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macroeconomics principles
Macroeconomics Private And Public Choice 13th Edition James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson - Solutions
Suppose that Abel builds a factory next to Baker’s farm, and air pollution from the factory harms Baker’s crops. Is Baker’s property right to the land being violated? Is an externality present? What if the pollution invades Baker’s home and harms her health? Are her property rights
What are the necessary conditions for economic efficiency? In what four situations might a market fail to achieve ideal economic efficiency?
“Elementary education is obviously a public good. After all, it is provided by the government.”Evaluate this statement.
If sellers of toasters were able to organize themselves, reduce their output, and raise their prices, how would economic efficiency be affected?Explain.
“If it’s worth doing, it’s worth doing to the best of your ability.” What is the economic explanation for why this statement is frequently said but rarely followed in practice? Explain.
English philosopher John Locke argued that the protection of each individual’s person and property (acquired without the use of violence, theft, or fraud) was the primary function of government.Why is this protection important to the efficient operation of an economy?
In response to the terrorist attacks of September 11, 2001, airline security screening has increased dramatically. As a result, travelers must now spend considerably more time being screened before flights. Would it make economic sense to devote enough resources to completely prevent any such
During the summer of 2001, the combination of city and state taxes on cigarettes sold in New York City rose from $1.19 to more than $3.00 per pack.How will this tax increase affect (a) the quantity of cigarettes sold in New York City, (b) the revenue derived by the city and state from the tax,(c)
Should policy makers seek to set the tax on an economic activity at a rate that will maximize the revenue derived from the tax? Why or why not?Explain.*
“We should impose a 20 percent luxury tax on expensive automobiles (those with a sales price of $50,000 or more) in order to collect more tax revenue from the wealthy.” Will the burden of the proposed tax fall primarily on the wealthy? Why or why not?*
Suppose Congress were to pass legislation requiring that businesses employing workers with three or more children pay these employees at least$15 per hour. How would this legislation affect the employment level of low-skilled workers with three or more children? Do you think some workers with large
Currently, the Social Security payroll tax is legally imposed equally on workers and employers:7.65 percent for employees and 7.65 percent for employers. Show this graphically, being careful to distinguish between the total cost to the employer of hiring a worker, the employee’s gross wage, and
The demand and supply schedules for a hypothetical labor market are given in the accompanying table.a. Find the equilibrium wage and number of workers hired.b. Suppose that a new law is passed requiring employers to pay an unemployment insurance tax of $1.50 per hour for every employee. What
What is the nature of the deadweight loss accompanying taxes? Why is it often referred to as an“excess burden”?
What conditions must be met for buyers to bear the full burden of a tax? What conditions would cause sellers to bear the full burden? Explain.*
What is meant by the incidence of a tax? Explain why the statutory and actual incidence of a tax can be different.
How do you think the markets for organ donation and child adoption would be affected if they were made fully legal with a well-functioning price mechanism? What would be the advantages and disadvantages relative to the current system?
What is a black market? What are some of the main differences in how black markets operate relative to legal markets?
Analyze the impact of an increase in the minimum wage from the current level to $10 per hour. How would the following be affected?a. employment of people previously earning less than $10 per hourb. the unemployment rate of teenagersc. the availability of on-the-job training for lowskilled workersd.
Congress recently passed a new program that will subsidize the purchase of prescription drugs by the elderly. What impact will this program have on the demand for and price of prescription drugs? How will people who are not elderly be affected by this program? Explain.*
To be meaningful, a price ceiling must be below the market price. Conversely, a meaningful price floor must be above the market price. What impact will a meaningful price ceiling have on the quantity exchanged? What impact will a meaningful price floor have on the quantity exchanged? Explain.
What is the difference between a price ceiling and a price floor? What will happen if a price ceiling is imposed below the market equilibrium? If a price ceiling for a good is set below the market equilibrium, what will happen to the quality and future availability of the good? Explain.*
Suppose that college students in your town persuaded the town council to enact a law setting the maximum price for rental housing at $400 per month. Will this help or hurt college students who rent housing? In your answer, address how this price ceiling will affect(a) the quality of rental housing;
If General Motors (GM) is earning losses, should the government step in to keep them in business with a taxpayer subsidy? What does the presence of losses say about how consumers value the company’s output relative to its cost of production?Be sure to address the effects of the policy on GM’s
How do higher gasoline prices affect each of the following? Explain your answers.a. the incentive to invest in developing alternative fuels (such as coal liquefaction or solar energy)b. use of mass transit and carpoolingc. the development of hybrid cars
Do business firms operating in competitive markets have a strong incentive to serve the interest of consumers? Are they motivated by a strong desire to help consumers? Are “good intentions” necessary if individuals are going to engage in actions that are helpful to others? Discuss.
