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Introduction To Information Systems 5th Edition R. Kelly Rainer, Brad Prince, Casey G. Cegielski - Solutions
You’re thinking of buying one of two firms. One has a profit margin of $8 per unit; the other has a profit margin of $4 per unit. Which should you buy? Why? (Difficult)(LO13-2)
If the conditions for perfect competition are generally not met, why do economists use the model? (LO13-1)
List three conditions for perfect competition. (LO13-1)
Why must buyers and sellers be price takers for a market to be perfectly competitive? (LO13-1)
Show graphically the analysis of the example in Figure A12-5 if the price of machines rises to $5.Demonstrate that the firm must reduce production if it keeps the same budget.
Show graphically the analysis of the example in Figure A12-5 if the price of labor falls to $3. Demonstrate that the firm can increase production given the same budget.
Draw a hypothetical isocost curve and an isoquant curve tangent to the isocost curve. Label the combination of inputs that represents an economically efficient use of resources.a. How does a technological innovation affect your analysis?b. How does the increase in the price of the input on the
Demonstrate the difference between economic efficiency and technical efficiency, using isocost/isoquant analysis.
Show, using isocost/isoquant analysis, how firms in the United States use relatively less labor and relatively more land than Japan for the production of similar goods, yet both are behaving economically efficiently.
Draw an isocost curve for a firm that has $100 to spend on producing jeans. Input includes labor and materials.Labor costs $8 and materials cost $4 a unit. How does each of the following affect the isocost curve? Show your answer graphically.a. Production budget doubles.b. Cost of materials rises
What happens to the marginal rate of substitution as a firm increases the use of one input, keeping output constant?What accounts for this?
The cost of setting up a steel mill is enormous. For example, a Gary, Indiana, hot-strip mill would cost an estimated$1.5 billion to build. Using this information and the cost concepts from the chapter, explain the following quotation:“To make operations even marginally profitable, big
When economist Jacob Viner first developed the envelope relationship, he told his draftsman to make sure that all the marginal cost curves went through both (1) the minimum point of the short-run average cost curve and(2) the point where the short-run average total cost curve was tangent to the
A major issue of contention at many colleges concerns the cost of meals that is rebated when a student does not sign up for the meal plan. The administration usually says that it should rebate only the marginal cost of the food alone, which it calculates at, say, $1.25 per meal. Students say that
If you were describing the marginal cost of an additional car driving on a road, what costs would you look at? What is the likely shape of the marginal cost curve?
What inputs do you use in studying this book? What would the long-run average total cost and marginal cost curves for studying look like? Why?
A pair of shoes that wholesales for $28.79 has approximately the following costs:a. Which of these costs would likely be a variable cost?b. Which would likely be a fixed cost?c. If output were to rise, what would likely happen to average total costs? Why? Manufacturing labor Materials Factory
A major survey conducted by economists David Levine and Laura Tyson found that “in most reported cases the introduction of substantive shop floor participation (job redesign and participatory work groups) leads to some combination of an increase in satisfaction, commitment, quality and
Firms have an incentive to “externalize” their costs, that is, to make others face the opportunity costs of their actions while firms reduce their own accounting costs.a. Give some examples of firms doing this.b. What implications for policy does it have?(Institutionalist)
Adam Smith argued that at birth most people were similarly talented, and that differences in individual abilities, and hence productivity, are largely the effect of the division of labor, not its cause. What implications does that insight have for economic policy, and for the way we should treat
The chapter points out that “businesses give enormous weight to experience,” or learning by doing. Empirical evidence suggests that, in surveys and applications, women tend to report the nature of their jobs in far less detail than do men.a. How might this contribute to differences in
The text presents costs as if a firm could look them up in a book.a. How do you believe a firm’s true costs are revealed?b. Is this an optimal method of finding out costs?(Austrian)
If a firm is experiencing learning by doing, what is likely true about the long-run average total cost curve? Explain your answer. (LO12-4)
How does learning by doing affect average total costs? (LO12-4)
A student has just written on an exam that technological change will mean that the cost curve is downward-sloping.Why did the teacher mark it wrong? (LO12-4)
True or false? Because entrepreneurs are motivated by opportunities to sell an item at a price higher than the average cost of producing it, they do not start for-benefit firms. Explain your answer. (LO12-3)
