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intermediate microeconomics
Microeconomic Theory Basic Principles And Extensions 8th Edition Walter Nicholson - Solutions
3. What are the gains from trade?
2. Why is comparative advantage important in determining trade instead of absolute advantage?
1. Why do people choose to become interdependent as opposed to self-sufficient?
How would your analysis change ifyou .assumed, more realistically, that each country had 10 million workers? Suppose a worker in the United Stites can produce 4 cars or 20 computers per month whereas a worker in Russia can produce 1 car or 5 computers per month. Again, for simplicity, assume each
Suppose the productivity ofa worker in Poland doubles so that a worker can produce 8 computers or 8 tons of grain per month. Which country has the absolute advantage in producing computers? grain? 'After the doubling of productivity in Poland, which country has a compara tive advantage in producing
Suppose the productivity ofa worker in Poland doubles so that a worker can produce 8 computers or 8 tons of grain per month. Which country has the absolute advantage in producing computers? grain?'After the doubling of productivity in Poland, which country has a compara tive advantage in producing
Suppose each country specializes in production and they trade 4 computers for 2 tons ofgrain. Plot the final con sumption points on the graphs you made in part b above. Are these countries consuming inside or outside oftheir production possibilities frontier?
Suppose Germany and Poland settle on a price of 2 computers for 1 ton of grain or 1/2 ton of grain for a computer.
What is the range of prices for computers and grain for which both countries would beneflt?
What is the opportunity cost of 1 computer in Poland? What is the opportunity cost of 1 ton of grain in Poland? Which country has the absolute advantage in producing computers? grain? Which country has the -comparative advantage in producing computers? grain? Each country should tend toward
2. What is Angela's opportunity cost of 1 pot? 10 pots? What is Angela's opportunity cost of 1 mug? 10 mugs? Why is her production possibilities frontier a straight line instead ofbowed out like those presented in Chapter 2? Suppose a worker in Germany can produce 15 computers or 5 tons ofgrain per
L Angela is a college student. She takes a full load of classes and has only 5 hours per week for her hobby. Angela is artistic and can make 2 clay pots per hour or 4 coffee mugs per hour.a. . Draw Angela's production possibilities frontier for pots and mugs in Exhibit 2.b. c.d. 2. What is Angela's
Explain why all people have a comparative advantage even if they have no absolute advantage
Because people carry umbrellas to work in the morning and it rains later in the afternoon, carrying umbrellas must cause rain.
Reverse causality means that while we think A causes B, B may actually cause A.
There is a positive correlation between lying down and death. Ifwe conclude from this evidence that it is unsafe to down, we have an omitted variable problem because critically ill people tend to lie down.
When a'line has negative slope, the two variables measured on each axis are positively correlated.
The slope of a line is equal to the change in y divided by the change in x along the line.
Ifthree variables are related, a change in the variable not represented on the x-, y-.coordinate system will cause a movement along the curve drawn in the X-, y-coordinate system.
If three variables are related, one of them must be held constant when graphing the other two in the X-J y-coordinate system.
Price and quantity demanded for most goodsare positively related.
When a line slopes upward in the X-, y-coordinate system, the two variables measured on each axis are positively correlated.
When graphing in the coordinate system, the x-coordinate tells us the horizontal location while the y-coordinate tells us the vertical location of the point.
An alien lands on earth and observes the following: on mornings when people carry umbrellas; it tend, to rain later in the day. The alien concludes that umbrellas cause raIn.What error has the alien committed?What role did expectations play, in the alien's error?Ifrain is truly caused by humidity,
2.Did the doubling ofJoe's income cause a movement along his demand curve or a shift in his demand curve? Why?
Suppose Joe's income doubles from $20,000 per year to $40,000 per year. Now the following ordered pairs describe Joe's demand tor gourmet coffee. Plot these ordered pairs on the graph provided in part a above.$5 43 24 cups 6 cups 8cups 10 cups 12 g.
If the price of coffee moves from $2 per cup to $4 per cup, what happens to the quantity demanded? Is this a movement along a curve or a shift in the curve?
Are the price of coffee and Joe's quantity demanded of coffee positively cor related or negatively correlated? How can you tell? -~
What is the slope ofJoe's demand curve for coffee in the price range of$2 and$1?
What is the slope ofJoe's demand curve for coffee in the price range of$5 and$4?
Plot and connect the ordered pairs on the graph in Exhibit 10.