What’s wrong with this way of thinking?“Economists argue that lower prices will result in fewer units being supplied. However, there are exceptions to this rule. For example, in 1972, a very simple ten-digit electronic calculator sold for $120.By 2000, the price of the same type of calculator
Recent tax reforms make college tuition partially tax deductible for certain families. This should motivate more people to attend college. How will this higher demand for a college education affect tuition prices?How will it affect the cost of college for families who don’t qualify for the tax
Define consumer and producer surplus. What is meant by economic efficiency, and how does it relate to consumer and producer surplus?
Are prices an accurate measure of a good’s total value? Are prices an accurate measure of a good’s marginal value? What’s the difference? Can you think of a good that has high total value but low marginal value? Use this concept to explain why professional wrestlers earn more than nurses,
The following tables show the production possibilities for two hypothetical countries, Italia and Nire. Which country has the comparative advantage in producing butter?Which country has the comparative advantage in producing guns? What would be a mutually agreeable rate of exchange between the
This question pertains to the addendum to Chapter
During the last three decades, entrepreneurs like Michael Dell, Sam Walton, and Ted Turner have earned billions of dollars. Do you think the average American is better or worse off as the result of the economic activities of these individuals? Explain your response.*
In this chapter, it was stated that a private-property right also involves having the right to transfer or exchange what you own with others. However, selling your organs is a violation of federal law, a felony punishable by up to five years in prison or a$50,000 fine. In 1999, eBay intervened when
Consider the following questions:a. Do you think that your work effort is influenced by whether there is a close link between personal output and personal compensation (reward)?Explain.b. Suppose the grades in your class were going to be determined by a random drawing at the end of the course. How
Consider the choices of two groups of women ages thirty to fifty. All the women in one group have a college education. All the women in the other group have less than a high school education. Which of the two groups will participate more in the workforce?Which of the two groups will bear a larger
In many states, ticket scalping, or reselling tickets to entertainment events at prices above the original purchase price, is prohibited. Who is helped and who is hurt by such prohibitions? How can owners who want to sell their tickets get around the prohibition? Do you think it would be a good
What are the major sources of gains from trade?Why is exchange important to a nation’s prosperity?How does trade influence the quantity of output that trading partners are able to produce? In a market economy, will there be a tendency for both resources and products to be supplied by low-cost
Does a 60-year-old tree farmer have an incentive to plant and care for Douglas fir trees that will not reach optimal cutting size for another fifty years?*
If you have a private-ownership right to something, what does this mean? Does private ownership give you the right to do anything you want with the things that you own? Explain. How does private ownership influence the incentive of individuals to(a) take care of things, (b) conserve resources for
What is the objective of the entrepreneur when it comes to the use of his or her resources? What is the major function of the middleman? Is the middleman an entrepreneur?
It takes one hour to travel from New York City to Washington, D.C., by air, but it takes five hours by bus.If the airfare is $110 and the bus fare is $70, which would be cheaper for someone whose opportunity cost of travel time is $6 per hour? For someone whose opportunity cost is $10 per hour? $14
Economists often argue that wage rates reflect productivity. Yet, the wages of house painters have increased nearly as rapidly as the national average, even though these workers use approximately the same production methods as they did fifty years ago. Can you explain why the wages of painters have
The following tables show the production possibilities for two hypothetical countries, Italia and Nire. Which country has the comparative advantage in producing butter?Which country has the comparative advantage in producing guns? What would be a mutually agreeable rate of exchange between the
This question pertains to the addendum to Chapter
During the last three decades, entrepreneurs like Michael Dell, Sam Walton, and Ted Turner have earned billions of dollars. Do you think the average American is better or worse off as the result of the economic activities of these individuals? Explain your response.*
In this chapter, it was stated that a private-property right also involves having the right to transfer or exchange what you own with others. However, selling your organs is a violation of federal law, a felony punishable by up to five years in prison or a$50,000 fine. In 1999, eBay intervened when
Consider the following questions:a. Do you think that your work effort is influenced by whether there is a close link between personal output and personal compensation (reward)?Explain.b. Suppose the grades in your class were going to be determined by a random drawing at the end of the course. How
Consider the choices of two groups of women ages thirty to fifty. All the women in one group have a college education. All the women in the other group have less than a high school education. Which of the two groups will participate more in the workforce?Which of the two groups will bear a larger
What are the major sources of gains from trade?Why is exchange important to a nation’s prosperity?How does trade influence the quantity of output that trading partners are able to produce? In a market economy, will there be a tendency for both resources and products to be supplied by low-cost
Does a 60-year-old tree farmer have an incentive to plant and care for Douglas fir trees that will not reach optimal cutting size for another fifty years?*
If you have a private-ownership right to something, what does this mean? Does private ownership give you the right to do anything you want with the things that you own? Explain. How does private ownership influence the incentive of individuals to(a) take care of things, (b) conserve resources for
What is the objective of the entrepreneur when it comes to the use of his or her resources? What is the major function of the middleman? Is the middleman an entrepreneur?
