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intermediate microeconomics
Study Guide For N. Gregory Mankiw's Principles Of Microeconomics 5th Edition David R. Hakes - Solutions
4. According to the signaling view of education, educationa. increases human capital and the wages of workers.b. c.d. only helps firms sort workers into high-ability and low-ability workers. reduces the wage gap between high-skilled and low-skilled workers. can make any worker into a superstar.
3. Which of the following is not part of a worker's human capital? educationa. b. on-the-job training C. experienced. efforte. All of the above are parts of a worker's human capital.
2. According to the human-capital view of education, educationa. increases human capital and the wages of workers.b. only helps firms sort workers into high-ability and low-ability workers.c. has no impact on the human capital of workers.d. can make any worker into a superstar.
1. If a person who works in a coal mine gets paid more than a person with a similar background and skills who works in a safer job, thena. we have evidence of discrimination against workers outside the coal mine.b. we have observed a compensating differential.c. coal miners must have greater human
10. Provide three reasons why wages might be set above the equilibrium wage. Explain.
9. Why is a plumber's apprentice paid less than a master plumber?
8. List the professions of most superstars. What do these professions have in common?
7. Is there discrimination in professional sports? Is the employer the source of the discrimination? Explain.
6. If a discriminatory wage differential persists in a competitive market, is it due to discrimination on the part of the employer or must it be from some other source? Explain.
5. Does a difference in average wages among groups, by itself, suggest that there is discrimination in the labor market? Explain.
4. What are the necessary conditions for a superstar to arise in a market? Explain.
3. What has happened to the relative wages of skilled and unskilled workers in the United States over the last 25 years? Why?
2. Name some characteristics of a job that might require a positive compensating differential.
1. Why does someone who has a great amount of human capital that was acquired through education earn more than someone with a small amount of human capital?
2.a. Explain the human-capital view of education and the signaling view of education.b. What are the implications for education policy under each view? C. Which of the above is true? Explain.
1. Within each of the following pairs of workers, which worker is likely to earn more and why? (It may be obvious which one is paid more. The real issue is to explain why one is paid more than the other is.)a. a carpenter working at the top of a 600-foot cooling tower of a nuclear power plant or a
Explain why competitive employers are unlikely to discriminate against groups of employees unless the customers or the government demands it
say anything about how much discrimination there is in the labor market
Explain why differences in wages among groups does not by itself
IList three reasons why a wage can rise above the equilibrium wage
List the characteristics of a market where superstars can arise
Explain the impact ofpolicies aimed at mc:realslD,g the educational attainment ofall workers under the and the human-capital view of education
Explain why an economics professor earns less than a corporate economist ofsimilar age, background, and training
3.a. How can a competitive market eliminate discrimination in the labor market?b. What limits a competitive market's ability to reduce discrimination? Explain.
2.a. Explain the human-capital view of education and the signaling view of education.b. What are the implications for education policy under each view?c. Which of the above is true? Explain.
1. Within each of the following pairs of workers, which worker is likely to earn more and why? (It may be obvious which one is paid more. The real issue is to explain why one is paid more than the other is.)a. a carpenter working at the top of a 600-foot cooling tower of a nuclear power plant or a
3. Are the positions that each group takes on immigration consistent with their interests? Explain. Is there likely to be a solution that satisfies both? Why or why not?
2. If there were open immigration, what would happen to the value of the marginal product of capital and land and their rental rates?
1. If there were open immigration, what would happen to the value of the marginal product of labor and the wage?
20. Suppose that a war is fought with biological weapons. The weapons destroy people but not capital. What is likely to happen to equilibrium wages and rental rates after the war when compared to their values before the war?a. Wages rise and rental rates rise.b. Wages fall and rental rates fall. C.
19. When capital is owned by the firm as opposed to being directly owned by households, capital income may take any of the following forms excepta. retained earnings.b. interest. C. dividends.d. stock.
