Microeconomic Theory Basic Principles And Extensions 8th Edition Walter Nicholson - Solutions

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11. If the price of a good is equal to the equilibrium price, +a. there is a surplus and the price will rise.b. there is a surplus and the price will fall.c. there is a shortage and the price will rise.d. there is a shortage and the price will fall.e. the quantity demanded is equal to the quantity
10. If the price of a good is below the equilibrium price,a. there is a surplus and the price will rise.b. there is a surplus and the price will fall.c. there is a shortage and the price will rise.d. there is a shortage and the price will fall.e. the quantity demanded is equal to the quantity
9. If the price of a good is above the equilibrium price,a. there is a surplus and the price will rise.b. there is a surplus and the price will fall.c. there is a shortage and the price will rise.d. there is a shortage and the price will fall.e. the quantity demanded is equal to the quantity
8. All of the following shift the supply of watches to the right excepta. an increase in the price of watches.b. an advance in the technology used to manufacture watches.c. a decrease in the wage of workers employed to manufacture watches.d. manufacturers' expectations of lower watch prices in the
7. Which of the following shifts the demand for watches to the right?a. b. C. a decrease in the price of watches a decrease in consumer incomes if watches are a normal good a decrease in the price of watch batteries if watch batteries and watches are complementsd. an increase in the price of
6. A monopolistic market hasa. only one seller.b. at least a few sellers.c. many buyers and sellers.d. firms that are price takers.c. none of the above.
5. If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment isa. a complementary good.b. a substitute good.c. a normal good.d. an inferior good.c. none of the above.
4. The law of supply states that an increase in the price of a good 3. decreases the demand for that good.b. decreases the quantity demanded for that good.c. increases the supply of that good.d. increases the quantity supplied of that good.e. does none of the above.
3. The law of demand states that an increase in the price of a gooda. decreases the demand for that good.b. decreases the quantity demanded for that good.c. d.e. increases the supply of that good. increases the quantity supplied of that good. does none of the above.
2. If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes area. substitutes.b. complements.c. normal goods.d. inferior goods.e. none of the above.
1. A perfectly competitive market hasa. only one seller.b. at least a few sellers.c. many buyers and sellers.d. firms that set their own prices.e. none of the above.
15. If there is an increase in supply accompanied by a decrease in demand for coffee, then there will be a decrease in both the equilibrium price and quantity in the market for coffee.
14. An advance in the technology employed to manufacture Rollerblades will result in a decrease in the equilibrium price and an increase in the equilibrium quantity in the market for Rollerblades.
12. If Coca-Cola and Pepsi are substitutes, an increase in the price of Coca-Cola will cause an increase in the equilibrium price and quantity in the market for Pepsi.
If pencils and paper are complements, an increase in the price of pencils causes the demand for paper to decrease or shift to the left.
11. If there is a shortage of a good, then the price of that good tends to fall.
10. The market supply curve is the horizontal summation of the individual supply curves.
9. When the price of a good is below the equilibrium price, it causes a surplus.
8. An increase in the price of steel will shift the supply of automobiles to the right.
7. The law of supply states that an increase in the price of a good increases the quantity supplied of that good.
6. If consumers expect the price of shoes to rise, there will be an increase in the demand for shoes today.
5. If golf clubs and golf balls are complements, an increase in the price of golf clubs will decrease the demand for golf balls.
4. If apples and oranges are substitutes, an increase in the price of apples will decrease the demand for oranges.
3. The law of demand states that an increase in the price of a good decreases the demand for that good.
2. A monopolistic market has only one seller.
1. A perfectly competitive market consists of products that are all slightly different from one another.
10. Suppose there is an advance in the technology employed to produce automobiles. In the market for automobiles, does this event cause an increase in supply or an increase in the quantity supplied? Does this cause an increase in demand or an increase in the quantity demanded? Explain.
9. Suppose there is an increase in consumers' incomes. In the market for automobiles (a normal good), does this event cause an increase in demand or an increase in quantity demanded? Does this cause an increase in supply or an increase in quantity supplied? Explain.
8. If there is a surplus of a good, is the price above or below the equilibrium price for that good?
7. Suppose suppliers of corn expect the price of corn to rise in the future. How would this affect the supply and demand for corn and the equilibrium price and quantity of corn?
