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macroeconomics principles
Macroeconomics In Context 4th Edition Neva Goodwin, Jonathan M. Harris, Julie A. Nelson, Pratistha Joshi Rajkarnikar, Brian Roach, Mariano Torras - Solutions
1. 21. What is a tariff, and have tariffs been increasing or decreasing in recent years?
1. 20. What is the infant industry argument for trade protectionism?
1.19. What is import substitution?
1. 18. List and describe four types of protectionist policies.
1. 17. What is "trade protectionism," and why do countries oen engage in it?
1. 16. What are some of the countries that are most active in international trade, as a percentage of GDP?
1. 15. What is globalization?
1.14. What do we mean when we say that trade is more a story of redistribution than a story of efficiency gains?
1. 13. What is “exporting pollution”?
1.12. What are some of the relationships between trade and the environment?
1. 11. What is “lo-in,” and why is it a potential problem?
1. 10. Why does a country’s vulnerability increase with expanded trade?
1. 9. What are some other advantages of free trade?
1. 8. What is the theory of “factor price equalization”? Does the evidence tend to support it?
1. 7. What does it mean to say that a particular country is suited for labor-intensive production? What is capital-intensive production?
1.6. How do we determine whi country has the comparative advantage in the production of something in the Ricardian model of trade?
1.5. What is meant by the “principle of comparative advantage”?
1. 4. How do we determine the opportunity cost of producing something in the Ricardian model of trade?
1. 3. What is an absolute advantage in the production of something?
1. 2. Explain how more extensive markets tend to produce a higher degree of specialization.
1.1. How does specialization lead to greater productivity, according to Adam Smith?
1. 2. Debates between advocates of “free trade” and advocates of “protectionism” have gone on for hundreds of years. How aware are you of current debates, whi are now oen framed in terms of pro- and anti-“globalization”? Do you have more sympathy for one side than for the other?
1.1. What international trade issues have been in the news recently? What views are presented by different interest groups in trade debates? Are there any issues that particularly affect your community?
1. 2. What do you suppose Smith or Ricardo would have had to say about the disadvantages of free trade discussed in this apter? Do you agree with them? Why or why not?
1.1. Do you think it is beer to buy products made in your own country? If so, why? Can you think of situations where it is beer to buy foreign products?
1. 2. Can the policy lead to actions that may violate social norms related to issues su as ild labor, unionization rights, or environmental standards?
1.1. Are the net efficiency gains small compared to the magnitude of the losses, especially if those losses impact low-income or other disadvantaged groups?
1. 2. Ricardo’s model discusses benefits to countries at an aggregate level. But what if you were a Portuguese cloth maker or an English winemaker? Might you have a different view about the benefits of trade? Whi factors might influence what you think about your country’s trade policies?
1.1. Suppose that in a one-hour period, you can buy six bags of groceries or clean three rooms. Your housemate, however, is slower moving and can buy only three bags of groceries or clean only one room in an hour. You clearly have an absolute advantage in production of both these services. Does
1. 2. Do you currently “specialize” in something? If not, what do you plan to do aer college? Do you hope to develop knowledge or expertise in only one area or more than one? Why?
1.1. Does it make sense that the larger or more extended a market is, the greater would be the incentive to specialize in supplying that market? What if everyone decided to specialize in shoemaking because the shoe market went global? What would Adam Smith say?
1. 7. Mat ea concept in Column A with an example in Column B.Column A Column Ba. Consumer surplus 1. Profitsb. e government mandates that the price of milk must be at least $3 per gallon 2. A price ceilingc. Marginal anged. Producer surplus 3. An increase in demand of one unit 4. A loss
1. 6. Consider the market for electricity. Suppose that the price of producing energy decreases due to lower fossil fuel costs and the increasing availability of affordable renewable energy.a. How does the decrease in electricity production costs affect total net social welfare? Useb. graph to
1. 5. Consider the market for wheat. Suppose that the demand for wheat decreases because of dietary concerns.a. How does the decrease in the demand for wheat affect total net social welfare in the wheat market? Use a graph to support your answer, and indicate the area that represents theange in
1. 4. Suppose that the market equilibrium price for a basic medical e-up is $50, in a market in whithere is no health insurance. To encourage more people to get a e-up, the local government mandates that the price of a e-up cannot be more than $40.a. Is this a price floor or a
1. 3. Consider the following supply sedule for apartments in a local market.Rent (per month)antity of apartments supplied$800 100$700 80$600 60$500 40$400 20$300 0a. Draw the supply curve for apartments. Be sure to label the axes.b. Suppose the going rental price for apartments is $550 per
1. 2. Suppose the maximum willingness to pay for a new iPhone by different consumers in a market is given in the table below.Consumer Consumer Maximum Willingness to Pay Maximum Willingness to Pay#1#2#3#4#5#6#7#8$550$530$490$440$420$370$350$310a. If the price of iPhones is $420, how many iPhones
1.1. Consider the following demand sedule for umbrellas at a local store:Priceantity demanded per day$20 0$18 5$16 10$14 15$12 20$10 25a. Draw the demand curve for umbrellas. Be sure to label the axes.b. Suppose the price of umbrellas is $14. Indicate the area of market consumer surplus in
1. 23. What is market failure?