18. An increase in the price of automobiles shifts the demand for autoworkers to thea. right and increases the wage.b. left and decreases the wage.c. right and decreases the wage.d. left and increases the wage.
17. Which of the following is not true with regard to workers who have a high value of marginal product? These workersa. are usually highly paid.b. usually have little capital with which to work. C. have skills that are in relatively scarce supply.d. produce output for which there is great demand.
16. A competitive, profit-maximizing firm should hire workers up to the point where the wage, the rental price of capital, and the rental price of land are all equal.b. the marginal product of labor equals zero and the production function isa. maximized. C. the marginal product of labor equals the
15. An increase in the demand for a firm's outputa. increases the prosperity of the firm but decreases the prosperity of the factors hired by the firm.b. decreases the prosperity of the firm but increases the prosperity of the factors hired by the firm. C. increases the prosperity of both the firm
14. An individual firm's demand for a factor of productiona. slopes downward due to the factor's diminishing marginal product.b. slopes downward because an increase in the production of output reduces the price at which the output can be sold in a competitive market, thereby reducing the value of
13. If both input and output markets are competitive and firms are profit maximizing, then in equilibrium, each factor of production earnsa. an equal share of output.b. the value of its marginal product.c. the amount allocated by the political process.d. an amount equal to the price of output times
12. A decrease in the supply of farm tractors will cause all but which of the following?a. an increase in the rental rate for tractorsb. c.d. an increase in the value of the marginal product of tractors an increase in the wage of farmworkers a decrease in the rental rate of farmland
11. An increase in the demand for apples will cause all but which of the following? an increase in the price of applesa. b.c. d. an increase in the value of the marginal product of apple pickers an increase in the wage of apple pickers a decrease in the number of apple pickers employed
10. What will a decrease in the supply of fishermen do to the market for capital employed in the fishing industry?a. increase the demand for fishing boats and increase rental rates on fishing boatsb. decrease the demand for fishing boats and decrease rental rates on fishing boatsc. increase the
9. A decrease in the demand for fisha. decreases the value of the marginal product of fishermen, reduces their wage, and reduces employment in the fishing industry.b. increases the value of the marginal product of fishermen, increases their wage, and increases employment in the fishing industry.c.
8. An increase in the supply of labora. increases the value of the marginal product of labor and increases the wage.b. decreases the value of the marginal product of labor and decreases the wage.c. increases the value of the marginal product of labor and decreases the wage.d. decreases the value of
7. For a competitive, profit-maximizing firm, the value-of-the-marginal-product curve for capital is the firm'sa. production function.b. marginal-cost curve.c. supply curve of capital.d. demand curve for capital.
6. The value of the marginal product of labor isa. the price of the output times the wage of labor.b. the wage of labor times the quantity of labor. C. the price of the output times the marginal product of labor.d. the wage of labor times the marginal product of labor.e. none of the above.
5. If this profit-maximizing firm sells its output in a competitive market for $3 per unit and hires labor in a competitive market for $8 per hour, then this firm should hirea. one worker.b. two workers.c. three workers.d. four workers.e. five workers.
4. If the price of output is $4 per unit, what is the value of the marginal product of labor as the firm moves from using four workers to using five workers?a. $4b. $8 C. $12d. $56e. $60
3. What is the marginal product of labor as the firm moves from using three workers to using four workers?a. 0b. 2 C. 12d. 14e. None of the above is correct.
2. If a factor exhibits diminishing marginal product, hiring additional units of the factor willa. generate ever smaller amounts of output.b. cause a reduction in output. C. have no effect on output.d. increase the marginal product of the factor.
1. The most important factors of production area. money, stocks, and bonds.b. water, earth, and knowledge. C. management, finance, and marketing.d. labor, land, and capital.
What events will shift the supply oflabor to the right?
