Introductory Economics 1st Edition Michael Veseth - Solutions

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Mercantilism has evolved and adapted to changing IPE environments.Briefly explain how and why the following forms of mercantilism differ: classical mercantilism, neomercantilism, defensive mercantilism.
Each of the IPE perspectives has at its center a fundamental value or idea. What is the central idea of mercantilism? Explain how that central idea is illustrated by the mercantilist period of history, mercantilist philosophy, and mercantilist policies.
Using a newspaper or weekly newsmagazine as a reference, try to make a list of at least three important current events that are examples of international political economy. What characteristics do they share-that is, what makes them IPE? How are they different?
Efficiency and security are two important factors in IPE. Briefly explain why efficiency and security are both desirable values. Can security exist without efficiency? Explain. Can efficiency exist without security? Explain.
How do states and markets differ in their values and goals and in the means with which they seek to achieve their goals? Discuss this question both in general and with respect to the current event topic in question 2.
International political economy is sometimes defined as the set of questions and issues arising from the parallel existence and dynamic interaction of states and markets. Find an example of a current event that should properly be considered part of IPE (newspapers and newsmagazines are good sources
Define the terms "state" and "market" and give examples of "state actions" and "market actions." Is the line between state and market clean and clear, or is it sometimes hard to determine? What is the relationship between politics and the state on one hand and economics and the market on the other?
Suppose that your local government wishes to hire more police. List al I the costs of this action. Who will benefit from this? Who will lose? How should we decide whether or not to increase spending on the police?
Why should the elimination of poverty be a public policy as opposed to a purely private concern? Is poverty the result of market failures?
If education is one solution to the poverty problem, why must the government get involved?Why don't the poor invest in education and training themselves?
Economic growth makes all income groups better off. Does it force any trade-offs or do these gains come without opportunity cost? Explain your answer.
What other options are available in dealing with the poverty problem? Do these plans also create winners and losers? List two other ways of increasing poor people's incomes and state the winners and losers from each.
What kinds of trade-offs exist in antipoverty programs?
What kinds of government policies can be used to reduce the poverty problem?
How serious is the poverty problem in the United States? Who are the poor? Which groups are most affected by poverty? Why are they poor?
Suppose that a monopolist produces external costs. What is the proper governmental policy in this case?
If you were a monopolist, which type of government control would you prefer: regulation, subsidies, or a license to price discriminate? Which would you prefer if you were the monopolist's customer?Why?
Is product differentiation a good thing? What impact does it have on social welfare? Explain.
Suppose that you need to raise taxes in one market in order to finance subsidies in another.Which type of market does it make the most sense to impose the tax on: the monopolist or a market where perfect competition prevails?
This chapter makes a case for regulating monopolists in order to increase social welfare. Does this case also apply to a cartel?What impact does a cartel have on social welfare? Explain.
What is the appropriate governmental policy in dealing with a natural monopoly?
What is a natural monopoly?
If monopolies are bad, why does the government create monopolies through patent and copyright laws?
How does government monopoly policy work?
Why does the government need to control monopolies?
You are a fan of your local pro football team. If the stadium is sold out by Friday, the big game will be shown on local television. If not, no local television coverage is possible and only those in the stadium will see the game. Use the theories of this chapter to determine whether or not the
Why is there such a large difference, in the case of a public good, between the market demand curve and marginal social benefits? What makes up the demand curve for a public good, given that it is possible to be a free rider?
Suppose that, in order to increase the production of a good that gives external benefits, the government must impose a tax on another good that also has external benefits. What is the impact here? Are there any con ditions under which such a policy would make sense? What are they?
Are taxes used to regulate all goods that produce external costs? Are regulations applied to the rest? Are there any goods that produce external costs that are left free, their quantity more or less determined by the free market? Why hasn't the government i ntervened?
Is it possible to produce too much of a good that produces positive externalities? Why?Give an example of a good with external benefits that may be produced in oversupply. How does this happen?
What is a public good and why does the government often act to produce public goods itself?
What is the appropriate government action when faced with externa I ities?
Why does the market fail when externalities are present?
What is an externality? What is the difference between an external benefit and an external cost?
The democratic choice mechanism has resulted in minimum wage legislation. Would the free market choice mechanism have brought about the same result?Why or why not?
Is there any real difference between democratic choice and free market choice? After all, both allow consumers and pro ducers to express their preferences. When would the same choice result under these two ways of making decisions?When would they be different?
Under what conditions can markets change so that both consumer and producer surplus increase? Does this ever happen?Explain.
Taxes destroy net benefits.Why, then, does the government impose taxes on many items? What possible reason can the government have?Where do the tax dollars go?
Suppose that a market is perfectly competitive. What impact does a price ceiling have on the net benefits that it makes possible? A price floor?
What problems occur when choices are made with votes instead of dollars?
What advantages does the free market have over other ways of making choices?
Why is the free market a desirable form of economic organization?
What is the energy crisis? Is crisis the right term for this?
Is energy necessary to economic growth? Can the economy grow without expanding energy supplies? Defend your answer.
Under what conditions will energy prices fall? Are these conditions likely? What effect will falling energy prices have on the economy? On firms? On consumers?
The government can keep energy prices low to consumers and still encourage the development of new energy sources by providing price subsidies so that, in effect, the government pays part of the cost of energy for consumers. Evaluate this policy.
