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Macroeconomics 8th Edition Glenn Hubbard, Anthony Patrick O Brien - Solutions
Use the information in the following table to calculate the percentage change in Ford’s auto sales from one year to the next. (These are the data that are graphed in Figure 1A.2.) During which year did sales fall at the highest rate?Data given in Graph 1A.2
What are the three economic questions that every society must answer? Briefly discuss the differences in the way centrally planned, market, and mixed economies answer these questions.
Discuss whether you agree with the following statement: “The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes mistakes.”
Assume that the demand curve for Pepsi passes through the following two points:a. Draw a graph with a linear demand curve that passes through these two points.b. Show on the graph the areas representing total revenue at each price. Give the value for total revenue at each price. Price per Bottle of
Briefly explain which of the following statements represent positive analysis and which represent normative analysis.a. A 50-cent-per-pack tax on cigarettes will lead to a 12 percent reduction in smoking by teenagers.b. The federal government should spend more on research to reduce opioid
Annie Lowery, a business reporter, wrote the book Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World, which advocates that the federal government adopt a universal basic income (UBI) under which every person in the country would receive a
An opinion columnist in the Washington Post argues that the Stop Bad Employers by Zeroing Out Subsidies Act is “virtually guaranteed to hurt the very low income working families its sponsors want to help.”a. What were the main provisions of this act?b. Why would the columnist argue that the act
The Apply the Concept feature explains that there are both positive and normative aspects to the debate over whether the federal government should enact tariffs on imports from China. What economic statistics would be most useful in evaluating the positive elements in this debate? Assuming that
Review the information in Figure 2.4. Choose a rate of trading cherries for apples different from the rate used in the text (15 pounds of cherries for 10 pounds of apples) that will allow you and your neighbor to benefit from trading. Prepare a table like Table 2.1 to illustrate your answer.Data
The U.S. Postal Service (USPS) charges Amazon about $2 to deliver a package. The USPS argues that its contract with Amazon allows it to reduce the loss it suffers on its overall operations. A business writer for the Washington Post observes, “Looked at from the standpoint of incremental revenue
Suppose you are building an economic model to forecast the number of people employed in U.S. manufacturing in 2026.Should your model take into account possible changes in economic policy enacted by the president and Congress? Briefly explain.
In a paper written by Bentley College economists Patricia M. Flynn and Michael A. Quinn, the authors state: We find evidence that Economics is a good choice of major for those aspiring to become a CEO [chief executive officer]. When adjusting for the size of the pool of graduates, those with
In an opinion column in the Wall Street Journal, economist Richard McKenzie of the University of California, Irvine wrote: “If countries import goods that can be made more cheaply abroad than at home, and produce goods that can be made more cheaply at home than abroad, then all trading nations
Suppose that France and Germany both produce cheese and wine. The following table shows combinations of the goods that each country can produce in a day.a. Which country has a comparative advantage in producing wine? Which country has a comparative advantage in producing cheese?b. Suppose that
Prior to 2019, Tesla operated only a single factory, located in Fremont, California. In 2019, the firm began constructing a second factory, located in Shanghai, China. According to an article in the Wall Street Journal, initially the plant will produce only Model 3 cars.a. Draw a production
Identify whether each of the following transactions will take place in the factor market or in the product market and whether households or firms are supplying the good or service or demanding the good or service.a. Tariq buys a Tesla Model 3.b. Tesla increases employment at its Fremont plant.c.
Imagine that the next time the Green Bay Packers play the Chicago Bears at Lambeau Field in Green Bay, Wisconsin, Packers star quarterback Aaron Rodgers has a temporary lack of judgment and plans to sell Packers memorabilia during the game because he realizes that he can sell five times more
An editorial in the New York Times discussed whether the federal government should enact regulations that would force firms to accept lower prices when selling pharmaceuticals and medical devices. The editorial notes that European countries that have such regulations “accept a trade-off, inherent
A news article described a new prescription drug that costs up to “$94,000 for one 12-week treatment regimen” to treat hepatitis C, which is a liver disease that afflicts as many as 3 million people in the United States. It can result in severe liver damage and even death. Hepatitis C is
According to an article in the Economist magazine, “In all rich countries, property rights are secure. . . . Legally recognising land ownership has boosted farmers’ income and productivity in Latin America and Asia. . . . More than two thirds of Africa’s land is still under customary tenure,
In discussing dividing up household chores, Emily Oster, an economist at Brown University, advised, “No, you shouldn’t always unload the dishwasher because you’re better at it.” If you are better at unloading the dishwasher, why shouldn’t you be the one to unload it?
