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intermediate microeconomics
Microeconomics Canada In The Global Environment 11th Edition Michael Parkin, Robin Bade - Solutions
a. What is the quantity of tuna that fishers catch and the price of tuna? Is the tuna stock being used efficiently? Explain why or why not.b. What would be the price of tuna if the stock of tuna is used efficiently?
If the government appoints a bureaucrat to run the program, would mosquito spraying most likely be underprovided, overprovided, or pro- vided at the efficient quantity? Common Resources (Study Plan 16,3) Use the following figure to work Problems. The figure shows the market for North Atlantic tuna.
The table sets out the benefits that Terri and Sue receive from on-campus police at night: Police officers Marginal benefit on duty (sumber per night) Terri (dollars per police officer) Suppose that Terri and Sue are the only students on campus at night. Draw a graph to show the marginal social
For each of the following goods, explain why a free-rider problem arises or how it is avoided. Canada Day fireworks display TransCanada Highway in Manitoba Wireless Internet access in a hotel The public library in your city
Classify each of the following items as a public good, a private good, a club good, or a common resource. Explain your answer. Highway police services Internet service A Tim Hortons coffee Fish in the Atlantic occan Purolator courier service Public Goods (Study Plan 16.2)
Classify each of the following items as exclud- able, nonexcludable, rival, or nonrival. Explain your answer. A Big Mac A bridge A view of the sunset A hurricane warning system
What is the efficient number of sprays per season?
What is the marginal social benefit of mosquito control at each quantity of sprays?
What is the tragedy of the commons? Give two examples, including one from your province.
What is the free-rider problem? Why do free niders make the private provision of a public good inefficient?
Provide examples of goods (or services or resources) in each of the four categories that differ from the examples in this section.
Explain the tragedy of the commons and its possible solutions
Explain how the free-rider problem arises and how the quantity of public goods is determined
Distinguish among private goods, public goods, and common resources
Universities Raise Tuition Despite Moving Online Due to COVID-19 Dalhousie University is one of the many Cana- dian universities raising tuition for the 2020 fall term, despite teaching most classes online during the pandemic. Erica Seelemann, a vice-president at the Dalhousie Student Union says,
After you have studied Economics in the News on pp. 368-369, answer the following questions.a. What are the marginal private costs and mar ginal private benefits of social isolating?b. What are the marginal social costs and mar ginal social benefits of social isolating?c. Why don't people practise
Draw a graph to illustrate why giving money to the arts might improve efficiency. Economics in the News
Draw a graph to illustrate and explain why the market for arts creates a deadweight loss.
to 30. Trudeau Commits $500 Million to Arts, Culture and Sports Sectors Affected by COVID-19 Prime Minister Justin Trudeau said, "We need our artists to continue to make us dream, particularly in dark times." Source: cp24.com, April 17, 2020 28. What external benefits are associated with the arts?
If all universities are private and the government offers vouchers to those who enroll, calculate the value of the voucher that will achieve the efficient number of students. Use the following news clip to work Problems
If the government decides to subsidize private universities, what subsidy will achieve the effi- cient number of students?
If all universities are public, calculate the tuition that will achieve the efficient number of stu dents. How much will taxpayers have to pay?
If all universities are private and the marker for education is competitive, calculate the number of students, the tuition, and the deadweight loss.
to 27. The table shows the demand for university education. Price (dollars per student) Quantity (students per year) 10,000 20,000 30,000 40,000 50,000 The marginal cost of educating a student is a con- stant $4,000 a year and education creates an external benefit of a constant $2,000 per student
a. How could the market for mercury-filled light bulbs be made to operate efficiently?b. Draw a graph to illustrate your answer. Positive Externality: Knowledge Use the following data to work Problems
a. What is the external cost that arises from using mercury-filled light bulbs?b. Draw a graph to illustrate and explain why the market for mercury-filled light bulbs is inefficient.
