Read Eye on the Price of Avocados on p. 105 and explain how we know that the price increased during August 2018 because the supply of avocados decreased and not because the demand for avocados
“As more people buy smartphones, the demand for smartphone service increases and the price of smartphone service falls, which decreases the supply of smartphone service.” Is this statement true
Record number waiting to upgrade cell phones Faced with a $1,000 price tag for an old-tech phone, consumers may be waiting for the new 5G technology coming before buying a replacement phone.Explain
When the price of home heating oil increased by 20 percent, the quantity demanded decreased by 2 percent and the quantity of wool sweaters demanded increased by 10 percent.Use the total revenue test
Read Eye on Elasticity at the Coffee Shop on p. 125 then use the following data about Elle’s Espresso Bar to work. When Elle’s Espresso Bar increased its prices by 10 percent, the quantity of
When the price of ice cream rises from $3 to $5 a scoop, the quantity of ice cream bought decreases by 10 percent. The price elasticity of demand for ice cream is _______.A. 5B. 0.2C. 50D. 2.5
When the price of home heating oil increased by 20 percent, the quantity demanded decreased by 2 percent and the quantity of wool sweaters demanded increased by 10 percent.If the price of a wool
Read Eye on Elasticity at the Coffee Shop on p. 125 then use the following data about Elle’s Espresso Bar to work. When Elle’s Espresso Bar increased its prices by 10 percent, the quantity of
In Pioneer Ville, the price elasticity of demand for bus rides is 0.5. When the price of a bus ticket rises by 5 percent, _______.A. The demand for bus rides increases by 10 percentB. The quantity of
When rain ruined the banana crop in Central America, the price of bananas rose from $1 to $2 a pound. Growers sold fewer bananas, but their total revenue was unchanged. By what percentage did the
The price elasticity of demand for a good is 0.2. A 10 percent rise in the price will _______ the total revenue from sales of the good.A. DecreaseB. IncreaseC. Decrease the quantity sold with no
The income elasticity of demand for haircuts is 1.5, and the income elasticity of demand for food is 0.14. You take a weekend job, and the income you have to spend on food and haircuts doubles. If
If the price of a good falls and expenditure on the good rises, the demand for the good is _______.A. ElasticB. Perfectly elasticC. InelasticD. Unit elastic
Drought cuts the quantity of wheat grown by 2 percent. If the price elasticity of demand for wheat is 0.5, by how much will the price of wheat rise?If pasta makers estimate that this change in the
When the price of a good rises from $5 to $7 a unit, the quantity supplied increases from 110 to 130 units a day. The price elasticity of supply is_______. The supply of the good is _______.A. 60;
“In a market in which demand is price inelastic, producers can gouge consumers and the government must set high standards of conduct for producers to ensure that consumers get a fair deal.” Do
If all personal trainers agree to charge $80 an hour, how do consumer surplus and producer surplus change? What is the deadweight loss created?The table shows the demand schedule for personal trainer
A survey found that when incomes increased by 10 percent, the following changes in the quantities demanded occurred: spring water up by 5 percent; sports drinks down by 2 percent; cruises up by 15
Calculate the equilibrium price of a sandwich, the consumer surplus, and the producer surplus. What is the efficient quantity of sandwiches?The table shows the demand and supply schedules for
In rose beds, money blooms On Valentine’s Day 2018, Americans bought 257 million roses at about double the normal price. On a normal day, 3 million roses are sold.Does the information about the
A 2 percent increase in income increases the quantity demanded of a good by 1 percent. The income elasticity of demand for this good is _______. The good is a _______ good.A. 2; normalB. –2;
How many personal trainer hours are bought, the value of an hour, and the total surplus from the hours bought? The table shows the demand schedule for personal trainer services and the supply
Record U.S. corn crop, up 24%, is forecast The USDA reported that world corn production will be 9.9 percent greater than last year’s, while U.S. corn production will be 24 percent larger. The price
What is the magnitude of the elasticity that you can estimate using the information provided? Explain your answer.
