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microeconomics
Microeconomics 9th Edition David Colander - Solutions
5.23. There are two types of consumers in a market for sheet metal. Let P represent the market price.The total quantity demanded by Type I consumers is Q1 ! 100 " 2P, for 0 # P # 50.The total quantity demanded by Type II consumers is Q2 ! 40 " P, for 0 # P # 40.Draw the total market demand on a
5.22. Suppose the market for rental cars has two segments, business travelers and vacation travelers. The demand curve for rental cars by business travelers is Qb !35 " 0.25P, where Qb is the quantity demanded by business travelers (in thousands of cars) when the rental price is P dollars per day.
5.21. Carina buys two goods, food F and clothing C, with the utility function U ! FC $ F. Her marginal utility of food is MUF ! C $ 1 and her marginal utility of ?
5.20. Lou’s preferences over pizza (x) and other goods( y) are given by U(x, y) ! xy, with associated marginal utilities MUx ! y and MUy ! x. His income is $120.a) Calculate his optimal basket when Px ! 4 and Py ! 1.b) Calculate his income and substitution effects of a decrease in the price of
5.19. Jim’s preferences over cookies (x) and other goods ( y) are given by U(x, y) ! xy with associated marginal utility functions MUx ! y and MUy ! x. His income is $20.a) Find Jim’s demand schedule for x when the price of y is Py ! $1.b) Illustrate graphically the change in consumer surplus
5.18. The demand function for widgets is given by D(P) ! 16 % 2P. Compute the change in consumer surplus when the price of a widget increases from $1 to $3.Illustrate your result graphically.
5.17. The accompanying figure illustrates the change in consumer surplus, given by Area ABEC, when the price decreases from P1 to P2. This area can be divided into the rectangle ABDC and the triangle BDE. Briefly describe what each area represents, separately, keeping in mind the fact that consumer
5.16. (This problem shows that an optimal consumption choice need not be interior and may be at a corner point.) Suppose that a consumer’s utility function is U(x, y) ! xy $ 10y. The marginal utilities for this utility function are MUx ! y and MUy ! x $ 10. The price of x is Px and the price of y
5.15. Dave consumes only two goods, coffee and doughnuts. When the price of coffee falls, he buys the same amount of coffee and more doughnuts.a) On an optimal choice diagram (with budget lines and indifference curves), illustrate this pattern of consumption.b) Is this purchasing behavior
5.14. Scott consumes only two goods, steak and ale.When the price of steak falls, he buys more steak and more ale. On an optimal choice diagram (with budget lines and indifference curves), illustrate this pattern of consumption.
4. If indifference curves are bowed in toward the origin and the price of a good drops, can the substitution effect ever lead to less consumption of the good?
3. What can you say about the income elasticity of demand of a normal good? of an inferior good?
1. What is a price consumption curve for a good?
Explain the biases in the Consumer Price Index.
Explain how consumers choose to allocate their time between labor and leisure and how this relates to the supply of labor in the market.
Discuss the effects of network externalities on demand curves.
Derive market demand curves from individual demand curves.
Explain how a change in the price of a good affects three measures of consumers’ well-being: consumer surplus, compensating variation, and equivalent variation.
Examine how a change in the price of a good affects a consumer through a substitution effect and an income effect.
6. Describe five nudges that firms currently use to get you to do what they want you to do.
5. Do we as society focus too much on consumption, and, if so, how would one change that focus?
4. In which of the following cases might a nudge be helpful?Explain why or why not.a. Deciding what mortgage is affordable.b. Deciding whether to exercise or not on a particular day.c. Deciding whether to fill your gas tank.d. Deciding whom to marry.
3. To offset the effect of the designated hitter system, what might the American League do to reduce the number of beanballs thrown?
2. Why were more batters being hit in the American League than in the National League starting in 1973? (Be sure your answer uses shadow prices.)