6. What are the variables that should affect the amount of a good that producers wish to sell, other than its price?
5. Explain the law of supply.
4. What is the difference between a normal good and an inferior good?
3. What are the variables that should affect the amount of a good that consumers wish to buy, other than its price?
2. Explain the law of demand.
1. What are the two main characteristics of a perfectly competitive market?
3. The following questions address a market when both supply and demand shift.a. What would happen to the equilibrium price and quantity in the bicycle market if there were an increase in both the supply and the demand for bicycles?b. What would happen to the equilibrium price and quantity in the
2. Each of the events listed below has an impact on the market for bicycles. For each event, which curve is affected (supply or demand for bicycles), what direction is it shifted, and what is the resulting impact on the equilibrium price and quantity of bicycles?a. The price of automobiles
. Suppose that the bicycle maker's labor union bargains for an increase in its wages. Furthermore, suppose this event raises the cOSt of production, makes bicycle manufacturing less profitable, and reduces the quantity supplied of bicycles by 20 units at each price of bicycles. Plot the new supply
How many units of surplus or shortage are there? Will this cause the price to rise or fall?
If the price of bicycles were $400, is there a surplus or a shortage?
How many units of surplus or shortage are there? Will this cause the price to rise or fall?
1===+1. Suppose we have the following market supply and demand schedules for bicycles: $100 200 300 400 500 600 70 60 50 40 30 20 30 40 50 60 70 80a. EXHIBIb. c.d. e. Plot the supply curve and the demand curve for bicycles in Exhibit 1.b. What is the equilibrium price of bicycles?c. What is the
Shift supply and demand in response to an economic event and find the new equilibrium price and quantity
25.10 Suppose voters based their decisions on the ratio of utilities received from two candidates—that is, Equation 25.6 would be Show that the results from a game involving net value platforms would in this case maximize the Nash Social Welfare function sw= Ylut.
25.9 How does the free rider problem arise in the decision of eligible voters to vote? How might voter participation decisions affect median voter results? How might it affect probabilistic voting models?
25.8 The demand for gummy bears is given by g=200- 100P, and these confections can be produced at a constant marginal cost of $.50.a. How much will Sweettooth, Inc., be willing to pay in bribes to obtain a monopoly con cession from the government for gummy bear production?b. Do the bribes represent
25.7 Suppose individuals face a probability of u that they will be unemployed next year. If they are unemployed they will receive unemployment benefits ofb, whereas if they are employed they receive w (1 — t) where Z is the tax used to finance unemployment benefits. Unemployment benefits are
25.6 Suppose there are three individuals in society trying to rank three social states (A, B, and C). For each of the methods of social choice indicated, develop an example to show how (at least) one of the Arrow axioms will be violated.a. Majority rule without vote trading.b. Majority rule with
25.5 Suppose there are two individuals in an economy. Utilities of those individuals under five possible social states are shown in the following table:
25.4 Suppose seven individuals constitute a society in which individuals cast votes for their most preferred social arrangement and that the arrangement with the greatest number of votes is always chosen. Devise an example of individual rankings of the three states A, B, and Csuch that state A is
25.3 Suppose an economy is characterized by a linear production possibility function for its two goods (Xand Y) of the form X+ 2F = 180.There are two individuals in this economy, each with an identical utility function for X and Y of the form U(X, Y)= VXY.a. Suppose Y production is set at 10. What
25.2 In the 1930s several authors suggested a "bribe criterion" for judging the desirability of social situations. This welfare criterion states that a movement from social state A to state B is an improvement in social welfare if those who gain by this move are able to compensate those who lose
25.1 There are 200 pounds of food that must be allocated between two sailors marooned on an island. The utility function of the first sailor is given by utility = VFi, where FY is the quantity of food consumed by the first sailor. For the second sailor, utility (as a function of his food
24.10 The analysis of public goodsin Chapter 24 exclusively used a model with only two individuals.The results are readily generalized to n persons—a generalization pursued in this problem.a. With n persons in an economy, what is the condition for efficient production of a pub lic good? Explain
24.9 Suppose the production possibility frontier for an economy that produces one public good(P) and one private good (G) is given by G2 + 100P 2 = 5,000.This economy is populated by 100 identical individuals, each with a utility function of the form utility =
24.8 Suppose there are iVindividuals in an economy with three goods. Two of the goods are pure(nonexclusive) public goods, whereas the third is an ordinary private good.a. What conditions must hold for resources to be allocated efficiently between either of the public goods and the private good?b.
24.7 Suppose there are only two individuals in society. The demand curve for mosquito control for person A is given by qa = 100 - P.For person B the demand curve for mosquito control is given by qb = 200 - P.a. Suppose mosquito control is a pure public good; that is, once it is produced, everyone
24.6 Suppose a monopoly produces a harmful externality. Use the concept of consumer surplus to analyze whether an optimal tax on the polluter would necessarily be a welfare improvement.