Kawhi’s buzzer-beating shot sends Raptors ticket prices soaring Kawhi Leonard’s buzzer-beating basket against the Philadelphia 76ers was very close to a miracle. So is getting a cheap ticket for
The method of allocation that most stores use during Thanksgiving sales is:A. A combination of market price and lotteryB. First-come, first-servedC. A combination of contest and commandD. A
If the quantity supplied decreases by 100 sandwiches an hour at each price, what is the equilibrium price and what is the change in total surplus?The table shows the demand and supply schedules for
If the quantity demanded decreases by 100 sandwiches an hour at each price, what is the equilibrium price and what is the change in total surplus?The table shows the demand and supply schedules for
All of the following statements are correct except ______.A. The value of an additional unit of the good equals the marginal benefit from the goodB. Marginal benefit is the excess of value over the
Choose the best statement.A. An increase in the demand for a good increases producer surplus.B. If producers decrease the supply of the good, their producer surplus will increase.C. Producer surplus
In California, farmers pay a lower price for water than do city residents.What is this method of allocation of water resources? Is this allocation of water efficient? Is this use of scarce water
The market for a good is efficient if ______.A. The marginal cost of producing the good is minimizedB. The marginal benefit from the good is maximizedC. The consumer surplus is maximizedD. The total
In California, farmers pay a lower price for water than do city residents.If farmers were charged the same price as city residents pay, how would the price of agricultural produce, the quantity of
When the marginal benefit from a good exceeds its marginal cost, ______.A. There is overproduction of the goodB. A deadweight loss, which is the excess of marginal benefit over marginal cost,
If the college puts a strictly enforced rent ceiling on rooms of $550 a month, what is the rent, how many rooms are rented, and is the on campus housing market efficient? Explain why or why not.The
In California, farmers pay a lower price for water than do city residents.If all water in California is sold for the market equilibrium price, would the allocation of water be more efficient? Why or
Market failure arises if ______.A. There is overproduction of the good but not if there is underproductionB. The deadweight loss is zeroC. Producer surplus exceeds consumer surplusD. Total surplus is
If the college puts a rent ceiling on rooms of $650 a month, what is the rent, how many rooms are rented, and is the on campus housing market efficient?The table shows the demand and supply
The world’s largest tulip and flower market Every day over 19 million tulips and flowers are auctioned at the Dutch market called “The Bloemenveiling.” These Dutch auctions match buyers and
The allocation of resources is fair ______.A. In the fair-rules view if everyone has equal opportunityB. In the fair-results view if most resources are distributed to the poorest peopleC. In the
If the college introduces a minimum wage of $10.50 an hour, how many students are employed at on-campus venues and how many are unemployed?Use the table, which shows the demand and supply schedules
The world’s largest tulip and flower market Every day over 19 million tulips and flowers are auctioned at the Dutch market called “The Bloemenveiling.” These Dutch auctions match buyers and
Land-use regulations are obstacles to the California dream According to the 2010 Census, 95 percent of Californians live on just 5.3 percent of the land in the state. Less than 17 percent of the San
Resellers are trying to turn a profit on Nipsey Hussle memorial tickets Free memorial tickets, given to fans, were scooped up and within minutes, some appeared on secondary site for more than $400.
Suppose that with a strictly enforced rent ceiling on rooms of $550 a month, a black market develops. How high could the black market rent be and would the on-campus housing market be fair? Explain
Online sellers guide to eBay spring update On eBay, the bidder who places the highest bid wins the auction and pays what the second highest bidder offered. Each spring, eBay updates its rules and
A price ceiling imposed below the equilibrium price ______.A. Creates a black market in which the price might equal or exceed the equilibrium priceB. Creates a black market in which the price equals
Suppose that the government introduces a production quota for mushrooms and sets it at 3,000 pounds per week. What is the market price of mushrooms? Calculate the producer surplus and the deadweight
Concerned about the political fallout from rising gas prices, suppose that the U.S. government imposes a price ceiling of $3.00 a gallon on gasoline.Explain how the market for gasoline would react to
A price ceiling is ______ if it is set _____ the market equilibrium price.A. Efficient and fair; belowB. Unfair but efficient; equal toC. Efficient and unfair; aboveD. Inefficient and unfair; below
Concerned about the political fallout from rising gas prices, suppose that the U.S. government imposes a price ceiling of $3.00 a gallon on gasoline.Explain how the market for gasoline would react to
Concerned about the political fallout from rising gas prices, suppose that the U.S. government imposes a price ceiling of $3.00 a gallon on gasoline. Under what conditions would the price ceiling
Suppose the government introduced a ceiling on lawyers’ fees.a. How would the amount of work done by lawyers, the consumer surplus of people who hire lawyers, and the producer surplus of law firms
Suppose that the government introduces a production quota for mushrooms and sets it at 2,000 pounds a week. What is the market price of mushrooms? Calculate the producer surplus and the deadweight
A minimum wage is ______.A. Efficient if the wage paid rises and more people look for jobsB. Inefficient if workers’ surplus decreases and firms’ surplus increasesC. Inefficient if job search

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