9. What events will shift the demand for labor to the right?
8. When households own capital directly, capital income is in the form of rental pay- ments to households. In what form is capital income paid when businesses own capital?
7. Explain the difference between the rental price of a factor and the purchase price of a factor. How are they related?
6. Why does an increase in the amount of capital reduce the rental rate of capital? Why does this same event increase the wage of labor?
5. Suppose there is an increase in college enrollments, which causes an increase in the demand for textbooks. What should happen in the markets for labor and capital employed in the manufacturing of textbooks? Explain.
4. Why must the equilibrium wage in the market for labor equal the value of the marginal product of labor for each firm?
3. Prove that when a competitive firm hires up to the point at which the value of the marginal product equals the wage, it also produces up to the point at which price equals marginal cost.
2. Why does the firm's demand curve for labor slope downward (that is, why does it slope negatively)?
1. Why is the firm's demand curve for labor the value of the marginal product of labor?
4. Describe the impact of the following events on the market for autoworkers in Tennessee. (Note that Honda operates a factory in Tennessee.)a. Honda adds on to its factory in Tennessee.b. Consumer Reports declares Honda to be the best-made automobile in its class.c. Refugees with manufacturing
3. Suppose that an enormous amount of forestland is cleared for agricultural use in Brazil.a. Show the impact of this event on the market for agricultural land in Brazil in Exhibit 2. What has happened to the marginal product of land and the rental price of land in Brazil?b. Show the impact of this
2. Suppose there is an increase in the demand for lumber, which raises the price of lumber.a. . Show the impact of the increase in the price of lumber on the market for lumberjacks in Exhibit 1.b. What did the increase in the price of lumber do to the value of the marginal product of lumberjacks
1. Suppose that labor is the only variable input in the production process for a com- petitive profit-maximizing firm that produces coffee mugs. The firm's production function is shown below. Labor (number of workers) Marginal Value of Output per Product of MPL when Value of MPL when Hour Labor P =
EA-plain why the change in the supply of one factor alters the value of the marginal product of the other factors
Demonstrate the similarity between the labor market and the market for other factors ofproduction
hires labor to the point where the wage equal~ the value of the marginal product onabor
Explain why a competitive firm maximizes profit when it
Explain why the labor-supply curve is usually upward sloping
Ex-plain why the labor-demand curve is the value-of-the marginal-product curve for labor
3. Why would the manufacturer place this type of restriction on the retailers that sell its. products?
2. Although this activity appears like price fixing, is the objective of this practice to reduce competition? Why?
1. Why would Warehouse Electronics be unable to reveal the name of the manufacturer when it advertises its television sets for an unusually low price?
20. Laws that make it illegal for firms to conspire to raise prices or reduce production are known asa. pro-competition laws.b. + antitrust laws.c. antimonopoly laws.d. e. anticollusion laws. all of the above.
19. If ABC Publishing engages in tying, its best strategy is to charge a combined price ofa. $60.b. $75. C. $80.d. $85.c. $90.
18. If ABC Publishing charges separate prices for both products, its best strategy is to charge prices that, when combined, totala. $60.b. $75. C. $80.d. $85.e. $90.