1.The following ordered pairs ofprice and quantity demanded describe Joe's demand for cups of gourmet coffee.Price; ~r ~!i! RQf coiJee$5 43 21~uln'lti~ demanClea of coffee 2 cups 4 cups 6 cups 8 cups 10
What ifyou later discovered that the economist opposed to free trade worked for a labor union. Would that help you explain why there appears to be a difference of opinion on this issue?
Suppose you discover that 93 percent of economists believe that free trade is generally best (which is the greatest agreement on any single issue). Could you now give a mOre precise answer as to why economists might disagree on this issue?
Can you give your roommate any insight into why economists might disagree on this issue?
You are watching NewsHour with Jim Lehrer on public television. The first focus segment is a discussion of the pros and cons of free trade (lack of obstructions to international trade).For balance, there are two economists present-one in support of free trade and one opposed.Your roommate says,
20. THINKING LIKE AN ECONOMIST Suppose two economists are arguing about policies that deal with unemployment. One economist says, "The government could lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars."The other economist responds,
19. Suppose two economists are arguing about policies that deal with unemployment.One economist says, "The government should fight unemployment because it is the greatest social evil."The other economist responds, "Hogwash. Inflation is the greatest social evil."These economists 'a.b.c.d.disagree
18.The unemployment rate should be reduced because unemployment robs in dividuals of their dignity.The rate of inflation should be reduced because it robs the elderly of their savings.The state should increase subsidies to universities because the future of our country depends on education.Positive
17. In making which of the following statements is an economist acting more like a scientist?a.A reduction in unemployment benefits will reduce the unemployment rate.b.c.d.
16. Which of the following statements is normative?a.Printing too much money causes inflation.b.c.d.People work harder if the wage is higher.The unemployment rate should be lower.Lan~e government deficits cause an economy to grow more slowly.
15. Which of the following statements about microeconomics and macroeconomics is not true?a.The study of very large industries is a topic within macroeconomics.b.c.d.Macroeconomics is concerned with economy-wide phenomena.Microeconomics is a building block for macroeconomics.Microeconomics and
14. Which of the following issues is related to microeconomics?a.the impact of money on inflation b.c.d.the impact of technolof,'Y on econOInic growth the impact of the deficit on saving the impact of oil prices on auto production
13. As we move from point A to point D, a.the opportunity cost of eggs in terms ofbacon is constant.b.c.d.e.the opportunity cost of eggs in terms of bacon falls.'the opportunity cost of eggs in terms of bacon rises.the economy betorne;; more efficient.the economy becomes Jess efficient.
12. Point F representsa. a combination of production that can be reached if we reduce the production of eggs by 20 units.b. a combination of production that is inefficient because there are unemployedc. resources. a combination of production that can be reached if there is a sufficient advance in
11. If the economy were operating at point E,a. the opportunity cost of 20 additional units of eggs is 10 units of bacon.b. the opportunity cost of 20 additional units of eggs is 20 units of bacon.c. the opportunity cost of 20 additional units of eggs is 30 units of bacon.d. 20 additional units of
10. If the economy is operating at point C, the opportunity cost of producing an ad- ditional 15 units of bacon isa. 10 units of eggs.b. 20 units of eggs.c. 30 units of eggs.d. 40 units of eggs.e. 50 units of eggs. +
9. Economic growth is depicted bya. a movement along a production possibilities frontier toward capital goods.b. a shift in the production possibilities frontier outward.c. a shift in the production possibilities frontier inward.d. a movement from inside the curve toward the curve. Use Exhibit 6 to
8. Which of the following will not shift a country's production possibilities frontier outward?a. an increase in the capital stockb. an advance in technologyc. d. a reduction in unemployment an increase in the labor force
7. Points on the production possibilities frontier are efficient.a. b. inefficient.c. unattainable.d. e. normative. none of the above.
6. Which of the following is not a factor of production?a. landb. laborc. capitald. moneye. All of the above are factors of production.
5. Economic models area. b. created to duplicate reality. built with assumptions.c. usually made of wood and plastic.d. useless if they are simple.
4. In which of the following cases is the assumption most reasonable?a. To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum.b. To address the impact of money growth on inflation, an economist assumes that money is strictly coins. C. To address the impact
3. Which of the following statements regarding the circular-flow diagram is true?a. The factors of production are owned by households.b. If Susan works for IBM and receives a paycheck, the transaction takes place in the market for goods and services.c. If IBM sells a computer, the transaction takes
2. Which of the following is most likely to produce scientific evidence about a theory?a. an economist employed by the AFL/CIO doing research on the impact of tradeb. C.d. restrictions on workers' wages a radio talk show host collecting data on how capital markets respond to taxation a tenured
1. The scientific method requires that 3. scientists use test tubes and have clean labs.b. scientists be objective.c. scientists use precision equipment.d. only incorrect thories are tested.e. only correct theories are tested.