The chapter mentions that in 1965, married women and men combined spent significantly more time on housework than they did in 2018. Does the decrease in the total number of hours of housework during that period mean that families are willing to live in messier homes today than they were in 1965?
A Gallup public opinion poll indicates that among people aged 18 to 29, more have a favorable view of socialism than of capitalism. A columnist in the Wall Street Journal comments, “Would these people actually know socialism if they saw it? Taxing the rich, Medicare-for-All, and a Green New Deal
The city government of Washington, DC, has passed a regulation that requires most childcare workers to hold at least an associate’s degree. Suppose that this regulation increases the quality of childcare and causes the demand for childcare services to increase. At the same time, assume that
The following graphs show the demand and supply curves for two markets. One of the markets is for electric automobiles, and the other is for a cancer-fighting drug, without which lung cancer patients will die. Briefly explain which graph most likely represents each market.
Suppose the demand for athletic shoes increases rapidly during 2020. At the same time, six more firms begin producing athletic shoes. A student remarks that, because of these events, we can’t know for certain whether the price of athletic shoes will rise or fall. Briefly explain whether you
According to a personal technology column in the Wall Street Journal, as smartphones have increased in size, several firms, including PopSockets, have begun making grips that make it less likely that you will drop your phone: “There are two parts: an adhesive base that sticks to my phone, and the
According to an article in the Wall Street Journal in early 2019, the price of oil produced in the United States had increased by 25 percent since the beginning of the year. At the same time, U.S. oil production was at a record high.a. Are these two facts consistent with a movement along the supply
Briefly explain whether each of the following statements describes a change in supply or a change in quantity supplied.a. To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to increase output.b. The success of Nike and Adidas athletic shoes
According to a news article, “The health benefits of coconut oil have been challenged by the American Heart Association and other organizations in recent years and that has hurt demand.” The article also noted that more plantations growing coconuts had “sprung up in the [Philippines] and
The late Nobel Laureate Gary Becker once described how an economist should analyze the demand for butter: An economist “would want to consider the price of butter and probably the level of income, the price of margarine, and the size of the population as well. But [the economist] would neglect
For each of the following pairs of products, briefly explain which pairs are complements, which are substitutes, and which are unrelated.a. New cars and used carsb. Houses and washing machinesc. UGG boots and Skechers lace-up sneakersd. Skechers lace-up sneakers and Diet Coke
Pine trees can take about 30 years to grow. A number of family farmers in southern states like Mississippi converted their land from growing other crops to growing pine trees. One farmer was quoted as saying, “We thought the future was pine trees.” In 2018, demand for housing resulted in strong
According to a news article: About 1.4 billion pounds of American, cheddar and other kinds of cheese is socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago. . . . Many [cheese companies] are paying to store their excess
According to an article in the Wall Street Journal, both the quantity of organic milk sold and the price per half gallon have been falling. For each of the following scenarios, briefly explain whether the scenario can account for this outcome.a. The demand for organic milk has been decreasing,
A student was asked to draw a demand and supply graph to illustrate the effect on the market for premium bottled water of a fall in the price of electrolytes used in some brands of premium bottled water, holding everything else constant. She drew the following graph and explained it as follows:
According to an article in the Wall Street Journal, between 1998 and 2018, the number of nonstop coast-to-coast flights in the United States more than doubled at the same time that the price of a ticket declined. For each of the following scenarios, briefly explain whether the scenario can account
The following four graphs represent four market scenarios, each of which would cause either a movement along the supply curve for premium bottled water or a shift of the supply curve. Match each scenario with the appropriate graph.a. A decrease in the supply of sports drinksb. A drop in the average
From 1979 to 2015, China had a policy that allowed couples to have only one child. (Since 2016, couples have been allowed to have two children.) The one-child policy caused a change in the demographics of China. Between 1980 and 2017, the share of the population aged 14 and under decreased from 36
An article in the Wall Street Journal on the market for traditional canned tuna stated the following two facts:i. Firms selling traditional canned tuna are struggling to connect with millennial and generation Z consumers, “who favor fresher, less-processed options” in the food they eat.ii.
An article on All birds athletic shoes, which are made with merino wool uppers, made the following three points:a. The shoes “are a favorite of striving venture capitalists and celebrities.”b. The shoes “are a staple in the offices of seemingly every technology startup.”c. It quoted one of
Why do some consumers tend to favor price ceilings while others tend to oppose them?