1. What mechanism might be developed to determine whether it is appropriate for government to give a nudge?
4. Behavioral economics acknowledges that cultural norms impact people’s behavior, something that feminist economists have long included in their analysis. What risks does nudge policy pose for using cultural norms to affect behavior of those in society who have comparatively less power?
3. How does behavioral economics undermine the standard supply/demand model? (Institutionalist)
2. There is an implicit view in the chapter that if a policy meets the libertarian paternalistic goal, it is a good policy.Is that necessarily the case? (Radical)
1. Behavioral economics seems to suggest that the “longterm self” rather than the “short-term self” is rational.How do we know that? (Austrian)
26. Assume that government proposes that all employees must be presented with the choice of opting out of a retirement saving program. What assumptions are necessary for this to be a true nudge? Are they reasonable assumptions?
25. Why aren’t there many libertarian nudge policies? ( LO22-4 )
24. What are four reasons to be cautious about nudges? ( LO22-4 )
23. How might conspicuous consumption lower total happiness? ( LO22-3 )
22. How is conspicuous consumption an example of the importance of relative materialism to one’s happiness? ( LO22-3 )
21. Identify the following as either a nudge, a push, or neither.a. The cover of your state tax forms reports that 90 percent of residents pay taxes on time.b. If your friends gain weight, you are likely to gain weight too.c. Amazon is required by government to set the default mail option as the
20. Why would push instead of nudge policies be required?( LO22-3 )
19. What distinguishes a nudge from a push? ( LO22-3 )
18. Government has provided a way for people to file their tax returns on the Internet to make filing easier and raise compliance. Is this an example of a libertarian paternalistic policy? Explain your answer. ( LO22-2 )
17. Classify the following nudges as either a “potentially advantageous default nudge,” an “information or encouragement nudge,” or “not a nudge.” ( LO22-2 )a. A firm redesigns its health enrollment form so that employees must explicitly choose to forgo health insurance.b. Your local
16. Why, in the traditional model, is a nudge unnecessary but potentially helpful in the behavioral model? ( LO22-2 )
15. Why is a nudge useful for choices where benefits and costs are separated by time? ( LO22-2 )
14. What are three types of choices in which nudges are useful?( LO22-2 )
13. Two people are given the choice to participate in a retirement program in which the firm matches contributions.Person A is given a form in which she must check a box to opt into the retirement program. Person B is given a form in which she must check a box to opt out of the retirement program.
12. In what way is nudge policy paternalistic? ( LO22-2 )
11. How can a nudge be defined as libertarian?
10. What is a nudge policy? Give an example. ( LO22-2 )
9. Behavioral economics is a new field in economics. Are nudges new too? ( LO22-2 )
8. How is choice architecture related to behavioral economics and mechanism design? ( LO22-2 )
7. Can a model that includes just money price miss relevant prices? Why or why not? ( LO22-1 )
6. How did mechanism design lead to behavioral economics? ( LO22-1 )
5. What is the primary task of a mechanism design economist? ( LO22-1 )
4. What is the incentive compatibility problem? Give an example. ( LO22-1 )
3. True or false? Only money prices affect incentives;shadow prices do not. Explain. ( LO22-1 )
2. True or false? For a market to have a coordination mechanism, money must be exchanged. Explain.( LO22-1 )
1. What is a coordination mechanism? Give an example.( LO22-1 )
Q-10 What are four concerns about behavioral economic policies?
Q-9 Do more conspicuous consumption goods make society better off?
Q-8 If the government tells a company how to structure the bills it issues, is the policy a nudge policy?
Q-7 A policy designed to structure choices so that people make a certain choice is called what type of policy?
Q-6 If an economist believes that choice architecture is important, is he or she more likely to be a traditional economist or a behavioral economist?
Q-5 True or false? A traditional economist believes people are always rational.
Q-4 Why did economists’ work in mechanism design lead to a greater interest in behavioral economics?
Q-3 Does grading in courses involve an incentive compatibility problem?
Q-2 How does a shadow price differ from a normal price?
Q-1 How does economic engineering differ from economic science?
