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International Human Resource Management A Multinational Company Perspective 1st Edition Monir Tayeb - Solutions
2. How can a businessowner who earns $10 million per year from his business credibly claim to earn zero economic profit? LO1
1. Why do most cities in the United States now have more radios but fewer radio repair shops than they did in 1960? LO2
5. Understand and explain the relationship between a market equilibrium and a social optimum.
4. Use the theory of the invisible hand to analyze events in everyday life.
3. Explain the difference between economic profit and economic rent.
2. Show how economic profit and economic loss affect the allocation of resources across industries.
1. Define and explain the differences between accounting profit and economic profit.
7.5 At a consumption level of 2 million gallons per day, the marginal source of water is the lake, which has a marginal cost of 0.8 cent per gallon. The city should charge everyone 0.8 cent per gallon, including those who get their water from the spring.
7.4 Under first-come, first-served, Dana will have to postpone his lesson. Since Dana would be willing to pay up to $10 to avoid postponing it, he will be better off if the pro asks for a contribution of, say, $8, and then lets him take Bill’s place at the scheduled time. The pro could then give
7.3 With a $0.50 per loaf subsidy, the new domestic price becomes $1.50 per loaf. The new lost surplus is the area of the small shaded triangle in the diagram: (1 2)($0.50/loaf)(1,000,000 loaves/month) $250,000 per month.
7.2 As shown in the accompanying diagram, the new loss in total economic surplus is $200 per day.
7.1 At a price of 50 cents per gallon, there is excess demand of 4,000 gallons per day. Suppose a seller produces an extra gallon of milk (marginal cost 50 cents) and sells it to the buyer who values it most (reservation price $2.50) for $1.50. Both buyer and seller will gain additional economic
10.*Refer to problem 9. Suppose each of the 1 million Islandian households has the same demand curve for heating oil. LO2a. What is the household demand curve?b. How much consumer surplus would each household lose if it had to pay $2 per gallon instead of $1 per gallon for heating oil, assuming
9.*The government of Islandia, a small island nation, imports heating oil at a price of $2 per gallon and makes it available to citizens at a price of $1 per gallon. If Islandians’ demand curve for heating oil is given by P 6 Q, where P is the price per gallon in dollars and Q is the quantity in
8.*Phil’s demand curve for visits to the Gannett walk-in medical clinic is given by P 48 8Q, where P is the price per visit in dollars and Q is the number of visits per semester. The marginal cost of providing medical services at Gannett is $24 per visit. Phil has a choice between two health
7. The municipal water works of Cortland draws water from two sources: an underground spring and a nearby lake. Water from the spring costs 2 cents per 100 gallons to deliver and the spring has a capacity of 1 million gallons per day. Water from the lake costs 4 cents per 100 gallons to deliver
6. In Charlotte, North Carolina, citizens can get their electric power from two sources: a hydroelectric generator and a coal-fired steam generator. The hydroelectric generator can supply up to 100 units of power per day at a constant marginal cost of 1 cent per unit. The steam generator can
5. Is a company’s producer surplus the same as its profit? (Hint: A company’s total cost is equal to the sum of all marginal costs incurred in producing its output, plus any fixed costs.) LO1
4. Suppose the weekly demand for a certain good, in thousands of units, is given by the equation P 8 Q and the weekly supply of the good is given by the equation P 2 Q, where P is the price in dollars. LO4a. Calculate the total weekly economic surplus generated at the market equilibrium.b. Suppose
3. The Kubak crystal caves are renowned for their stalactites and stalagmites. The warden of the caves offers a tour each afternoon at 2 p.m. sharp. The caves can be shown to only four people per day without disturbing their fragile ecology. Occasionally, however, more than four people want to see
2. Refer to problem 1. Suppose a coalition of students from Lincoln High School succeeds in persuading the local government to impose a price ceiling of $7.50 on used DVDs, on the grounds that local suppliers are taking advantage of teenagers by charging exorbitant prices. LO2a. Calculate the
1. Suppose the weekly demand and supply curves for used DVDs in Lincoln, Nebraska, are as shown in the diagram. Calculate LO1a. The weekly consumer surplus.b. The weekly producer surplus.c. The maximum weekly amount that producers and consumers in Lincoln would be willing to pay to be able to buy
4. Why is compensating volunteers to relinquish their seats on overbooked flights more efficient than a policy of first-come, first-served? LO3 5. Why do price ceilings reduce economic surplus? LO3
3. Why does the loss in total economic surplus directly experienced by participants in the market for a good that is taxed overstate the overall loss in economic surplus that results from the tax? LO4
2. You are a senator considering how to vote on a policy that would increase the economic surplus of workers by $100 million per year but reduce the economic surplus of retirees by $1 million per year. What additional measure might you combine with the policy to ensure that the overall result is a