and 23. Ottawa Unveils Plan for Safe Disposal of Mer- cury-Filled Light Bulb The federal government has unveiled its national plan for the safe disposal of mercury-filled light bulbs. Mercury is a toxic substance under the Cana- dian Environmental Protection Act. Source: cbc.ca, July 18, 2019
If the government levies a pollution tax so that the utility produces the efficient quantity, what is the price of electricity, the tax levied, and the government's tax revenue per day? Use the following news clip to work Problems
to 21. The first two columns of the table show the demand schedule for electricity from a coal-burning utility; the second and third columns show the utility's cost of producing electricity. The marginal external cost of the pollution created equals the marginal cost. Marginal cost Price (cents per
If no one owns the lake and the government levies a pollution tax, what is the tax that achieves the efficient outcome? Use the following table to work Problems
What quantity of pesticide is produced if no one owns the lake? What is the efficient quantity? 16. If the town owns the lake, what is the quantity of pesticide produced and how much does the town charge the factories to dump waste?
Betry and Anna work at the same office in Toronto and they have to attend a meeting in Montreal. They decide to drive to the out- of-town meeting together. Betty is a cigarette smoker and her marginal benefit of smoking a package of cigarettes a day is $40. Cigarettes are $6 a pack. Anna dislikes
What externalities arise from beautiful and ugly buildings and how do we deal with them? Negative Externality: Pollution
What externalities arise from smoking cigarettes and how do we deal with them?
Which of the following activities creates an externality? If it does, is it a positive or negative production or consumption externality? A sunset over the Pacific Ocean An increase in the number of graduates A person talks on a smartphone while driving A bakery bakes bread
China Is Leading the COVID-19 Vaccine Race Sinovac Biotech's experimental vaccine is set to enter final-stage testing later this month Source: The Sydney Morning Herald, July 7, 2020a. Explain why research to develop a COVID-19 vaccine has a positive externality.b. Why might international
If the government offers students vouchers, what is the value of the voucher that will achieve the efficient number of students?
If the government provides public universities, what tuition will achieve the efficient number of students? How much will taxpayers have to pay?
What is the efficient number of students? If all universities are private, how many people enroll in university and what is the tuition?
If no one owns the river and the city introduces a pollution tax, what is the tax per tonne grown that achieves an efficient outcome? The marginal cost is a constant $6,000 per student per year. The marginal external benefit of a univer- sity education is a constant $4,000 per student per year.
a. If the town owns the river and makes growers pay the cost of pollution, how many tomatoes are grown? What do growers pay the town per tonne grown?b. If the tomato grower owns the river and rents it to the town, how many tomatoes are grown? How is the rent paid by the town to the grower (per
to 9. Price and co thousands of dollars per 20 D-MB 30 40 50 60 Suders thousands per year 50 25 100 200 300 400 500 Quantly one per no 0 3 If no one owns the river and the town takes no action to control the waste, what is the quantity of tomatoes and the deadweight loss created?
to 6. Suppose that tomato growers use a chemical to con- trol insects and waste flows into the town's river. The marginal social cost of tomatoes is double the mar ginal private cost. Price (dolan per tonne 150 125 100 75 6. Compare the outcomes when property rights exist and when the pollution tax
Describe three production activites that create external benefits Negative Externality: Pollution (Study Plan 15.2) Use the following figure, which illustrates the market for tomatoes, to work Problems
What is the efficient number of fitness sessions per month?
Calculate the marginal social benefit of fitness at each quantity of sessions.
What is the market-determined quantity of fit- ness sessions per month and what is the price of a session?
How might governments use public provision, private subsidies, vouchers, and patents and copyrights to achieve an efficient amount of research and development?
How might governments use public provision, private subsidies, and vouchers to achieve an efficient amount of education?
What is special about knowledge that creates external benefits?
Explain why a flu shot and a stay-at-home order in a pandemic generate positive externalities.
Distinguish between a positive and a negative externality and provide an example of cach.