On a shopping trip, Sofia decided to buy a light blue coat that had a price tag of $79.95. When she brought the coat to the store’s sales clerk, Sofia was told that the coat was on sale, and she would pay 20 percent less than the price on the tag. After the discount was applied, Sofia paid
Economist Tim Harford wrote in a column for the Financial Times that “new digital goods have a huge and unmeasured benefit to consumers—‘consumer surplus.’” Briefly explain what he meant. Can’t we measure the product’s benefit to consumers by just looking at the product’s price?
The following graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the questions.a. Which areas in the graph represent the excess burden (deadweight loss) of the tax?b. Which areas represent the revenues collected by the government from the tax?c. Would economists
According to an article in the Wall Street Journal, restaurants such as McDonald’s and Wendy’s have the goal of using in their hamburgers only meat from cattle that were raised without being fed antibiotics. Using this method of raising cattle increases their cost. Suppose that consumers react
Erik Brynjolfsson and Avinash Gannamaneni of MIT and Felix Eggers of the University of Groningen estimated that the average U.S. consumer over the age of 16 would pay $1,173 per year rather than do without Netflix. Netflix had about 59 million subscribers in the United States and charged an average
Ekaterina Jardim, Jacob Vigdor, and colleagues at the University of Washington concluded that when Seattle raised its minimum wage, the effect was to lower “the amount paid to workers in low-wage jobs by an average of $74 per month per job in 2016.”a. Shouldn’t an increase in the minimum wage
Cities like San Francisco and New York that require a driver to buy a city-issued taxi medallion before the driver can legally operate a taxi are shifting the supply curve for taxis to the left relative to where it would be without the requirement for a medallion.a. Briefly explain why the supply
Use the information on the market for apartments in Bay City in the table to answer the following questions.a. In the absence of rent control, what is the equilibrium rent, and what is the equilibrium quantity of apartments rented? Draw a demand and supply graph of the market for apartments to
The city of Philadelphia imposes a 10 percent tax on sales of liquor in the city. According to the city’s website, the liquor tax “is technically paid by retail customers at the point of sale. However, the seller is responsible for filing and paying the tax on a monthly basis.”a. What does
Amazon has been a pioneer in developing cashierless technology in retail stores. In Amazon Go supermarkets, sensors detect which products shoppers have put in their baskets and charge the shoppers’ credit cards as they leave the store. Eliminating checkout lines significantly reduces the cost of
In late 2018, malnutrition was widespread in Venezuela. Writing in an opinion column in the New York Times, Javier Corrales argued, “The government is making the crisis worse by . . . imposing more price controls.” Shouldn’t price controls help reduce malnutrition by lowering the price of
According to a news story, in early 2019, sales of beef and pork in Venezuela had declined by 60 percent since 2012, and sales of chicken had declined by 74 percent. The government had imposed price ceilings on beef, pork, and chicken. With prices kept low by price controls, shouldn’t consumers
Why do many economists prefer market-based policies to the command-and-control approach to pollution?
What is the tragedy of the commons? Give two examples. How can the tragedy of the commons be avoided?