One source of oil noted in this chapter is imported oil. Suppose that, for national security reasons, Congress drastically limits the amount of oil that can be imported. How will this affect market supply and price?Will this encourage the development of new energy sources?Explain.
Which is more important: energy or the environment?
What impact do price controls have on energy markets?
Will we run out of energy soon?
Why is the price of energy now and in the future important?
What are the sources of energy? What is the outlook for future energy supplies?
What are the uses of energy? Why is it so important?
Economists have long observed price cycles involving beef, pork, and chicken prices. It takes several years to bring cattle to market, about a year to raise pigs, and only a few months to produce a marketable chicken. Given this information, what form do you think this cycle takes? Use the cobweb
Because of the problem of enforcing property rights, individual firms may produce too much of a natural resource but undertake fewer worker training programs. Why does this hap pen? Is it possible for the government, using laws that define property rights, to change this result?
Do all cobwebs converge to an equilibrium price like the one illustrated in the text? Can you draw an exploding cobweb?What is the difference between these two results?
Suppose that interest rates are currently rising. What effect do you expect this to have on the price of the finite natural resource oil? Explain your reasoning.
Suppose that a particular machine is guaranteed to produce marginal revenues of $1000 at the end of one year, $2000 at the end of the second year and$1000 a the end of the third year. Use the present value formula to determine the maximum amount that a firm will pay for this machine if the interest
Why do some natural resource markets go through boom and bust cycles with market prices rising and falling over a period of years?
What factors affect natural resource supplies to make them different from other input supplies?
How is the demand for capital different from the demand for other inputs?
What factors affect this decision?
How does a firm decide how much of an input to use in production?
Is the market wage rate described in this chapter a fair wage? Define the meaning of a fair wage and evaluate the market as a means of rewarding labor.
"Inflation reduces unemployment." Explain under what conditions this statement is true.
What impacts do social security payments for retired workers have on the labor force? Does it affect demand? Supply? Both?Explain.
Is there an economic reason for firms to base pay raises on seniority? Why should workers with more years on the job receive higher incomes?
One of the most interesting wage differentials is that which has traditionally prevailed between men and women in similar jobs. Is there an economic justification for this differential?Explain.
How do government policies affect the labor market?
How do labor unions affect the labor market?
Why do different jobs pay such different wages? What is the cause of this wage differential?
How does a firm decide how many workers to hire?
What factors affect the supply of labor?
What is the labor market and how does it work?
OPEC has proved to be a relatively long-lived cartel. Can you think of any economic reasons for this stability? Can you suggest any noneconomic reasons?
Show how restricting entry in a market can increase the economic profits of firms already in that market. Use supply and demand tools to show the impact on price and quantity produced.
"Product differentiation is most likely to occur in oligopoly markets." Evaluate this statement.
Suppose that Pepsi and Coke have both succeeded in producing differentiated products.What will happen to the price and quantity that Coke produces if Pepsi should suddenly lower its price?
Suppose that firms in oligopoly markets earn high economic profits. Why do these markets stay oligopolies? Why don't other firms enter the industry and force competition for these profits? Make a list of industries where oligopolies prevail and determine what barriers to entry exist.
How can government regulations create market imperfections? How do regulations increase profits for producers?
What is an oligopoly? How does an oligopoly determine price and quantity produced?
What is a cartel? Are cartels advantageous to their members? To their customers? Are they likely to be long-lived?
What is price discrimination and why would a producer want to adopt this pricing strategy? Are there limits on price discrimination?
What is product differentiation and why would a firm want to have a differentiated product?
Is competition better than monopoly? Defend your answer.State the advantages and disadvantages (to sellers, to buyers, to others) of each form of market organization.
Would it be profitable for all firms in an industry to form an organization to set prices on quantities (such an organization is sometimes called a cartel)?Can the firms involved gain higher profits from working together instead of working apart?
Suppose that the government sets a price floor in an industry.What effect does this floor have on individual producers? On the market? How can a surplus be avoided in this situation? Explain.
How will an increase in fixed costs affect a market in the short run? In the long run?Why?
Suppose that a single firm in a market discovers a technological improvement that leads to lower marginal costs. How does this affect that firm? The market?Market price? Will your answers be different if a// the firms in the industry use the cost-reducing invention? Why?
How does the behavior of fi rms and industries differ in the long run and in the short run?
What factors can affect the competitive fi rm's production decision?
How much does a competitive fi rm produce?
Why are competitive fi rms called price-takers?
What is meant by perfect competition?
How a re competitive markets different from monopolies?
Suppose that the government imposes a license fee on all monopoly producers-they must pay a flat registration fee to the government regardless of their production. How will this kind of a tax on monopolists affect the following: marginal revenues, marginal costs, price, production, and profits?
A monopolist wishes to increase TABLE 23-1 Price $2000 1 800 1 500 1 400 1 000 800 500 Quantity Demanded 1 2 3 4 5 6 7 profits, and so he begins an advertising program that features a giveaway-a free ball point pen is given away with each purchase in an attempt to stimulate demand. Explain how this
Using Table 1, construct total revenue, marginal revenue, and average revenue curves for this typical demand curve.
Suppose that the government imposes a price ceiling (maximum legal price) in a market characterized by monopoly. Assume that the price ceiling is below the price that the monopolist would otherwise charge.What impact will the price ceiling have on marginal revenue, marginal costs, price, and
In looking at supply·and demand analysis, we learned that, assuming normally shaped supply and demand curves, an increase in demand normally results in increased price and quantity. The monopolist has no supply curve. How, then, will an increase in demand affect price and quantity in a monopoly

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Introductory Economics 1st Edition Michael Veseth - Solutions

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