Introductory Economics 1st Edition Michael Veseth - Solutions

How are the costs of production different in the long run from those in the short run? Is this difference important?
What measures of cost are useful to the firm and why?
What is the relationship between production and costs?
What determines these costs?
What costs does the firm consider when making a production decision?
Why do firms exist? What is the motive of the firm?
Can you think of a circumstance such that an individual consumer might have an upward-sloping demand curve for an item (larger quantity demanded at a higher price)? Use the tools of this chapter to describe how this wacky behavior might come about.
This chapter began with a story about changing conditions in the markets for raisins and walnuts. Can you explain the types of consumer behavior described here using the tools of this chapter? What happens to opportunity cost in each case?Why?
Suppose that you observe the price of a good (movie tickets)rising with no decrease in the quantity demanded. Can you explain this behavior using the tools of this chapter? What conditions must be present for this to happen?
Poor people and rich people consume different items. In particular, poor people often buy low-quality items while the rich buy better-made products. Does this difference in behavior reflect a difference in preferences?Can you explain this behavior in any other way?
Suppose that hamburgers cost$1 .00 and french fries are 50¢.If you have $3.00 to spend and the marginal utilities of these two items are as shown below, how many french fries and hamburgers should you buy?Explain your reasoning.Marginal Utility Quantity Hamburgers French fries 1 so 20 2 40 10 3 20
What other decisions does the consumer make? How do costs and benefits affect consumer choice in these areas?
Why is the demand curve for an individual item downward sloping and what factors cause a person's demand to change?
What is utility and how do economists use it to anlayze consumer choice?
What costs and benefits do consumers consider when making a demand decision?
Suppose the government wants to take actions that will reduce the retail price of beef products.Congress has decided to accomplish this goal through the use of subsidies. Does it make any difference if the subsidy is paid to the beef producers (they receive a government payment when they sell beef)
The following is a list of items that are typically taxed by state governments. Who bears the burden of the tax in each case?Gasoline, alcohol, automobiles, hotel rooms, theatre admissions.
Governments often impose price floors-minimum legal prices. The minimum wage is an example of such a price floor. Suppose that the minimum wage is set below the equilibrium wage in the labor market. What economic effects will this action have on employers, employees, and unemployment?
You are a merchant and you are trying to improve business by putting some items on sale for a short period of time. Under what circumstances would this be a good idea? When might you lose money doing this?
Does supply and demand analysis work in all markets? When does it break down? Why? What are the consequences?1 . Suppose that there were to be a new discovery of oil in the United States. What impacts would this have on the following markets: oil, natural gas, automobiles, airlines, hamburgers?
How does a tax affect markets? Who bears the burden of a tax? Is the distribution of the tax burden the same for all items?
Are all markets the same? How do markets differ?
How are markets related? Do actions in one market have impacts on. the prices and quantities of goods in other markets?
Sometimes the demand for an item falls but its price does not.How can this happen?
Because of increases in population, income, and other factors, demand for many items is constantly rising. Does this mean that inflation (rising general level of prices) is inescapable?Is it possible to have rising demand without rising prices?How?
Sometimes observers in the press and elsewhere come to the conclusion that the market does not work. This is often the case, for example, during gasoline shortages when sellers of especially economical small cars can repeatedly raise the price of these gas misers and still sell all that they can
Prices in some markets are very unstable, tending to rise and fall repeatedly over time. The market for beef displays this characteristic with prices going up and then falling over a period of years. What factors could cause the price of beef to rise? What kinds of things could make it fall? Which
Draw a hypothetical market for new cars. Indicate the probable effect on demand, supply, price, and quantity on each of the following events:D Increase in the price of steel.D Auto workers negotiate higher wages.D Gasoline prices rise.D Bus fares increase.
What factors can make prices change?
What is the equilibrium price?
What factors determine the quantities supplied?
What is meant by the term supply?
What factors determine the amounts of goods and services that people demand?
What is meant by demand?
Give an example of an exchange rate in Problem 4 where Doug gains, but Gai l does not;Gail gains, but Doug does not;both gain; both lose.
Doug and Gail are students. In a given period of time, Gail can solve 3 marketing problems or work 5 accounting problems. In the same time, Doug can work 2 marketing problems or solve 4 accounting problems. If Gail and Doug form a partnership when they graduate, who should be the salesperson and
Dean Chance was also an excellent baseball pitcher, yet he was seldom allowed to go to bat. What makes Chance different from Babe Ruth? What does this say about absolute advantage, comparative advantage, and specialization?
The record books show that Babe Ruth was one of the best pitchers in baseball during the early part of his career. Despite this, he was seldom al lowed to pitch. Use the theory of comparative advantage to explain this seeming paradox.
How is the law of diminishing returns related to the shape of the productions possibilities curve? Show how the property of constant returns gives the straight-line PPC shown in Figure 1.
What factors can limit the amounts and kinds of exchanges that take place?
How does money make exchange easier and more efficient?
How does exchange lead to specialization?
Who gains from exchange? Who loses?
What determines how exchange takes place?
"Economic growth is good because it al lows us to help the poor without harming other income groups. When the economy is growing, all parties can benefit at the same time; none need lose." Does this statement make sense? Use a PPC to illustrate your answer.
The purchase possibilities curve in Figure 4 shows the combinations of beer and pizza that Joe can buy with $100.00 if beer costs $2.00 and pizza is priced at $5.00. How does this curve change if the amount to be spent rises to $1 20.00? When the price of pizza falls to $4.00?What will happen to