1. 22. What is the laissez-faire approa to government regulation?
1. 21. How does a price floor affect consumer and producer surplus?
1.20. What limits the quantity sold with a price floor: supply or demand?
1. 19. What is a price floor? How can it be represented in a supply-and-demand graph?
1. 18. What is a deadweight loss? How is it represented in a supply-and-demand graph?
1. 17. How does a price ceiling affect consumer and producer surplus?
1. 16. What limits the quantity sold with a price ceiling: supply or demand?
1.15. What is a price ceiling? How can it be represented in a supply-and-demand graph?
1. 14. Why is a market equilibrium socially efficient?
1. 13. What is social efficiency? What are some limitations of this concept?
1. 12. How is market producer surplus represented in a supply-and-demand graph?
1.11. How is producer surplus for an individual transaction represented in a supply-and-demand graph?
1. 10. What does ea point on a supply curve represent?
1.9. What is another name for a supply curve, in reference to welfare analysis?
1. 8. Define producer surplus.
1. 7. How is market consumer surplus represented in a supply-and-demand graph?
1. 6. How is consumer surplus for an individual consumer represented in a supply-and-demand graph?
1. 5. What does ea point on a demand curve represent?
1. 4. What is another name for a demand curve, in reference to welfare analysis?
1. 3. What is a marginal ange?
1. 2. Define consumer surplus.
1.1. What is the difference between social welfare and well-being?
1. 2. Considering everything that we have covered so far in the book, have you anged your mind about any policy issues in your country? What lessons from the book do you find particularly relevant to current policy debates?
1.1. Do you think that the current level of government regulation is too high or too low? Do you generally support a laissez-faire approa to regulation, or more extensive regulation? Does your answer ange depending on the policy issue under consideration?
1.2. Do you think that social efficiency is an appropriate tool for analyzing the net impact of different policies? Can you think of some policy situations in whi social efficiency is a sufficient measure for determining whi policies should be enacted? Can you think of other policy situations
1.1. ink of another real-world example of a price floor or a price ceiling, not discussed in the text. Based on what you read in this section, as well as your own views, do you think that price regulation is a“good” policy?
1. 2. Have you ever operated a business, even a small one, su as a lemonade stand, when you were younger? If so, what factors motivated you to start a business? Do you think that your profits(producer surplus) overstated or understated your benefits? Does your answer have any implications for
1.1. Do you think that the concept of producer surplus accurately represents the benefits that producers obtain from selling goods and services? Do you have any reservations about the concept?
1. 2. Do you think that the concept of consumer surplus is an effective tool for converting “psyic”benefits to a monetary value? Do you have any reservations about the concept?
1.1. ink about a good or service that you have purased recently. Try to estimate the maximum amount that you would have been willing to pay for it. What factors influenced your WTP decision?How do you think your willingness to pay might differ from that of other consumers?
1. 2. ink of a government policy that is currently being debated in the news. Describe how you would evaluate the costs and benefits of this policy differently if you were concerned primarily about social welfare or social well-being.
1.1. Do you believe, in principle, that the costs and benefits of various policies can be quantified in monetary terms? Do you believe that some impacts cannot be fundamentally measured in dollars?How would you suggest that we evaluate these impacts?
1. 9. Mat ea concept in Column A with the corresponding fact or example in Column B.Column A Column Ba. Price-inelastic demand 1. Income elasticity of 1.4 Column A Column Bb. Inferior goodc. Income effect of a priceanged. Perfectly price-elastic supplye. Unit price elasticity of demand 2.