Explain why external benefits bring market failure and underproduction and how public choices might achieve an efficient outcome
Explain why external costs bring market failure and overproduction and how property rights and public choices might achieve an efficient outcome
Explain how externalities arise
Germany's Lufthansa Orders 40 Boeing 787, Airbus A350 Planes Lufthansa is retiring its wide-body long-range Airbus 380s and replacing them with more fuel- efficient long-range aircraft. Lufthansa struck a good deal below the $12 billion list price. Source: nationalpost.com, March 13, 2019a.
After you have studied Economics in the News on pp. 344-345, answer the following questions.a. What are the strategies of Rogers, Bell, and Telus in the market for smartphone service?b. If Rogers, Bell, and Telus played a one-shot game, how would the outcome be different?c. Why is a tit-for-tat
Why might the MAP strategy be against the social interest and benefit only the producer? Economics in the News
a. Describe the practice of resale price mainte- nance that violates the anti-combine law.b. Describe the MAP strategy used by Apple and explain how it differs from a resale price maintenance agreement that would violate the anti-combine law
Agile Airlines' profit on a route on which it has a monopoly is $10 million a year. Wanabe Airlines is considering entering the market and operating on this route. Agile warns Wanabe to stay out and threatens to cut the price so that if Wanabe enters it will make no profit. Wanabe determines that
If Bud and Wise in Problem 10 play the game repeatedly, what is the equilibrium of the game?
Huawei Says Its Operating System Can Rival Google, Apple-bur Experts Say It Might Be a Struggle Huawei's smartphones have relied on Google's Android operating system for years. But in 2019, Huawei launched its own system. A top Huawei executive said its mobile operating system, Har- monyOS, can
Why are these three consoles different?
a. Thinking about competition in game consoles as a game, describe the firms strategies.b. What, based on the information provided, turned out to be the equilibrium of the game?
Why do Coca-Cola and PepsiCo spend huge amounts on advertising? Do they benefit? Does the consumer benefit? Explain your answer by constructing a game to illustrate the choices Coca-Cola and PepsiCo make. Use the following news clip to work Problems 15 and 16. Nintendo Switch Was Black Friday's Big
Suppose that Mozilla and Microsoft each develop their own versions of an amazing new Web browser that allows advertisers to target consumers with great precision. Also, the new browser is easier and more fun to use than existing browsers. Each firm is trying to decide whether to sell the browser or
Canada's Syrup Cartel Challenged by Vermont's "Maple on Steroids" If you poured pure maple syrup on your pan- cakes this morning, there's a good chance you were using the product of a cartel. More than 70% of all maple syrup sold worldwide comes from Canada's Federation of Quebec Maple Syrup
Construct a payoff matrix for the game that Bud and Wise must play
Pet Food Suppliers Dominating the Industry-but Competition Is Heating Up As pet owners look to buy more nutritional pet food, the three market leaders seem slow to adapt. Source: markets.businessinsider.com, May 30, 2018 2. According to the news clip, what is the cur rent structure of the pet-food
Apple conspired with five publishers to undercut Amazon's 90 percent share of the e-book market, which caused e-book prices to rise to $12.99 or $14.99 from the $9.99 that Amazon charged. Source: Financial Post, July 10, 2013 Explain why this conspiracy to raise prices vio- lates the anti-combine
If Soapy Inc. and Suddies Inc. play the game in Problem 5 repeatedly, on each round of play: What strategies might each firm adopt?b. Can the firms adopt a strategy that gives the game a cooperative equilibrium?c. Would one firm still be tempted to cheat in a cooperative equilibrium? Explain your
Minister Urged to Approve Air Canada- Transat Merger Despite concerns about harm to air service between Canada and holiday destinations, the two- airlines should be allowed to merge, particularly considering the COVID-19 pandemic. Source: westernaviationnews.com, March 30, 2020a. Explain how
Soapy Inc. and Suddies Inc., the only laundry detergent producers, collude and agree to share the market equally. If neither cheats, each makes $1 million. If one firm cheats, it makes $1.5 mil- lion, while the complier incurs a loss of $0.5 mil- lion. If both cheat, they break even. Neither firm
Consider a game with two players who cannot communicate and can answer honestly or lic. If both answer honestly, each receives $100. IF one answers honestly and the other lies, the liar receives $500 and the honest player gets nothing If both lie, then each receives $50. 2. Describe the strategies
CRTC's MVNO Proposal Would Weaken Regional Wireless Networks, Competition Bureau Says Last year, the CRTC proposed that mobile virtual network operators (MVNOs) get access to the net- works of the Big Three mobile carriers. Histori- cally, the CRTC favoured the Big Three because they built the
WestJet and Air Canada: How Little Sepa- rates the Airlines Anymore WestJet and Air Canada are becoming as similar as their fures. Experts say differences between the two carriers are essentially non-existent. Source: cbc.ca, May 12, 2018 Sketch the market demand and cost curves that describe the
Make up some profit numbers for Black and White that are consistent with the above account of their situation. Construct a payoff matrix for the game they are playing, and find the equilib- rium of the game.