LO22-4 Discuss the concerns many traditional economists have about nudge and push policies.
LO22-3 Discuss the problems of implementing nudges and how the behavioral economic frame changes how policy is viewed.
LO22-2 Define nudge and choice architecture and explain how they are related to behavioral economic policy.
LO22-1 Explain the relationship between behavioral economic policy and mechanism design.
6. A student is given the option of selecting two homework schedules—one in which three five-page papers and one one-page paper are due at the end of the semester and another in which the first three papers are due the third, sixth, and ninth weeks of the semester and the last paper is due at the
5. What might an economist do if he cannot solve a model analytically? (Give up is not an option.)
4. Can an economist who bases her models on traditional building blocks be a modern economist? Why or why not?
3. Is the supply/demand model a path-dependent model?Why or why not?
2. In one study, a group of Asian-American women were asked to take a math exam. First they were divided into two groups.Before taking the test, individuals in the first group were asked their opinions about coed dorms while the second were asked their family history. Those who had been reminded by
1. What does it mean to assume that people are purposeful in their behavior instead of rational?
5. If modern economics focuses on empirical models, does that mean that those aspects of life that cannot be quantified are shortchanged? (Institutionalist)
4. The book talks as if modern economists have made a large break from traditional assumptions; many heterodox economists see the two as simply minor modifications of the same approach. In what way is that true? (Austrian)
3. It is sometimes said that modern economists pose little questions that can be answered while sociologists pose large questions that cannot be answered. How might that description be related to the economist’s modeling approach? (Radical)
2. Was Mother Teresa rational? (Religious)
1. How might modeling itself frame an economist’s analysis, making the economist unable to see basic truths about the way in which society subjugates women? (Feminist)
20. State whether each of the policy recommendations is an example of a modern economist’s precepts or a traditional economist’s precepts. ( LO21-4 )a. More goods are preferred to fewer goods.b. Banks ought to be required to get approval for new financial instruments.c. Firms can decide what
19. True or false? Models provide both theorems and precepts. Explain your answer. ( LO21-4 )
18. Why is “out-of-sample” data important for testing inductive models? ( LO21-3 )
17. What is an agent-based computational model? ( LO21-3 )
16. What characteristics would you look for in data to use as a natural experiment? ( LO21-3 )
15. What is a regression? ( LO21-3 )
14. What does it mean to “let the data speak”? ( LO21-3 )
13. Why do economists rely more on empirical evidence today than they did 100 years ago? ( LO21-3 )
12. According to economist Robert Frank, why are people more likely to return $20 they’d been given in error in change than a lampshade that had not been scanned at checkout? What does this say about traditional building blocks? ( LO21-2 )
11. Why might government intervention make sense in a model of path-dependency but not a supply/demand model? ( LO21-2 )
10. Even though the Betamax format for videos is believed to have been better than the VHS format, early market leadership by VHS established VHS as the dominant choice for videocassette recorders. Some argue that if Betamax had an early lead, it would have been the dominant technology. What kind
9. What is a heuristic model ? Can a heuristic model be traditional? Why or why not? ( LO21-2 )
8. In a recent study, when asked to choose between an iPod and $100, people were more likely to choose the money.But when they were given an iPod and then asked if they would trade it for $100, they were more likely to choose the iPod. ( LO21-2 )a. What effect does this reflect?b. Is this behavior
7. Name two advantages and two disadvantages of the behavioral model. ( LO21-1 )
6. Name two advantages and two disadvantages of the traditional model. ( LO21-1 )
5. One rule of thumb many people follow is “eat until your plate is clean.” How does this rule of thumb violate the rationality assumption? ( LO21-1 )
4. How does enlightened self-interest differ from self-interest? ( LO21-1 )
3. What are the two main building blocks for traditional economists? How do they differ from the building blocks of behavioral economists? ( LO21-1 )
2. How does an inductive approach to economics differ from a deductive approach? ( LO21-1 )
1. How is a model different from the reality that it represents?Give an example. ( LO21-1 )
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