24.5 Three types of contracts are used to specify the way in which tenants on a plot of agricultural land may pay rent to the landlord. Rent may be paid (1) in money (or a fixed amount of agricultural produce), (2) as a fixed proportionate share of the crop, or (3) in "labor dues" by agreeing to
24.4 There is considerable legal controversy about product safety. Two extreme positions might be termed caveat emptor (let the buyer beware) and caveat vendor (let the seller beware). Under the former scheme producers would have no responsibility for the safety of their products: buyers would
24.3 Suppose the oil industry in Utopia is perfectly competitive and that all firms draw oil from a single (and practically inexhaustible) pool. Assume that each competitor believes that he or she can sell all the oil he or she can produce at a stable world price of $10 per barrel and that the cost
24.2 On the island of Pago Pago there are 2 lakes and 20 anglers. Each angler can fish on either lake and keep the average catch on his particular lake. On Lake Xthe total number offish caught is given by , F*=10Lx- -Lh where Lx is the number of people fishing on the lake. For Lake Fthe
24.1 A firm in a perfectly competitive industry has patented a new process for making widgets.The new process lowers the firm's average cost curve, meaning this firm alone (although still a price taker) can earn real economic profits in the long run.a. If the market price is $20 per widget and the
23.10 Optimal control theory can be used to generalize the model of intertemporal consumption choice contained in Example 23.1. Consider the following simple life cycle model: An individual receives wages (w) each period and a return on his or her invested capital. Let k =capital, r = market
23.9 Example 23.3 assumed that oil was produced in a competitive market. Assuming the other conditions of the example did not change, how would optimal resource use change if all oil were owned by a single monopoly firm?
23.8 Suppose an individual has W dollars to allocate between consumption this period (Co) and consumption next period (Q) and that the interest rate is given by r.a. Graph the individual's initial equilibrium and indicate the total value of current-period savings (W— Co).b. Suppose that after the
23.7 A high-pressure life insurance salesman was heard to make the following argument: "At your age a $100,000 whole life policy is a much better buy than a similar term policy. Under a whole life policy you'll have to pay $2,000 per year for the first four years, but nothing more for the rest of
23.6 This problem focuses on the interaction of the corporate profits tax with firms' investment decisions.a. Suppose (contrary to fact) that profits were denned for tax purposes as what we have called pure economic profits. How would a tax on such profits affect investment decisions?b. In fact,
23.5 The calculations in Problem 23.4 assume there is no difference between the decision on cutting a single tree and managing a woodlot. But managing a woodlot also involves replanting, which should be explicity modeled. To do so, assume a lot owner is considering planting a single tree at a cost
23.4 As in Example 23.2, suppose trees are produced by applying one unit of labor at time 0. The value of the wood contained in a tree is given at any time (t) by f(t). If the market wage rate is w and the instantaneous rate is r, what is the PDV of this production process and how should t be
23.3 As scotch whiskey ages, its value increases. One dollar of scotch at year 0 is worth V(t) =g2Vi -0.15/ dollars at time t. If the interest rate is 5 percent, after how many years should a person sell scotch in order to maximize the PDVof this sale?
23.2 Assume an individual expects to work for 40 years and then retire with a life expectancy of an additional 20 years. Suppose also that the individual's earnings rise at a rate of 3 percent per year and that the interest rate is also 3 percent (the overall price level is constant in this
23.1 An individual has a fixed wealth (W) to allocate between consumption in two periods (Q and C2). The individual's utility function is given by TJ(C C \and the budget constraint is w= c +C*1 + r where r is the one-period interest rate.a. Show that in order to maximize utility given this budget
22.9 Following in the spirit of the labor market game described in Example 22.4, suppose the firm's total revenue function is given by TR = 10L - L 2and the union's utility is simply a function of the total wage bill U{w,L) = wL.a. What is the Nash equilibrium wage contract in the two-stage game
22.8 Universal Fur is located in Clyde, Baffin Island, and sells high-quality fur bow ties throughout the world at a price of $5 each. The production function for fur bow ties (Q) is given by Q= 240X- 2X 2, where Xis the quantity of pelts used each week. Pelts are supplied only by Dan's Trading
22.7 Suppose a union has a fixed supply of labor to sell. If the union desires to maximize the total wage bill, what wage rate will it demand? How would your answer change if unemployed workers were paid unemployment insurance at the rate u per worker and the union now desired to maximize the sum
22.6 A welfare program for low-income people offers a family a basic grant of $6,000 per year. This grant is reduced by $.75 for each $1 of other income the family has.a. How much in welfare benefits does the family receive if it has no other income? If the head of the family earns $2,000 per year?
22.5 A family with two adult members seeks to maximize a utility function of the form U(C, Hu H2),
22.4 An individual receives utility from daily income (Y), given by U(Y) = 100F- -^ Y 2.The only source of income is earnings. Hence, Y = wL, where w is the hourly wage and L is hours worked per day. The individual knows of a job that pays $5 per hour for a certain 8-hour day. What wage must be
22.3 Using the concept of the opportunity cost of time, discuss the following:a. Which persons might you expect to pay the higher fares to fly the faster Concorde to Europe?b. Which individuals do you expect would be more likely to stand in long lines and even camp out overnight to purchase tickets
22.2 Mr. Peabody has a utility function U — VC- Hand is maximizing his utility at U = 20 when he works 14 hours a day. Would he be willing to give up an hour of his leisure to drive Mrs.Atterboy to the wrestling match if she offered him $5?
