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International Human Resource Management A Multinational Company Perspective 1st Edition Monir Tayeb - Solutions
3. Acme, Inc., supplies rocket ships to the retail market and hires workers to assemble the components. A rocket ship sells for $30,000, and Acme can buy the components for each rocket ship for $25,000. Wiley and Sam are two workers for Acme. Sam can assemble 1 5 of a rocket ship per month and
2. Stone, Inc., owns a clothing factory and hires workers in a competitive labor market to stitch cut denim fabric into jeans. The fabric required to make each pair of jeans costs $5. The company’s weekly output of finished jeans varies with the number of workers hired, as shown in the following
1. Mountain Breeze supplies air filters to the retail market and hires workers to assemble the components. An air filter sells for $26, and Mountain Breeze can buy the components for each filter for $1. Sandra and Bobby are two workers for Mountain Breeze. Sandra can assemble 60 air filters per
5. Why is exclusive reliance on the negative income tax unlikely to constitute a long-term solution to the poverty problem? LO5
4. Mention two self-interested reasons that a top earner might favor policies to redistribute income. LO4
3. How might recent changes in income inequality be related to the proliferation of technologies that enable the most productive individuals to serve broader markets? LO3, LO4
2. True or false: If the human capital possessed by two workers is nearly the same, their wage rates will be nearly the same. Explain. LO3
1. Why is the supply curve of labor for any specific occupation likely to be upward-sloping, even if, for the economy as a whole, people work fewer hours when wage rates increase? LO2
4. Discuss how advertising, conspicuous consumption, statistical discrimination, and other devices are responses to asymmetric information problems.
3. Define asymmetric information and describe how it leads to the lemons problem.
2. Use the concept of rational search to find the optimal amount of information market participants should obtain.
1. Explain how middlemen add value to market transactions.
11.3 The income figures from the different levels of investment in cattle would remain as before, as shown in the table. What is different is the opportunity cost of investing in each steer, which is now $11 per year instead of $13. The last column of the table shows that the socially optimal
11.2 If the two were to live together, the most efficient way to resolve the telephone problem would be as before, for Betty to give up reasonable access to the phone. But on top of that cost, which is $150, Betty would also bear a $60 cost from the loss of her privacy. The total cost of their
11.1 Since Fitch gains $50 per day when Abercrombie operates with a filter, he could pay Abercrombie as much as $49 per day and still come out ahead. LO2
10.*A village has six residents, each of whom has accumulated savings of $100. Each villager can use this money either to buy a government bond that pays 15 percent interest per year or to buy a year-old llama, send it onto the commons to graze, and sell it after 1 year. The price the villager
9. Refer to problem 8. Barton decides to buy a full-sized grand piano. The new payoff matrix is as follows: LO2, LO3a. If Statler has the legal right to peace and quiet and Barton and Statler can negotiate at no cost, will Barton install and maintain soundproofing? Explain. Is this outcome
8. Barton and Statler are neighbors in an apartment complex in downtown Manhattan. Barton is a concert pianist, and Statler is a poet working on an epic poem. Barton rehearses his concert pieces on the baby grand piano in his front room, which is directly above Statler’s study. The following
7. How, if at all, would your answer to problem 6 differ if John would be willing to pay up to $30 per month to avoid giving up his privacy by sharing quarters with Karl? LO2, LO3
6. John and Karl can live together in a two-bedroom apartment for $500 per month, or each can rent a single-bedroom apartment for $350 per month. Aside from the rent, the two would be indifferent between living together and living separately, except for one problem: John leaves dirty dishes in the
5. Suppose the law says that Jones may not emit smoke from his factory unless he gets permission from Smith, who lives downwind. If the relevant costs and benefits of filtering the smoke from Jones’s production process are as shown in the following table, and if Jones and Smith can negotiate
4. Refer to problem 3. How would the imposition of a tax of $3 per unit on each daily boom box rental affect efficiency in this market? LO2
3. Suppose the supply curve of boom box rentals in Golden Gate Park is given by P 5 0.1Q, where P is the daily rent per unit in dollars and Q is the volume of units rented in hundreds per day. The demand curve for boom boxes is 20 0.2Q. If each boom box imposes $3 per day in noise costs on others,
2. Phoebe keeps a bee farm next door to an apple orchard. She chooses her optimal number of beehives by selecting the honey output level at which her private marginal benefit from beekeeping equals her private marginal cost. LO1, LO2a. Assume that Phoebe’s private marginal benefit and marginal
1. Determine whether the following statements are true or false, and briefly explain why: LO2a. A given total emission reduction in a polluting industry will be achieved at the lowest possible total cost when the cost of the last unit of pollution curbed is equal for each firm in the industry.b.