1. Why do economists emphasize efficiency as an important goal of public policy? LO1
4. Examine the ways in which the imposition of taxes affects efficiency
3. Explain how the concept of efficiency helps determine the “right” price for public services.
2. Analyze how consumer surplus, producer surplus, total economic surplus, and efficiency are affected by public and private policies.
1. Define efficiency as economists use this term.
6.5 The fact that each of the city’s 60,000 residents is willing to pay 0.00005 cent for each bottle removed means that the collective benefit of each bottle removed is (60,000)(0.00005) 3 cents. So the city should set the redemption price at 3 cents, and from the supply curve we see that 15,000
6.4 Because the firm makes its smallest loss when it hires zero employees, it should shut down in the short run.
6.3 The relevant costs are now as shown in the table on the next page. With each variable and marginal cost entry half what it was in the original example, the firm should now hire six employees and produce 350 bottles per day.
6.2 If bottles sell for 62 cents each, the firm should continue to expand up to and including the sixth employee (350 bottles per day). LO3
6.1 Since Harry will find 300 containers if he searches a third hour, we find his reservation price for searching a third hour by solving p(300) $6 for p 2 cents. His reservation prices for additional hours of search are calculated in an analogous way. LO1 Fourth hour: p(200) $6, so p 3 cents.
slice?
10.*For the pizza seller whose marginal, average variable, and average total cost curves are shown in the accompanying diagram (who is the same seller as in problem 9), what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $1.18 per
9.*For the pizza seller whose marginal, average variable, and average total cost curves are shown in the accompanying diagram, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $0.50 per slice?
8. For the pizza seller whose marginal, average variable, and average total cost curves are shown in the accompanying diagram, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $0.80 per slice?
7. For the pizza seller whose marginal, average variable, and average total cost curves are shown in the accompanying diagram, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $2.50 per slice?
6. Calculate daily producer surplus for the market for pizza whose demand and supply curves are shown in the graph.
5. The supply curves for the only two firms in a competitive industry are given by P 2Q1 and P 2 Q2, where Q1 is the output of firm 1 and Q2 is the output of firm 2. What is the market supply curve for this industry? (Hint: Graph the two curves side by side, then add their respective quantities at
4. In the preceding question, how would Paducah’s profit-maximizing level of output be affected if the government imposed a tax of $10 per day on the company? (Hint: Think of this tax as equivalent to a $10 increase in fixed cost.) What would Paducah’s profit-maximizing level of output be if
3. The Paducah Slugger Company makes baseball bats out of lumber supplied to it by Acme Sporting Goods, which pays Paducah $10 for each finished bat. Paducah’s only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the
2. A price-taking firm makes air conditioners. The market price of one of their new air conditioners is $120. Its total cost information is given in the table below:How many air conditioners should the firm produce per day if its goal is to maximize its profit? LO3
1. Zoe is trying to decide how to divide her time between her job as a wedding photographer, which pays $27 per hour for as many hours as she chooses to work, and as a fossil collector, in which her pay depends on both the price of fossils and the number of them she finds. Earnings aside, Zoe is
5. Why do we use the vertical interpretation of the supply curve when we measure producer surplus? LO5
4. True or false: The perfectly competitive firm should always produce the output level for which price equals marginal cost. LO3
3. Economists often stress that congestion helps account for the law of diminishing returns. With this in mind, explain why it would be impossible to feed all the people on Earth with food grown in a single flowerpot, even if unlimited water, labor, seed, fertilizer, sunlight, and other inputs
2. Which do you think is more likely to be a fixed factor of production for an ice cream producer during the next two months: its factory building or its workers who operate the machines? Explain. LO4
1. Explain why you would expect supply curves to slope upward on the basis of the Principle of Increasing Opportunity Cost. LO1