22.1 Suppose there are 8,000 hours in a year (actually there are 8,760) and that an individual has a potential market wage of $5 per hour.a. What is the individual's full income? If he or she chooses to devote 75 percent of this in come to leisure, how many hours will be worked?b. Suppose a rich
21.10 The town of Podunk has decided to provide security services to its residents by hiring workers (L) and guard dogs (D). Security services (S) are produced according to the production function s= VLD, and residents of the town wish to consume 10 units of such services per period.a. Suppose that
21.9 The Ajax Coal Company is the only hirer of labor in its area. It can hire any number of female workers or male workers it wishes. The supply curve for women is given by Lf=and for men by Lm = 9u£, where wf and wm are the hourly wage rates paid to female and male workers, respectively.Assume
21.8 Carl the clothier owns a large garment factory on an isolated island. Carl's factory is the only source of employment for most of the islanders, and thus Carl acts as a monopsonist. The supply curve for garment workers is given by L =where L is the number of workers hired and w is their hourly
21.7 In the early 1960s President John Kennedy's Council of Economic Advisers recommended the institution of "Wage-Price Guideposts." The basic idea of the guideposts was to require wages in all industries to increase at the rate at which the national level of output per worker increases (about 3.2
21.9 The Ajax Coal Company is the only hirer of labor in its area. It can hire any number of female workers or male workers it wishes. The supply curv Lf= 100wf
21.8 Carl the clothier owns a large garment factory on an isolated island. Carl's factory is the only source of employment for most of the islanders, and thus Carl acts as a monopsonist. The supply curve for garment workers is given by L = 80w, where L is the number of workers hired and w is their
21.7 In the early 1960s President John Kennedy's Council of Economic Advisers recommended the institution of "Wage-Price Guideposts." The basic idea of the guideposts was to require wages in all industries to increase at the rate at which the national level of output per worker increases (about 3.2
21.6 Suppose there are a fixed number of 1,000 identical firms in the perfectly competitive concrete pipe industry. Each firm produces the same fraction of total market output, and each firm's production function for pipe is given by q=VKL.Suppose also that the market demand for concrete pipe is
21.5 Assume the quantity of envelopes licked per hour by Sticky Gums, Inc., is Q= 10,000 vZ, where L is the number of laborers hired per hour by the firm. Assume further that the envelope-licking business is perfectly competitive with a market price of $.01 per envelope.a. How much labor would be
w/L)?b. What is the elasticity of demand for lawn mowers with respect to their rental rate (that is, dK/Sv v/K)}c. What is the cross elasticity of demand for lawn mowers with respect to the wage rate (that is, dK/dw w/K)}
21.4 The mowing of lawns requires only labor (gardeners) and capital (lawn mowers). These factors must be used in the fixed proportions of one worker to one lawn mower, and production exhibits constant returns to scale. Suppose the wage rate of gardeners is $2 per hour, lawn mowers rent for $5 per
21.3 A landowner has three farms (A, B, and C) of differing fertility. The levels of output for the three farms with one, two, and three laborers employed are as given:Number of Laborers Level of Output FarmA FarmB Farm C 12 310 17 21 811 13 57 8For example, if three laborers are hired, one for
21.2 Assume that the market for rental cars (used for business purposes) is perfectly competitive with the demand for this capital input given by K= 1,500 - 25r>and the supply given by K=75v- 500, where K represents the number of cars rented by firms and v is the rental rate per day.a. What will be
21.1 Suppose demand for labor is given by L = -50w + 450 and supply is given by L= 100w, where L represents the number of people employed and w is the real wage rate per hour.a. What will be the equilibrium levels for w and L in this market?b. Suppose the government wishes to raise the equilibrium
20.10 In Example 20.5 we showed that the Nash equilibrium in this first-price, sealed bid auction was for each participant to adopt a bidding strategy of b{v) = [ ( n — l)/n] v. The total revenue a seller might expect to receive from such an auction will obviously be [ { n — l)/n] v*—where v*
20.9 Suppose that in the Bayesian-Cournot model described in Example 20.4 the firms have identical marginal costs (10) but information about demand is asymmetric. Specifically, assume firm A knows the demand function (Equation 20.20) but firm B believes that demand may be either P= 120 -qA~qB or
20.8 Suppose the demand for steel bars in Example 20.1 fluctuates with the business cycle. During expansions demand is Q= 7,000- 100P,Assume also that expansions and recessions are equally likely and that firms know what the economic conditions are before setting their price.a. What is the lowest

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Microeconomic Theory Basic Principles And Extensions 8th Edition Walter Nicholson - Solutions

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