5. Explain why the wearing of high-heeled shoes might be viewed as the result of a positional externality. LO5
4. Why does the Great Salt Lake, which is located wholly within the state of Utah, suffer lower levels of pollution than Lake Erie, which is bordered by several states and Canada? LO4
3. If Congress could declare any activity that imposes external costs on others illegal, would such legislation be advisable? LO2
2. How would you explain to a friend why the optimal amount of freeway congestion is not zero? LO3
1. What incentive problem explains why the freeways in cities like Los Angeles suffer from excessive congestion? LO1
5. Define positional externalities and their effects, and show how they can be remedied.
4. Characterize the tragedy of the commons, and show how private ownership is a way of preventing it.
3. Discuss why the optimal amount of an externality is not equal to zero.
2. Explain how the effects of externalities can be remedied.
1. Define negative and positive externalities, and analyze their effect on resource allocation.
10.4 The equilibrium of this game in the absence of a commitment to tip is that the waiter will give bad service because if he provides good service, he knows that the diner’s best option will be not to tip, which leaves the waiter worse off than if he had provided good service. Since the diner
10.3 Smith assumes that Jones will choose the branch that maximizes his payoff, which is the bottom branch at either B or C. So Jones will choose the bottom branch when his turn comes, no matter what Smith chooses. Since Smith will do better (60) on the bottom branch at B than on the bottom branch
10.2 In game 1, no matter what Chrysler does, GM will do better to invest, and no matter what GM does, Chrysler will do better to invest. Each has a dominant strategy, but in following it, each does worse than if it had not invested. So game 1 is a prisoner’s dilemma. In game 2, no matter what
10.1 No matter what American does, United will do better to leave ad spending the same. No matter what United does, American will do better to raise ad spending. So each player will play its dominant strategy: American will raise its ad spending and United will leave its ad spending the same.
10. Jill and Jack both have two pails that can be used to carry water down from a hill. Each makes only one trip down the hill, and each pail of water can be sold for $5. Carrying the pails of water down requires considerable effort. Both Jill and Jack would be willing to pay $2 each to avoid
The implication of these payoffs is that the market demand is large enough to support only one manufacturer. If both firms enter, both will sustain a loss. LO2a. Identify two possible equilibrium outcomes in this game.b. Consider the effect of a subsidy. Suppose the European Union decides to
8. Consider the following game. Harry has four quarters. He can offer Sally from one to four of them. If she accepts his offer, she keeps the quarters Harry offered her and Harry keeps the others. If Sally declines Harry’s offer, they both get nothing ($0). They play the game only once, and each
7. Consider the following game, called matching pennies, which you are playing with a friend. Each of you has a penny hidden in your hand, facing either heads up or tails up (you know which way the one in your hand is facing). On the count of “three,” you simultaneously show your pennies to
6. Newfoundland’s fishing industry has recently declined sharply due to overfishing, even though fishing companies were supposedly bound by a quota agreement. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4a. Model this situation as a
5. Imagine yourself sitting in your car in a campus parking lot that is currently full, waiting for someone to pull out so that you can park your car. Somebody pulls out, but at the same moment a driver who has just arrived overtakes you in an obvious attempt to park in the vacated spot before you
4. The owner of a thriving business wants to open a new office in a distant city. If he can hire someone who will manage the new office honestly, he can afford to pay that person a weekly salary of $2,000 ($1,000 more than the manager would be able to earn elsewhere) and still earn an economic
3. Blackadder and Baldrick are rational, self-interested criminals imprisoned in separate cells in a dark medieval dungeon. They face the prisoner’s dilemma displayed in the matrix.