Your average total cost is $40; the price you receive for the good is $12. Should you keep on producing the good?Why? (LO12-3)
What is the role of the entrepreneur in translating cost of production into supply? (LO12-3)
Where along the long-run average total cost curve will an efficient firm try to produce in the long run? (LO12-2)
Draw a short-run marginal cost curve, short-run average cost curve, and long-run average total cost curve for an efficient firm producing where there are diseconomies of scale. (LO12-2)
Why are long-run costs always less than or equal to short-run costs? (LO12-2)
Sea lions have been depleting the stock of steelhead trout.One idea to scare sea lions off the Washington state coast was to launch fake killer whales, predators of sea lions.The cost of making the first whale is $16,000—$5,000 for materials and $11,000 for the mold. The mold can be reused to
Draw a long-run average total cost curve. (LO12-2)a. Why does it slope downward initially?b. Why does it eventually slope upward?c. How would your answers to a and b differ if you had drawn a short-run cost curve?d. How large is the fixed-cost component of the long-run cost curve?e. If there were
In the early 2000s car makers began to design vehicles’chassis, engine, and transmissions so that different models could be produced on the same assembly line. Within the first year of implementing the plan, Ford cut production costs by $240 per car. (LO12-2)a. What cost concept was Ford taking
Why could diseconomies of scale never occur if production relationships were only technical relationships?(LO12-2)
A student has just written on an exam that, in the long run, fixed cost will make the average total cost curve slope downward. Why will the professor mark it incorrect?(LO12-2)
A dressmaker can sew 800 garments with 160 bolts of fabric and 3,000 hours of labor. Another dressmaker can sew 800 garments with 200 bolts of fabric and 2,000 hours of identical labor. Fabric costs $100 a bolt and labor costs$10 an hour. (LO12-1)a. Is it possible for both methods to be technically
One farmer can grow 1,000 bushels of corn on 1 acre of land with 200 hours of labor and 20 pounds of seed.Another farmer can grow 1,000 bushels of corn on 1 acre of land with 100 hours of labor and 20 pounds of seed. (LO12-1)a. Could both methods be technically efficient?b. Is it possible that both
What is the difference between technical efficiency and economic efficiency? (LO12-1)
If machines are variable and labor fixed, how will the general shapes of the short-run average cost curve and marginal cost curve change?
Say that neither labor nor machines are fixed but that there is a 50 percent quick-order premium paid for both workers and machines for their delivery in the short run.Once you buy them, they cannot be returned, however.What do your short-run marginal cost and short-run average total cost curves
The following cell phone offer by Sprint is typical of what one can get on a cell phone plan: 4,000 free minutes for$39.99 a month. The fine print says that only 350 of those minutes are anytime minutes; the remaining are restricted to evening and weekend usage. If you go over your allotted time,
If you increase production to an infinitely large level, the average variable cost and the average total cost will merge. Why?
“There is no long run; there are only short and shorter runs.” Evaluate that statement.
Walmart, the nation’s largest retailer, has perfected a“just-in-time competitive strategy.” This retail giant relies on bar codes for instant inventory, distribution centers that purchase supplies at the last minute and deliver only when needed, a small core of suppliers that Walmart can
The text does not emphasize firms’ role in shaping the tastes and preferences of consumers even though this is a very important role with firms spending about $150 billion a year on advertising. If it is true that firms are shaping consumer preferences, whose welfare are people maximizing when
The analysis in the book suggests that firms hire inputs so that they hold costs as low as possible. Yet, as Gloria Steinem has pointed out, looking at reality one sees men selling refrigerators and women selling men’s underwear.a. Do you believe that that allocation of jobs reflects firms trying
Say that a drug firm could increase its profit by marketing a drug that it knows might have serious side effects. Say also that it knows that it can never be prosecuted for doing so.a. Would it?b. Should it? (Religious)
The text presents very detailed cost tables when it considers the decisions of firms.a. Do entrepreneurs have such cost tables available to them when they enter a business?b. If not, how do they gather such information?c. If such information is gathered through trial and error, what implications
Say a firm has $100 in fixed costs and its average variable costs increase by $5 for each unit, so that the cost of 1 is $25, the cost of 2 is $30, the cost of 3 is $35, and so on. (LO11-4)a. Show VC, AFC, AVC, and MC in a table.b. Graph the AFC, ATC, AVC, and MC curves associated with these
Say that a firm has fixed costs of $100 and constant average variable costs of $25. (LO11-4)a. Show AFC, VC, AVC, and MC in a table.b. Graph the AFC, ATC, AVC, and MC curves.c. Explain why the curves have the shapes they do.d. What law is not operative for this firm?