17. Collusion is difficult for an oligopoly to maintaina. because antitrust laws make collusion illegal.b. because, in the case of oligopoly, self-interest is in conflict with cooperation.c. if additional firms enter of the oligopoly.d. for all of the above reasons. Use the following information to
16. Many economists argue that resale price maintenancea. is price fixing and, therefore, is prohibited by law.b. enhances the market power of the producer.c. has a legitimate purpose of stopping discount retailers from free riding on the services provided by full-service retailers.d. is both a and
15. Suppose Sue and Joe agreed to collude and jointly maximize their profits. If Sue and Joe were to be able to repeatedly play the game shown earlier and they agreed on a penalty for defecting from their agreement, what is the likely outcome of the game?a. Both are open for many hours.b. Both are
14. The dominant strategy for Sue and Joe is for both to be open for many hours.b. both to be open for a few hours.c. d.e. Sue to be open for many hours while Joe is open for few hours. Sue to be open for few hours while Joe is open for many hours. There is no dominant strategy in this prisoners'
13. Suppose that the duopolists are unable to collude. How much profit will each earn when the market reaches a Nash equilibrium? 2. $2,700b. $3,200c. $3,500d. $3,600 C $7,200 Use the prisoners' dilemma game in Exhibit 2 to answer questions 14 and 15. It shows the possible profits for duopolists
12. If the duopolists in this baseball market collude and successfully form a cartel, how much profit will each earn?a. $2,700b. $3,200 C. $3,500d. $3,600e. $7,200
11. If the duopolists in this baseball market collude and successfully form a cartel, what is the price that each should charge in order to maximize profits?a. $8b. $7c. $6d. $5c. $4
10. Under competition, the price and quantity in this market would bea. $8; 800.b. $6; 1,200.c. $4; 1,600.d. $2:2,000.e. $0; 2,400..
Use the table below to answer questions 10 through 13. The table shows the demand schedule for tickets to watch amateur baseball games in a medium-sized town. The city provides the ballparks, and the players play for free, so the marginal cost of providing the games is zero. The city has authorized
9. A situation in which oligopolists interacting with one another each choose their best strategy given the strategies that all the other oligopolists have chosen is known as aa. collusion solution.b. cartel. C. Nash equilibrium.d. dominant strategy.
8. As the number of sellers in an oligopoly increases,a. collusion is more likely to occur because a larger number of firms can place pressure on any firm that defects.b. output in the market tends to fall because each firm must cut back onc. production. the price in the market moves further from
7. When an oligopolist individually chooses its level of production to maximize its profits, it charges a price that isa. more than the price charged by a monopoly and less than the price charged by a competitive market.b. less than the price charged by a monopoly and more than the price charged by
6. When an oligopolist individually chooses its level of production to maximize its profits, it produces an output that isa. more than the level produced by a monopoly and less than the level produced by a competitive market.b. less than the level produced by a monopoly and more than the level
5. As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more likea. a monopoly.b. a duopoly.c. a competitive market.d. a collusion solution.
4. Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effect exceeds the price effect on the marginal unit of production, then the oligopolista. has maximized profits.b. should produce more units.c. should produce fewer units.d. should exit the
3. If oligopolists engage in collusion and successfully form a cartel, the market outcome isa. b. the same as if it were served by a monopoly. the same as if it were served by competitive firms.c. efficient because cooperation improves efficiency.d. known as a Nash equilibrium.
2. A market structure in which many firms sell products that are similar but not identical is known asa. perfect competition.b. monopoly.c. oligopoly.d. none of the above.
1. The market for hand tools (such as hammers and screwdrivers) is dominated by Black & Decker, Stanley, and Craftsman. This market is best described as competitive. a monopoly.a. b.c. an oligopoly.d. a duopoly.
6. What is predatory pricing? Do economists think that predatory pricing is commonly employed as a profitable business strategy? Why or why not?
5. Is it better for society as a whole if oligopolists cooperate? Explain. What measures do we take to try to prevent cooperation between oligopolists?
4. If oligopolists would be better off if they collude, why do they so often fail to cooperate?
3. Referring to question 2 above, what would happen to the price and quantity in the Nash equilibrium if an additional firm were to join the oligopoly? Why?
2. Suppose a group of oligopolists does not collude but instead reaches a Nash equi- librium. What price and quantity will result in this oligopolist market when compared to the monopolistic or competitive result?
1. What is the outcome in an oligopolistic market if the oligopolists collude and form a cartel? Explain.
2. Suppose High-Tech Software sells two products-a word-processing package and a spreadsheet package. Suppose that the business community values the word-processing package at $100 per unit and the spreadsheet package at $250 per unit while the university community values the word-processing
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