2. Consider the following “dating game,” which has two players, A and B, and two strategies, to buy a movie ticket or a baseball ticket. The payoffs, given in points, are as shown in the matrix below. Note that the highest payoffs occur when both A and B attend the same event.Assume that
1. In studying for his economics final, Sam is concerned about only two things: his grade and the amount of time he spends studying. A good grade will give him a benefit of 20; an average grade, a benefit of 5; and a poor grade, a benefit of 0. By studying a lot, Sam will incur a cost of 10; by
LO4 5. Describe the commitment problem that narrowly self-interested diners and waiters would confront at restaurants located on interstate highways. Given that in such restaurants tipping does seem to assure reasonably good service, do you think people are always selfish in the narrowest sense?
4. How is your incentive to defect in a prisoner’s dilemma altered if you learn that you will play the game not just once but rather indefinitely many times with the same partner?
3. Suppose General Motors is trying to hire a small firm to manufacture the door handles for Pontiac sedans. The task requires an investment in expensive capital equipment that cannot be used for any other purpose. Why might the president of the small firm refuse to undertake this venture without
2. Why did Warner Brothers make a mistake by waiting until the filming of Analyze This was almost finished before negotiating with Tony Bennett to perform in the final scene? LO5
1. Explain why a military arms race is an example of a prisoner’s dilemma. LO4
6. Discuss commitment problems and explain how altering preferences can solve commitment problems.
5. Show how games in which timing matters differ from games in which it does not.
4. Define and explain the Prisoner’s Dilemma and how it applies to realworld situations.
3. Recognize and show the effects of dominant strategies.
1. Describe the basic elements of a game. 2. Define and find an equilibrium for a game.
2. Suppose you are a monopolist in the market for a specific video game. Your demand curve is given by P 80 Q 2; your marginal cost curve is MC Q. Your fixed costs equal $400. LO4, LO5a. Graph the demand and marginal cost curves.b. Derive and graph the marginal revenue curve.c. Calculate and
1. Suppose that the University of Michigan Cinema is a local monopoly whose demand curve for adult tickets on Saturday night is P 12 2Q, where P is the price of a ticket in dollars and Q is the number of tickets sold in hundreds. The demand for children’s tickets on Sunday afternoon is P 8 3Q,
10. Beth is a second-grader who sells lemonade on a street corner in your neighborhood. Each cup of lemonade costs Beth 20 cents to produce; she has no fixed costs. The reservation prices for the 10 people who walk by Beth’s lemonade stand each day are listed in the following table.Beth knows
9. In the preceding question, how much total surplus would result if Serena could act as a perfectly price-discriminating monopolist? LO6
8. Serena is a single-price, profit-maximizing monopolist in the sale of her own patented perfume, whose demand and marginal cost curves are as shown. Relative to the consumer surplus that would result at the socially optimal quantity and price, how much consumer surplus is lost from her selling
7. TotsPoses, Inc., a profit-maximizing business, is the only photography business in town that specializes in portraits of small children. George, who owns and runs TotsPoses, expects to encounter an average of eight customers per day, each with a reservation price shown in the following table.a.
6. What is the socially desirable price for a natural monopoly to charge? Why will a natural monopoly that attempts to charge the socially desirable price invariably suffer an economic loss? LO7
5. Explain why price discrimination and the existence of slightly different variants of the same product tend to go hand in hand. Give an example from your own experience. LO2, LO6
4. If a monopolist could perfectly price-discriminate: LO6a. The marginal revenue curve and the demand curve would coincide.b. The marginal revenue curve and the marginal cost curve would coincide.c. Every consumer would pay a different price.d. Marginal revenue would become negative at some output
3. A single-price, profit-maximizing monopolist: LO4a. Causes excess demand, or shortages, by selling too few units of a good or service.b. Chooses the output level at which marginal revenue begins to increase.c. Always charges a price above the marginal cost of production.d. Also maximizes
2. State whether the following statements are true or false, and explain why. LO1, LO7a. In a perfectly competitive industry, the industry demand curve is horizontal, whereas for a monopoly it is downward-sloping.b. Perfectly competitive firms have no control over the price they charge for their
1. Two car manufacturers, Saab and Volvo, have fixed costs of $1 billion and marginal costs of $10,000 per car. If Saab produces 50,000 cars per year and Volvo produces 200,000, calculate the average production cost for each company. On the basis of these costs, which company’s market share do
5. True or false: Because a natural monopolist charges a price greater than marginal cost, it necessarily earns a positive economic profit. LO7
4. Why is marginal revenue always less than price for a monopolist but equal to price for a perfectly competitive firm? LO4
3. Why do most successful industrial societies offer patents and copyright protection, even though these protections enable sellers to charge higher prices? LO2