Describe the game played by Black and White.
What actions violate the anti-combine law?
What is the Act of Parliament that provides our anti-combine law?
What is the equilibrium strategy for each firm in a duopolists' dilemma and why do the firms not succeed in colluding to raise the price and profits?
Why does a collusive agreement to restrict output and raise the price create a game like the prisoners' dilemma?
If a market is contestable, how does the equilib rium differ from that of a monopoly?1 What are the common features of all games?
Describe the anti-combine laws that regulate oligopoly
Use game theory to explain other strategic decisions
Use game theory to explain how price and output are determined in oligopoly
Define and identify oligopoly
After you have studied Easier in the News on pp. 318-319, answer the following questions.a. Why did Vera Bradley introduce new fabrics and designs for its bags?b. How would Vera Bradley's cost curves have been different if the new fabrics had higher cost than the traditional fabrics?c. How do you
New Ontario Locations Farm Boy, Ontario's fastest growing fresh food retailer, today announced that it will bring its popular fresh-market shopping experience to more Ontario communities. Source: markets.businessinsider.com, December 10, 2019 How will Farm Boy's new outlets influence the
Farm Boy Fresh-Market Growth Accelerates With
If Loblaws pulls its flyers but continues to advertise online and increases its marketing expenditure, how will Loblaws' cost and revenue curves and eco- nomic profit change? Does average total cost at the profit-maximizing output increase or decrease?
a. What is the main objective of the marketing plans of these four stores? Why are they mak- ing different marketing decisions?b. Is marketing expenditure a fixed cost or a variable cost?
If Bianca advertises, will her average total cost increase or decrease at the quantity produced?
If Bianca's advertising works as she expects, can she increase her economic profit by advertising?
a. Explain why the profit that Callaway makes on women's golf clubs is likely to be temporaryb. Draw a graph to illustrate Callaway's cost and revenue curves for women's golf clubs in the long run. Mark the firm's excess capacity.
a. How are golf club manufacturers attempting to maintain economic profit?b. Draw a graph to illustrate the cost curves and revenue curves of Callaway in the market for golf clubs for women.c. Show on your graph in part (b) the short-run economic profit.
2. Predict whether the $210 price tag on the Utopias is at, above, or below marginal cost in the short run and (ii) in the long run.b. Do you think that Samuel Adams' Utopias makes the market for beer inefficient? Use the following news clip to work Problems 21 and 22. Women's Golf Clubs As more
a. Explain how Samuel Adams has differentiated its Utopias to compete with other beer brands in terms of quality, price, and marketingb. Predict whether Samuel Adams produces Utopias at, above, or below the efficient scale in the short runc. Predict whether Samuel Adams produces Utopias ar, above,
How will the price of a mountain bike and the number of bikes produced by Mike's Bikes change in the long run?b. How will the quantity of mountain bikes produced by all firms change in the long run?
a. Do you expect other firms to enter the market for singing lessons and compete with Lorie? h. What happens to the demand for Lorie's les- sons in the long run? What happens to Lorie's economic profit in the long run? Use the figure in the next column, which shows the situation facing Mike's
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