Most economists believe that tariffs and import quotas usually reduce general economic welfare.
Normative statements can be refuted with evidence.
When economists make positive statements, they are more likely to be acting as scientists.
12. The statement, "An increase in inflation tends to cause unemployment to fall in the short run" is normative.
11. Macroeconomics is concerned with the study of how households and firms make decisions and how they interact in specific markets.
An advance in production technology would cause the production possibilities curve to shift outward.
The production possibilities frontier is bowed outward because the trade-off between the production of any two goods is constant.
8.. If an economy were experiencing substantial unemployment, the economy is producing inside the production possibilities frontier.
7. Points outside the production possibilities frontier are attainable but inefficient.
6. If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.
5. If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.
4. When people act as scientists, they must try to be objective.
3. It is reasonable to assume that the world is composed of only one person when modeling international trade.
2. Assumptions make the world easier to understand because they simplify reality and focus our attention.
1. Economic models must mirror reality or they are of no value.
10. Name two economic propositions for which more than 90 percent of economists agree.
9. Name two reasons why economists disagree.
8. Which statements are testable: positive statements or normative statements? Why?
7. When an economist makes a normative statement, is she more likely to be acting as a scientist or a policy adviser? Why?
6. What are the two subfields within economics? Which is more likely to be a building block of the other? Why?
5. Why is the production possibilities frontier bowed outward?
4. Why does a production possibilities frontier have a negative slope (slope down and to the right)?
3. Is a more realistic model always better?
Describe the scientific method.What is the role ofassumptions in any science?
On the graph in Exhibit 5, show the shift in the production possibilities curve if there was an increase in technology that only affected the production of capital goods.Does the shift in part d imply that all additional production must be in the form of capital goods? Why?
3.The production possibilities frontier in Exhibit 3 shows the available trade-offs between consumption goods and capital goods. Suppose two countries face this identical production possibilities frontier.a.Suppose Party Country chooses to produce at point A, while Parsimonious Country chooses to
How many additional rackets could they produce without giving up any bats? Is the production of 200 bats and 200 rackets efficient? Explain.
Suppose Athletic Country is currently producing 200 bats and 200 rackets. How many additional bats could they produce without giving up any rackets?
2. The following table provides information about the production possibilities frontier of Athletic Country.0 100 200 300 400 500 420 400 360 300 200 --"0a. In Exhibit 2, plot and connect these points to create Athletic Country's production possibilities frontier.b. If Athletic Country currently
Mary buys a car from General Motors for $20,000.General Motors pays Joe $5,000 per month for work on the assembly line.Joe gets a $15 haircut.Mary receives $10,000 of dividends on her General Motors stock.
1. IdentifY the parts of the circular-flow diagram immediately involved in the following transactions.
List two reasons why economists disagree
See the link between policym~king and normative statements
Place economic statements into the categories of normative or positive
Place economic issues into the categories ofmicroeconomics or macroeconomics
Explain the slope ofa production possibilities frontier
Understand the art of making useful assumptions
Describe the scientifIc method
13.10 In Example 13.3, we computed the general short-run total cost curve for Hamburger Heaven as 400a. Assuming this establishment takes the price of hamburgers as given (P), calculate its profit function (see the extensions to Chapter 13), IT* (P, V, W).b. Show that the supply function calculated
13.9 Suppose a firm engaged in the illegal copying of computer CDs has a daily short-run total cost function given by STC =q 2 + 25.a. If illegal computer CDs sell for $20, how many will the firm copy each day? What will its profits be?b. What is the firm's short-run producer surplus at P = $20?c.
13.8 The market for high-quality caviar is dependent on the weather. If the weather is good, there are many fancy parties and caviar sells for $30 per pound. In bad weather it sells for only $20 per pound. Caviar produced one week will not keep until the next week. A small caviar producer has a
13.7 The production function for a firm in the business of calculator assembly is given by q=2VL, where q is finished calculator output and L represents hours of labor input. The firm is a price taker for both calculators (which sell for P) and workers (which can be hired at a wage rate of w per
13.6 Universal Widget produces high-quality widgets at its plant in Gulch, Nevada, for sale throughout the world. The cost function for total widget production (q) is given by total cost = .25q 2.Widgets are demanded only in Australia (where the demand curve is given by q = 100 — 2P)and Lapland
q, where b (
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