Recall the example of Joe College facing the problem of reading his economics text and writing an English paper. The production possibilities curve illustrated the options available to him and the trade-offs he faced.How would Joe actually decide which combination of reading and writing to do? What
We say that negative marginal returns prevail when more resources used results in less total production. Give an example of a situation where negative marginal returns prevail. How do you suppose negative returns are related to the law of diminishing returns?
The law of diminishing returns holds that as more and more resources are used in producing a good, they become less and less productive or effective in production. Can you think of examples where the concept applies? Can you think of areas where the law of diminishing returns does not hold? Give
What is the role of economic growth?
How do we deal with these problems?
What are the basic economic problems that face society?
Evaluate the argument that the dollar's value should be allowed to find its "natural value." If this argument is true, then what are the impacts of keeping the dollar from finding its true value through intervention?
How real is the threat of a "dollar panic" if we choose not to defend the dollar? What would happen if the dollar were to suddenly fall in price?
Suppose that the inflation/depreciation cycle exists. How would it be possible to stop this cycle? What policies would be needed?
Is inflation the cause of the declining dollar, or does a falling dollar cause inflation? How can you tell which is which?
Looking at current economic problems and current economic policies, what choices do current policies make? Has a goal been given up? Have the goals changed?
Do other nations have the same economic goals that we do?How do Japan's economic goals compare to ours?
Suppose that we make a commitment to fight inflation at all costs. What are the best policies for accomplishing this? What impacts would these policies have on the remaining economic goals?
If both a strong dollar and a trade surplus are not attainable, which goal should be given up?What are the impacts on the economy of choosing one goal over another?
Are economic goals the only ones we need worry about?
Is it necessary to give up a goal?
What trade-offs must be made?
What tools are available in our quest for these goals?
What are the goals of economic policy?
Suppose that the West German government were to pursue expansionary fiscal policies. What impact would this have on the U.S. economy? What would happen if the Germans were to use monetary policy instead?How would the U.S. economy react in this case?
How realistic is the assumption that real interest rates are equalized among major nations by international credit movements?What factors might contribute to residual interest rate differences?
How would contractionary monetary and fiscal policies work if the Japanese central bank were to intervene whenever the dollar depreciated? Under what conditions would the Japanese bank have to act?
Compare and contrast the impacts of contractionary monetary and fiscal policies under flexible and fixed exchange rates. Do the different policies work as well for contractionary policy as for the expansionary policies discussed in the text?
Does it make any difference if other countries intervene into exchange markets?
What difference does the type of exchange rate system make?
Which is more effective, monetary or fiscal policies, when the international impacts are included?
How do international credit flows affect economic policy?
How would the action of l imited exchange intervention by national governments be viewed by the proponents of fixed and of flexible exchange rates.
Each side claims that speculators are destabi lizing under the alternate exchange rate system.What is the role of international exchange speculators in the market? Do their actions tend to promote or discourage stable exchange rates? Use supply and demand analysis to determine the answers to these
With which side do you agree in this debate? Can you find flaws in either side's arguments?Should exchange rates be flexible or fixed?
Suppose that the exchange rate between the United States and Great Britain is $2.00 = £1 .Now suppose that the United States has inflation of 10 percent while the British have 20 percent inflation. What will be the likely impact of this on the exchange rate? Explain.
Suppose that a country has a balance-of-payments surplus.What impact does this have on the exchange rate?
Suppose that, in the situation in Question 1, the United States imposes a tariff on the German cars. What impact will this action have on the exchange rate?
What will be the likely affect on the exchange rate between the United States and West Germany if there is a sudden increase in the demand for Por�che cars in the United States? What will tend to happen to the price of these cars? Why?
Can governments control the exchange rate?
What causes an exchange rate to change?
Why are foreign currencies supplied?
Why are foreign currencies demanded?
What impact does the existence of transportation costs have on the theory of comparative advantage?
Suppose that a tariff were imposed on imported shoes. Who would gain from this action?Who would lose? Is the gain worth the loss?
Suppose that a country had a continuing balance-of-trade deficit. What kinds of problems could this cause for the economy?
Suppose that a $1 0-per-car tariff were imposed on imported cars.Who would bear the burden of this additional tax-the consumer, the importer, or both? Explain.
Bill and Jill are two students who are considering trading services. If Bill works one hour, he can clean and gap four sparkplugs or he can type two pages of notes. If Jill works one hour, she can type three pages of notes or she can clean and gap eight sparkplugs. Use the theory of comparative
Should we be concerned if the United States has a deficit in the balance of payments or balance of trade?
What are the balance of payments and balance of trade?
Are tariffs good or bad?
Who bears the burden of tariffs and quotas?
What are tariffs and quotas?
What determines a nation's imports and exports?
Evaluate the "probabilities" argument in favor of FRS independence.
How would a monetarist view the impact of a monetary policy that always accommodates fis cal actions? Would this be desirable or detrimental to the economy?
Can you think of other government agencies which have an independence similar to that of the FRS?
Would you favor Friedman's rules policy for money supply growth if you subscribed to the traditional view of the economy? Why or why not?
How does the monetarist view of fiscal policy differ from the traditional Keynesian view?Where does the key difference lie?

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Introductory Economics 1st Edition Michael Veseth - Solutions

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