It takes one hour to travel from New York City to Washington, D.C., by air, but it takes five hours by bus.If the airfare is $110 and the bus fare is $70, which would be cheaper for someone whose opportunity cost of travel time is $6 per hour? For someone whose opportunity cost is $10 per hour? $14
Economists often argue that wage rates reflect productivity. Yet, the wages of house painters have increased nearly as rapidly as the national average, even though these workers use approximately the same production methods as they did fifty years ago. Can you explain why the wages of painters have
Do individuals “economize”? If so, what are they trying to do? Do you economize when you shop at the mall? Why or why not?*
“Economics is about trade-offs. If more scarce resources are used to produce one thing, fewer will be available to produce others.” Evaluate this statement.
Which of the following are positive economic statements and which are normative?a. The speed limit should be lowered to 55 miles per hour on interstate highways.b. Higher gasoline prices cause the quantity of gasoline that consumers buy to increase.c. A comparison of costs and benefits should not
Congress and government agencies often make laws to help protect the safety of consumers. New cars, for example, are required to have many safety features before they can be sold in the United States. These rules do indeed provide added safety for buyers, although they also add to the cost of
In recent years, both the personal exemption and child tax credit have been increased in the United States. According to the basic principles of economics, how will the birthrate be affected by policies that reduce the taxes imposed on those with children?*
Is the federal debt approaching dangerous levels?
Are budget deficits the result of the political incentive structure?
How are future generations affected by debt financing?
What is the national debt and how large is it?
What are the important lessons of the Japanese experience for the United States?
What are the similarities and differences between the Japanese crisis of the 1990s and current conditions in the United States?
How did policy makers in Japan respond to the crisis?Were their actions effective?
What were the underlying factors of the Japanese economic crisis of the 1990s? Were they similar to the 2008 U.S. crisis?
What lessons should we learn from the Crisis of 2008?
What caused the economic Crisis of 2008?
How will Social Security work in the twenty-first century?
Will the Social Security Trust Fund lighten the tax burden of future generations?
Why is Social Security headed for problems?
How will Social Security work in the twenty-first century?
Will the Social Security Trust Fund lighten the tax burden of future generations?
Why is Social Security headed for problems?
What is the effect of the Internet on the labor market?
How is the Internet changing product markets?
Why is the development of the Internet an important economic phenomenon?
How does the size of government affect prosperity and economic growth?
How is the federal response to the financial crisis affecting spending and taxes?
Will a healthy economy run a balance-of-trade surplus?Does a balance-of-trade deficit indicate that a nation is in financial trouble?
What information is included in the balance-ofpayments accounts of a nation? Will the balance-ofpayments accounts of a country always be in balance?
What are the alternative types of exchange rate systems? Which types work well and which will lead to financial problems?
What determines the exchange rate value of the dollar relative to other currencies? Why do exchange rates change?
Why is the legal structure of a country crucially important?
How do sound institutions and policies affect investment? Why is this important?
What impact do sound institutions and policies have on growth and income?
How does the quality of institutions and policies differ across countries?
How do growth rates vary across countries? Are the rich countries getting richer while the poor are getting poorer?
How large are the income differences across countries?
What institutions and policies will promote growth and prosperity?
What are the major sources of economic growth?
How does sustained economic growth change income levels and the lives of people?
How does the economic instability of recent decades compare with earlier time periods?
Have important areas of agreement emerged from the experience and debate on stabilization policy of the past fifty years? Are there points of continuing disagreement?
What is the Phillips curve? Why were the early views about the Phillips curve wrong?
How are expectations formed? Do expectations influence how macroeconomic policy works?
Can monetary and fiscal policy reduce the ups and downs of the business cycle? Why or why not?
Did monetary policy cause the Crisis of 2008? How will current monetary policy affect future economic conditions?
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