5. Define and calculate producer surplus.
4. Connect the determinants of supply with the factors that affect individual firms’ costs.
3. Determine a perfectly competitive firm’s profit-maximizing output level and profit in the short run.
2. Discuss the relationship between the supply curve for an individual firm and the market supply curve for an industry.
1. Explain how opportunity cost is related to the supply curve.
5.4 Consumer surplus is now the new shaded area, $28 per day. LO6
5.3 Adding the two individual demand curves, (a) and (b), horizontally yields the market demand curve (c): LO5
5.2 The rational spending rule requires MUF PF MUS PS where MUF and MUS are John’s marginal utilities from food and shelter and PF and PS are the prices of food and shelter, respectively. At John’s original combination,MUF PF 4 utils per dollar and MUS PS 3 utils per dollar. John should thus
5.1 The combination of 300 pints per year of vanilla ($300) and 50 pints of chocolate ($100) costs a total of $400, which is exactly equal to Sarah’s ice cream budget. LO3
10.*The buyers’ side of the market for amusement park tickets consists of two consumers whose demands are as shown in the diagram below. LO5, LO6a. Graph the market demand curve for this market.b. Calculate the total consumer surplus in the amusement park market if tickets sell for $12 each
Tom consume each week?
LO3 9.*Refer to problem 8. Tom’s total utility is the sum of the utility he derives from pizza and movie rentals. If these utilities vary with the amounts consumed as shown in the table, and pizzas and movie rentals are again consumable only in whole-number amounts, how many pizzas and how many
8. Tom has a weekly allowance of $24, all of which he spends on pizza and movie rentals, whose prices are $6 per slice and $3 per rental, respectively. If slices of pizza and movie rentals are available only in whole-number amounts, list all possible combinations of the two goods that Tom can
7. For the demand curve shown, find the total amount of consumer surplus that results in the gasoline market if gasoline sells for $2 per gallon.
6. Ann lives in Princeton, New Jersey, and commutes by train each day to her job in New York City (20 round trips per month). When the price of a round trip goes up from $10 to $20, she responds by consuming exactly the same number of trips as before, while spending $200 per month less on
5. Sue gets a total of 20 utils per week from her consumption of pizza and a total of 40 utils per week from her consumption of yogurt. The price of pizza is $1 per slice, the price of yogurt is $1 per cup, and she consumes 10 slices of pizza and 20 cups of yogurt each week. True or false: Sue is
4. Toby’s current marginal utility from consuming peanuts is 100 utils per ounce and his marginal utility from consuming cashews is 200 utils per ounce. If peanuts cost 10 cents per ounce and cashews cost 25 cents per ounce, is Toby maximizing his total utility from the kinds of nuts? If so,
3. Martha’s current marginal utility from consuming orange juice is 75 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs 25 cents per ounce and coffee costs 20 cents per ounce, is Martha maximizing her total utility from the two beverages?
2. You are having lunch at an all-you-can-eat buffet. If you are rational, what should be your marginal utility from the last morsel of food you swallow? LO2
1. In which type of restaurant do you expect the service to be more prompt and courteous: an expensive gourmet restaurant or an inexpensive diner? Explain. LO4
5. Give an example of a good that you have consumed for which your marginal utility increased with the amount of it you consumed.