An economic consultant is presented with the following total product table and asked to derive a table for average variable costs. The price of labor is $15 per hour. (LO11-4)a. Help him do so.b. Show that the graphs of the average productivity curve and average variable cost curve are mirror
If average productivity falls, will marginal cost necessarily rise? How about average cost? (LO11-4)
A firm has fixed costs of $100 and variable costs of the following: (LO11-4)a. Show AFC, ATC, AVC, and MC in a table.b. Graph the AFC, ATC, AVC, and MC curves.c. Explain the relationship between the MC curve and the AVC and ATC curves.d. Say fixed costs dropped to $50. Which curves shifted?Why?
If marginal cost is increasing, what do we know about average cost? (LO11-4)
If average product is falling, what is happening to shortrun average variable cost? (LO11-4)
Graph the following table. (LO11-4)a. What is marginal product and average product at each level of production?b. Graph marginal product and average product.c. Label the areas of increasing marginal productivity, diminishing marginal productivity, and diminishing absolute productivity. Number of
Explain how each of the following will affect the average fixed cost, average variable cost, average total cost, and marginal cost curves faced by a steel manufacturer: (LO11-3)a. New union agreement increases hourly pay.b. Local government imposes an annual lump-sum tax per plant.c. Federal
Which of the costs discussed in the chapter is the most important when a firm is deciding how much to produce?(LO11-3)
Classify each of the following as fixed or variable costs: (LO11-3)a. Outsourced payroll services.b. Leased offices.c. Company-owned building.d. Payroll taxes.
For each of the following indicate what costs are being calculated: (LO11-3)a. FC + VCb. TC/Qc. FC/Qd. VC/Qe. AFC + AVC
Find TC, AFC, AVC, AC, and MC from the following table.(LO11-3) Units FC VC 012345 $100 $ 0 100 40 100 60 3 100 70 100 85 5 100 130
Explain how studying for an exam is subject to the law of diminishing marginal productivity. (LO11-2)
What is the difference between marginal product and average product? (LO11-2)
What distinguishes the short run from the long run? (LO11-2)
Economan has been infected by the free enterprise bug.He sets up a firm on extraterrestrial affairs. The rent of the building is $4,000, the cost of the two secretaries is$40,000, and the cost of electricity and gas comes to$5,000. There’s a great demand for his information, and his total revenue
Peggy-Sue’s cookies are the best in the world, or so I hear. She has been offered a job by Cookie Monster, Inc., to come to work at $125,000 per year. Currently, she is producing her own cookies, and she has revenues of $260,000 per year. Her costs are $40,000 for labor,$10,000 for rent, $35,000
What costs and revenues do economists include when calculating profit that accountants don’t include? Give an example of each. (LO11-1)
Most economists have a mixed view of limited free trade associations such as NAFTA or the EU. While they see free trade as beneficial, they are concerned about the possibility that these limited trade associations will impose trade restrictions on nonmember countries. Whether the net effect of
Two important international economic organizations are the WTO and GATT, which was replaced by the WTO. (LO10-4)
Whether or not it is efficient for a country to maintain barriers to trade in an industry that exhibits economies of scale depends upon the marginal costs and marginal benefits of maintaining those barriers. Having significant economies of scale does mean that average costs of production will be
True. In strategic trade bargaining it is sometimes reasonable to be unreasonable. The belief of the other bargainer that you will be unreasonable leads you to be able to extract larger gains from trade. Of course, this leads to the logical paradox that if “unreasonable” is “reasonable,”
Production is concentrated among a small number of firms that stand to benefit from trade restrictions and thus are more likely to combine efforts to lobby government.Because the number of consumers is large and the cost of trade restrictions to each relatively small, consumers have less incentive
An inefficient customs agency can have the same effect as a trade restriction, and if trade restrictions would help the country, then it is possible that an inefficient customs agency could also help the country. (LO10-2)
Importers prefer quotas because they receive higher prices. Government prefers a tariff because the tariff brings in revenue for government. (LO10-2)
Like tariffs, taxes shift the supply of a good up by the amount of the tariff. Equilibrium quantity falls and equilibrium price rises. (LO10-2)
A debtor nation will not necessarily be running a trade deficit. Debt refers to accumulated past deficits. If a country had accumulated large deficits in the past, it could run a surplus now but still be a debtor nation. (LO10-1)
The type of goods being imported has changed from primarily low-tech goods to technologically advanced goods. (LO10-1)
If you were economic adviser to a country that was following your advice about trade restrictions and that country fell into a recession, would you change your advice? Why, or why not?