1. 8. Look at the estimated price elasticities of demand for cigarees in Table 4.3. If the government of a high-income country raises taxes on cigarees, the price to consumers goes up. e extra revenue collected from the higher price goes to the government. Describe in a few sentences the
1. 7. Many environmentalists think that an increase in the price of petroleum products to consumers would be a good thing. Many policymakers believe that an increase in the price of higher education (say, through increased tuitions), however, would be a bad thing. Discuss why these beliefs might be
1. 6. Clark Marketing Services has found, through market tests, that the demand for Sonya’s Peanuts has a price elasticity of demand of 0.5 and an income elasticity of 1.8. You, an economist employed by Sonya’s Peanuts, have been asked by the executives of the company to explain what this means
1. 5. Use the formulas for elasticity to answer the following questions.a. When Mariba’s income rises by 10 percent, her expenditures on carrots rise 12 percent.What is Mariba’s income elasticity of demand for carrots? Are carrots, for her, a normal or an inferior good?b. Suppose that the price
1. 4. Braeburn Publishing decides to try to cut its costs of printing books by cuing the price that it offers to companies that supply it with paper.a. Suppose that the supply is perfectly price inelastic (at least in the short run), because Braeburn buys the entire output of the Morales Paper
1. 3. Calculate the percentage ange in revenue that would result from ea of the actions in question 2 above. Assume that the initial price in all cases is $100 per unit, and the initial quantity demanded is 1,000 units.
1.2. Calculate the price elasticity of demand for the following cases:a. When price rises by 5 percent, quantity demanded drops by 10 percent.b. When price rises by 10 percent, quantity demanded drops by 2 percent.c. When price rises by 0.05 percent, quantity demanded drops by 99 percent. (Whi
1.1. For ea of the following items, discuss whether you think the demand that the seller faces will be price inelastic or price elastic, and explain why.a. A new song by an extremely popular recording artistb. One share of sto, when there are millions of shares for that company outstandingc.
1.17. Explain why the long-run elasticity of demand for a good may differ from the short-run elasticity.
1. 16. Explain how a price ange has both “income effects” and “substitution effects” on buyer behavior.
1. 15. Can you illustrate the income elasticity of demand using a single demand curve? Why or why not?
1. 14. Give one example of a normal good and one example of an inferior good.
1. 13. What is the income elasticity of demand?
1. 12. What is the equation for calculating the price elasticity of supply?
1. 11. Sket, on a single graph, a relatively price-elastic supply curve and a relatively price-inelastic supply curve. (Make sure that they go through the same point.)
1. 10. What are examples of goods that are price elastic? What are some examples of price-inelastic goods?
1. 9. Describe quantity and revenue responses to price anges when the price elasticity of demand takes on the following values: (a) 0, (b) between 0 and –1, (c) –1, (d) more elastic than –1.
1. 8. How can we represent revenues on a graph?
1. 7. What is the relationship between price elasticity of demand and how a firm’s revenues ange as itanges its prices?
1. 6. Is elasticity the same thing as the slope of a curve?
1. 5. How does elasticity ange along a linear demand curve?
1. 4. What does a perfectly inelastic demand curve look like? What does a perfectly elastic demand curve look like?
1. 3. What is the “tenical definition” of a price-elastic demand? What is the tenical definition of a price-inelastic demand?
1. 2. What is the formula for the price elasticity of demand?
1.1. List three reasons why the demand for a good or service may be elastic. List three reasons why the demand for a good may be inelastic.
1. 2. Suppose that new tenological breakthroughs make solar water heaters extremely eap to purase and operate, compared with water heaters that use fossil fuels. Illustrate on a graph what you might expect the short-run and long-run demand adjustments to this price drop to be. What sorts
1.1. Maria rents on a month-to-month basis an apartment that she can barely afford, in a market where apartments are hard to find. Her landlord announces that she is doubling the rent, effective immediately. What is likely to be Maria’s short-run response (say, over the next few days or
1. 2. Suppose that the prices of all goods and services available to a particular consumer go up by 20 percent, at the same time, while the consumer’s income (or budget) remains unanged. What is the effect on the buyer’s purase of normal goods? Of inferior goods? Is there a substitution
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