4. Explain why a good or service that is offered at a monetary price of zero is unlikely to be a truly “free” good from an economic perspective. LO3
3. Why does the law of diminishing marginal utility encourage people to spread their spending across many different types of goods? LO3
2. Explain why economists consider the concept of utility useful, even if psychologists cannot measure it precisely
1. Why do economists prefer to speak of demands arising out of “wants” rather than “needs”? LO2
6. Define and calculate consumer surplus.
5. Discuss the relationship between the individual demand curve and the market demand curve.
4. Show how the Rational Spending Rule is related to substitution and income effects.
3. Explain the reasoning behind the Rational Spending Rule and apply it to consumer decision making.
2. Discuss how individual wants are translated into demand.
1. Relate the Law of Demand to the Cost-Benefit Principle (Core Principle 2).
4.4 For the supply curve below, Q 1 when P 6, so elasticity of supply (P Q) (1 slope) (6) (1 2) 3. LO6
4.3 Income elasticity percentage change in quantity demanded/percentage change in income 5 percent 10 percent 0.5. LO4
4.2 At point A in the accompanying diagram, P Q 4 4 1. The slope of this demand curve is 20 5 4, so 1 (1 slope) 1 4. LO2
4.1 In response to a 5 percent reduction in the price of ski passes, the quantity demanded increased by 20 percent. The price elasticity of demand for ski passes is thus (20 percent) (5 percent) 4, and that means that at the initial price of $400, the demand for ski passes is elastic with respect
10.*Suppose that, in an attempt to induce citizens to conserve energy, the government enacted regulations requiring that all air conditioners be more efficient in their use of electricity. After this regulation was implemented, government officials were then surprised to discover that people used
9.*At point A on the demand curve shown, by what percentage will a 1 percent increase in the price of the product affect total expenditure on the product?
8. Suppose that the ingredients required to bring a slice of pizza to market and their respective costs are as listed in the table:If these proportions remain the same no matter how many slices are made, and the inputs can be purchased in any quantities at the stated prices, draw the supply curve
7. What are the respective price elasticities of supply at A and B on the supply curve shown in the accompanying figure? LO5
6. A 2 percent increase in the price of milk causes a 4 percent reduction in the quantity demanded of chocolate syrup. What is the cross-price elasticity of demand for chocolate syrup with respect to the price of milk? Are the two goods complements or substitutes? LO4
5. Among the following groups—senior executives, junior executives, and students—which is likely to have the most and which is likely to have the least price-elastic demand for membership in the Association of Business Professionals? LO1
4. Is the demand for a particular brand of car, like a Chevrolet, likely to be more or less price-elastic than the demand for all cars? Explain. LO1
3. Suppose, while rummaging through your uncle’s closet, you found the original painting of Dogs Playing Poker, a valuable piece of art. You decide to set up a display in your uncle’s garage. The demand curve to see this valuable piece of art is as shown in the diagram. What price should you
2. The schedule below shows the number of packs of bagels bought in Davis, California, each day at a variety of prices.a. Graph the daily demand curve for packs of bagels in Davis.b. Calculate the price elasticity of demand at the point on the demand curve at which the price of bagels is $3 per
1. Calculate the price elasticity of demand at points A, B, C, D, and E on the demand curve below. LO2
5. Why is supply elasticity higher in the long run than in the short run? LO5
4. Why do economists pay little attention to the algebraic sign of the elasticity of demand for a good with respect to its own price, yet pay careful attention to the algebraic sign of the elasticity of demand for a good with respect to another good’s price? LO4
3. Under what conditions will an increase in the price of a product lead to a reduction in total spending for that product? LO3
2. Why does the price elasticity of demand for a good decline as we move down along a straight-line demand curve? LO2
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