Many antibiotics are no longer effective in eliminating infections because bacteria have evolved to become resistant to them. The more often an antibiotic is prescribed, the more quickly it becomes ineffective in curing bacterial infections. Some bacteria are now resistant to all but one or two
In the African country of Zimbabwe, farmers often live close to elephant herds in the Hwange National Park. The elephants can damage crops and sometimes cause injuries to people. According to Catherine Semcer of the Property and Environment Research Center, in 2014: the U.S. government used its
Under the Clean Air Act, the Environmental Protection Agency (EPA) regulates ozone emissions. Mark Perry, an economist at the University of Michigan–Flint, notes in an opinion column: “Ground-level ozone, a major component of smog, causes premature deaths among people with lung and respiratory
Look again at Solved Problem 5.3. Use the graph in the answer to part (b) to draw a new graph to illustrate the answer to part (c). Make sure that your graph shows (i) the $2.75-per-ride tax, (ii) the optimal tax, and (iii) the demand curve for rides after the state government imposes the
Some people who become vaccinated still contract the disease they were vaccinated against. But if most people get vaccinated against a disease, such as measles, then the population achieves “herd immunity,” which means that there are so few cases of the disease that even people for whom
Commuter trains often have “quiet cars” in which passengers are expected not to play music or engage in loud conversations. An opinion poll that asked whether airline passengers reclined their seats found that “half of respondents recline half the time or more, half of respondents do it once
According to a Wall Street Journal article on power company NextEra and its CEO Jim Robo, “When Mr. Robo took over in 2002, the wind industry was small and mostly unprofitable. Wind represented 0.3% of electricity generated, according to federal statistics.” In 2018, wind turbines generated
William Easterly, in The White Man’s Burden, shared the following account by Princeton University Professor Leonard Wantchekon of how Professor Wantchekon’s village in Benin, Africa, managed the local fishing pond when he was growing up: To open the fishing season, elders performed ritual tests
A columnist for the Wall Street Journal wrote, “The premise behind the Green New Deal is right.” But he also wrote that “the Green New Deal seems engineered to be as expensive as possible” and argued that climate change policy should focus on “market mechanisms that incentivize carbon
An editorial in the New York Times argued that “the single best way to slow global warming is to put a price on greenhouse gas emissions from fossil fuels.”a. How would it be possible to put a price on greenhouse gas emissions? Don’t utilities and other firms that emit greenhouse gases
According to an article on cnn. com, “the fight to enact a carbon tax has secured a high profile and somewhat surprising financial backer: ExxonMobil.” Why might an oil company like ExxonMobil support a carbon tax rather than other means of dealing with climate change, such as those proposed by
NextEra Energy has been helped in its expansion by the fact that prices of renewable energy equipment, such as wind turbines and silicon solar modules that are used in generating electricity from solar power, have been falling since 2010.a. Draw a graph showing the market for coal used in
According to an article in the Wall Street Journal, “Lululemon Athletica Inc. became a multibillion-dollar brand by convincing women to pay $100 for yoga pants. Though the market is now flooded with cheaper alternatives, the apparel maker’s new CEO says it has no plans to lower its prices.”a.
According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demand for cigarettes is -0.25. Americans purchase about 360 billion cigarettes each year.a. If the federal tax on cigarettes were increased enough to cause a 50 percent increase in the price of
According to an article in the Wall Street Journal in September 2018, “Apple’s iPhone unit sales for the nine-month period ended in June were largely flat with the same period the year before at a bit less than 170 million devices, yet iPhone revenue jumped 15% in that time, to $129.5
An article in the Wall Street Journal in 2019 noted that oil prices had increased to a 3-month high following an agreement by Russia and the members of OPEC to reduce their oil production by a combined 1.2 million barrels per day. World oil production is over 100 million barrels per day. How could
A study of consumers in Chile found that the cross-price elasticity of demand between soda and milk was 0.25, while the cross-price elasticity of demand between soda and candy and other sweet snacks was 0.a. What does the information tell us about the relationship in Chile between soda and milk?
Consider the information given in the following table on four consumers in the market for premium bottled water.a. If the price of a bottle of premium bottled water is $1.50, what is the total consumer surplus received by these consumers? Illustrate your answer with a graph.b. Suppose the price of
According to a news story about the bus system in the Lehigh Valley in Pennsylvania, “Ridership fell 14 percent . . . after a 33 percent increase” in bus fares. Based on this information, is the demand for bus trips price elastic or price inelastic? Explain your answer in terms of the five
According to an article on espn.com, when the Atlanta Falcons football team moved into a new stadium, the team changed its strategy of pricing concessions: “The Falcons lowered prices on food and beverage by 50 percent and fans spent 16 percent more.” Does this information indicate that the
A study of the consumption of beverages in Chile found that for soda “a price increase of 10% is associated with a reduction in consumption of 13.7%.” Given this information, calculate the price elasticity of demand for soda in Chile. Is demand price elastic or price inelastic? Briefly explain.
Use the midpoint formula for calculating elasticity to calculate the price elasticity of supply between point A and point B for each panel of Figure 6.6.Data given in Figure 6.6 Price (dollars per hour) $4.00 2.00 0 2. causes a large increase in price. A Supply Inelastic B 1. With inelastic supply,
An article in the Wall Street Journal used the headline “Procter & Gamble, in a Strategy Shift, Moves to Raise Prices” and the sub-headline “Company would seek to push through large price increases on Pampers diapers and Bounty paper towels.”a. The article notes that Pampers and Bounty are
The head of the United Kumquat Growers Association makes the following statement: The federal government is considering implementing a price floor in the market for kumquats. The government will not be able to buy any surplus kumquats produced at the price floor or to pay us any other subsidy.