In the 1930s Clair Wilcox of Swarthmore College organized a petition by economists “that any measure which provided for a general upward revision of tariff rates be denied passage by Congress, or if passed, be vetoed.” It was signed by one-third of all economists in the United States at the
The U.S. government taxes U.S. companies for their overseas profits, but it allows them to deduct from their U.S. taxable income the taxes that they pay abroad and interest on loans funding operations abroad, with no limits on the amount deducted.a. Is it possible that the overseas profit tax
Mexico exports many vegetables to the United States. These vegetables are grown using chemicals that are not allowed in U.S. vegetable agriculture. Should the United States restrict imports of Mexican vegetables? Why or why not?
When the United States placed a temporary price floor on tomatoes imported from Mexico, a U.S. trade representative said, “The agreement will provide strong relief to the tomato growers in Florida and other states, and help preserve jobs in the industry.” What costs did Americans bear from the
Suggest an equitable method of funding trade adjustment assistance programs.a. Why is it equitable?b. What problems might a politician have in implementing such a method?
One of the basic economic laws is “the law of one price.”It says that given certain assumptions one would expect that if free trade is allowed, the price of goods in countries should converge.a. Can you list what three of those assumptions likely are?b. Should the law of one price hold for
How does considering trade in the broader cultural context change one’s analysis?
The text presents free trade as advantageous for developing countries. However, in its period of most rapid development, the half century following the Civil War, the United States imposed tariffs on imports that averaged around 40 percent, a level higher than those in all but one of today’s
Who has benefited most from free trade? Who has been hurt most by it? Does that match the positions the various groups have about their support for free trade? Which group do economists align themselves with? Why?(Post-Keynesian)
Frederic Bastiat wrote, “When goods do not cross borders, soldiers will.” Discuss. (Religious)
Frederic Bastiat wrote: “It seems to me that this is theoretically right, for whatever the question under discussion—whether religious, philosophical, political, or economic; whether it concerns prosperity, morality, equality, right, justice, progress, responsibility, cooperation, property,
Frederic Bastiat wrote that “government is the great fiction through which everybody endeavors to live at the expense of everybody else.” Is this a correct way to understand the fight about tariffs? (Austrian)
The world price of textiles is Pw, as in the accompanying figure of the domestic supply and demand for textiles.The government imposes a tariff t, to protect the domestic producers. For this tariff: (LO10-2) Price Price with tariff P World price Pw Quantity
How do the effects of voluntary restraint agreements differ from the effects of a tariff? (LO10-2)
Demonstrate graphically how the effects of a tariff differ from the effects of a quota. (LO10-2)
Which countries are the two greatest trading partners for the United States? With which countries is trade rapidly increasing? (LO10-1)
How important is international trade in terms of its relationship to total U.S. production? What does this suggest about the importance of trade policies relative to other countries? (LO10-1)
Assuming a law such as the one suggested in question 4 were passed in the mid-1990s in the U.S., what subgroups of U.S. workers would have likely been helped, and what subgroups of U.S. workers would have likely been hurt?
One way to equalize imports and exports would be to pass a law that (1) in order to import, importers must provide a certificate certifying that an equal value of exports had occurred; and (2) in order to export, exporters must provide a certificate certifying that an equal value of imports had
The normal textbook presentation of international trade does not include the international trader. How does including the trader in the model provide a different view of trade than one would get from a model that did not include the trader?
One of the basic economic laws is the “law of one price.”Does it imply that the U.S. wage level will have to equal the Chinese wage level if free trade is allowed? Why or why not?
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