2. True or false: A firm with market power can sell whatever quantity it wishes at whatever price it chooses. LO2
1. What important characteristic do all three types of imperfectly competitive firms share? LO1
7. Discuss public policies that are often applied to natural monopolies.
6. Describe price discrimination and its effects.
5. Show how monopoly alters consumer surplus, producer surplus, and total economic surplus relative to perfect competition.
4. Understand and use the concepts of marginal cost and marginal revenue to find the output level and price that maximize a monopolist’s profit.
3. Explain how start-up costs affect economics of scale and market power.
2. Define market power and show how this affects the demand curve facing the firm.
1. Define imperfect competition and describe how it differs from perfect competition.
8.4 PV $1,728 (1.2)3 $1,000.
8.3 If the taxi medallion were available for free, it would still command an economic profit of $20,000 per year. So its value is still the answer to the question “How much would you need to put in the bank to generate interest earnings of $20,000 per year?” When the interest rate is 4
8.2 If each lane did not move at about the same pace, any driver in a slower lane could reduce his travel time by simply switching to a faster one. People will exploit these opportunities until each lane moves at about the same pace. LO4
8.1 As shown in the table below, Pudge’s accounting profit is now $10,000, the difference between his $20,000 annual revenue and his $10,000-per-year payment for land, equipment, and supplies. His economic profit is that amount minus the opportunity cost of his labor—again, the $11,000 per
10.*Louisa, a renowned chef, owns one of the 1,000 spaghetti restaurants in Sicily. Each restaurant, including her own, currently serves 100 plates of spaghetti a night at $5 per plate. Louisa knows she can develop a new sauce, at the same cost as the current sauce, that would be so tasty that all
9. You have an opportunity to buy an apple orchard that produces $25,000 per year in total revenue. To run the orchard, you would have to give up your current job, which pays $10,000 per year. If you would find both jobs equally satisfying, and the annual interest rate is 10 percent, what is the
8. You have a friend who is a potter. He holds a permanent patent on an indestructible teacup whose sale generates $30,000 a year more revenue than production costs. If the annual interest rate is 20 percent, what is the market value of his patent?
7. Unskilled workers in a poor cotton-growing region must choose between working in a factory for $6,000 a year and being a tenant cotton farmer. One farmer can work a 120-acre farm, which rents for $10,000 a year. Such farms yield $20,000 worth of cotton each year. The total nonlabor cost of
6. The government of the Republic of Self-Reliance has decided to limit imports of machine tools in order to encourage development of locally made machine tools. To do so, the government offers to sell a small number of machine-tool import licenses. To operate a machine-tool import business costs
5. Explain carefully why, in the absence of a patent, a technical innovation invented and pioneered in one tofu factory will cause the supply curve for the entire tofu industry to shift to the right. What will finally halt the rightward shift? LO2
4. The city of New Orleans has 200 advertising companies, 199 of which employ designers of normal ability at a salary of $100,000 a year. Paying this salary, each of the 199 firms makes a normal profit on $500,000 in revenue. However, the 200th company employs Janus Jacobs, an unusually talented
3. John Jones owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows:a. Calculate John’s annual accounting profit.b. John could earn $1,000 per year as a recycler of aluminum cans. However, he prefers to run the café. In fact, he would be willing
2. Explain why new software firms that give away their software products at a short-run economic loss are nonetheless able to sell their stock at positive prices. LO4
1. True or False: Explain why the following statements are true or false:a. The economic maxim “There’s no cash on the table” means that there are never any unexploited economic opportunities. LO5b. Firms in competitive environments make no accounting profit when the market is in long-run
5. Why is a payment of $10,000 to be received one year from now more valuable than a payment of $10,000 to be received two years from now? LO4
4. Why did airlines that once were regulated by the government generally fail to earn an economic profit, even on routes with relatively high fares? LO4
3. Why do market forces drive economic profit but not economic rent toward zero? LO3
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