A majority of the world’s chocolate is made from cocoa beans grown in the African countries of Ghana and Ivory Coast. It can take two to four years for new trees to produce the pods in which the beans are grown. An article on bloomberg.com in early 2019 noted that world demand for chocolate was
In 2019, the Metropolitann Transportation Authority (MTA) in New York City raised the price of a monthly subway pass from $121 to $127. According to an article in the New York Times, “Transit leaders say they need billions of dollars to tackle huge budget deficits and to pay for critical
The elasticities reported in this Apply the Concept were calculated using price data for many brands of beer. Why might price elasticity estimates be less reliable if they use data for only one brand of beer?
According to an article in the Economist, when Chicago enacted a 1-cent-per-ounce tax on soda, “it was introduced to protect public health but its main purpose was to plug a $1.8bn hole in the [city’s] budget.”a. Did policymakers in Chicago believe that the demand for soda was price elastic
In 2018, Amazon raised the annual price to subscribe to its Amazon Prime service from $99 to $119. An article on a business website commented that “Amazon likely sees many ways to spend $2 billion in incremental revenue. (That’s the additional $20 multiplied by 100 million Prime customers.).”
In 2019, after Netflix increased the price of its most popular streaming plan from $10.99 per month to $12.99 per month, competing service Hulu cut the price of its basic plan from $7.99 per month to $5.99 per month. What was Hulu assuming about the price elasticity of demand for its basic plan?
When Amazon purchased the Whole Foods grocery chain in 2017, it cut prices. But two years later, Amazon changed its strategy and began to raise prices.a. In 2017, what did Amazon likely believe was true about the price elasticity of demand for groceries purchased at Whole Foods? Why might Amazon
Why do some economists and policymakers believe that the federal government should increase its role in the U.S. health care system? Why do some economists and policymakers believe that the U.S. health care system should rely more on market mechanisms than the ACA does?
If the federal government paid for all medical care, as in the “Medicare for All” proposal, would the wages you receive from your employer likely rise or fall? Briefly explain.
Figure 7.7 shows that the Congressional Budget Office forecasts that less than half of the future increase in spending on Medicare and Medicaid as a percentage of GDP will be due to the aging of the population. What factors explain most of the increase?Data given in Figure 7.7 Federal spending as a
An article in the Economist noted that the National Health Service (NHS) in the United Kingdom is “free at the point of delivery.”a. What does “free at the point of delivery” mean? Is health care actually free to residents of the United Kingdom? Briefly explain.b. The same article suggested
An article in the Wall Street Journal refers to “the basic principle of insurance—pooling risk in order to minimize liability from unforeseen dangers.” In what sense does insurance involve pooling risks? How does the problem of adverse selection affect the ability of insurance to provide the
Eric Topol, a cardiologist, has written about the potential for using artificial intelligence (AI) in health care. He argues that in the future, many patients will have the option to receive treatment in their own bedrooms, where they can be monitored by AI rather than be admitted to hospitals.
Gary Shapiro is the head of the Consumer Technology Association. In an opinion column in the Wall Street Journal, he argues that once people begin wearing micro-electrical-mechanical systems (MEMSs), the costs of providing health care will fall: “Without asking a single question, your doctor
An article in the New York Times observes, “At the heart of the ‘Medicare for all’ proposals championed by Senator Bernie Sanders and many Democrats is a revolutionary idea: Abolish private health insurance.” What potential benefits do supporters of “Medicare for All” expect from
Some firms offer their employees health care plans with high deductibles, sometimes as much as $4,500 per year. What effect do high-deductible plans have on how often employees visit doctors or otherwise use health care services? If the federal government were to require that employer health care
Were the shares of stock issued as a result of Lyft’s initial public offering (IPO) sold in a primary market or a secondary market? Was the IPO an example of direct finance or indirect finance?
What is corporate governance? In whose interest should corporations be governed? Briefly explain.
Before the 2019 National Football League season, the San Francisco 49ers football team signed linebacker Kwon Alexander to a contract that would pay him an immediate $1 million signing bonus and the following amounts: $11.0 million for the 2019 season, $13.1 million for the 2020 season, $14.4
Evaluate the following argument:I would like to invest in the stock market, but I think that buying shares of stock in a corporation is too risky. Suppose I buy $10,000 of Lyft stock, and the company ends up going bankrupt. Because as a stockholder I’m part owner of the company, I might be
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