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microeconomics
Exploring Microeconomics 4th Edition Robert L. Sexton - Solutions
2. Do you think firms should be held accountable for all of the society costs caused by negative externalities? Why or why not?
1. How can firms use the externality concept to their advantage in marketing their services or products?
How do we measure the total gains from exchange?
What is producer surplus?
What is the connection between the law of demand and the law of?
What is the “best” decision for consumers?
What is utility?
Suppose the demand for Dolce & Gabbana designer jeans increased from 42 000 to 56 000 when per-capita incomes rose from $65 000 to $71 500.Calculate the income elasticity of demand coefficient (remember to use the midpoint method). Are Dolce & Gabbana designer jeans considered a normal or inferior
Assume you had the following observations on Canadian intercity rail travel:Between 2008 and 2010, rail travel increased from 17.5 passenger kilometres per person to 19 passenger kilometres per person. At the same time, neither per-kilometre railroad price or incomes changed, but the per-kilometre
If a 10 percent rise in the price of coffee increases the quantity of tea demanded by 25 percent and decreases the quantity of coffee demanded by 20 percent, calculate the cross-elasticity of demand between coffee and tea.
Indicate whether the products are normal, inferior, or neither based on the following estimates for the income elasticity of demand:
Indicate whether a pair of products are substitutes, complements, or neither based on the following estimates for the cross-price elasticity of demand:
If a 10 percent decline in the price of WiFi service increases the quantity of mobile computing devices demanded by 20 percent and increases the quantity of WiFi service demanded by 15 percent, calculate the cross-price elasticity of demand between WiFi service and mobile computing devices.
Assume the following weekly demand schedule for Sunshine DVD Rentals in Moncton.
If the local bus company raises its price per rider from $2.50 to $2.75 and its total revenues rise, what can we say about its elasticity of demand? What if total revenues fall as a result of the price increase?
The Winnipeg Blue Bombers want to boost revenues from ticket sales next season. You are hired as an economic consultant and asked to advise the Blue Bombers whether to raise or lower ticket prices next year. If the elasticity of demand for Blue Bomber game tickets is estimated to be -1.6, what
Bad weather spoils the orange crop. As a result, the price rises from $3 to $5 a basket and the quantity demanded decreases from 1500 to 900 baskets a week. Over this price range, calculate the price elasticity of demand (using the midpoint method).
Good weather produces a bumper crop of apples. As a result, the price falls from $6 to $3 a basket and the quantity demanded increases from 600 to 1100 baskets a week. Over this price range calculate the price elasticity of demand(using the midpoint method).
Why is a more narrowly defined good (e.g., pizza) likely to have a greater elasticity of demand than a more broadly defined good (e.g., food)?
For each of the following pairs, identify which one of the pair is likely to exhibit more elastic demand:a. shampoo; Paul Mitchell Shampoob. air travel prompted by an illness in the family; vacation air travelc. paper clips; an apartment rentald. prescription heart medication; generic headache
In each case below, indicate which good you think has a relatively more price elasticity of demand and identify the most likely reason, in terms of the determinants of the elasticity of demand (more substitutes, greater share of budget, or more time to adjust).
How does the relative elasticity of supply and demand determine the tax burden?
What is tax incidence?
What determines the price elasticity of supply?
What is the price elasticity of supply?
What is the income elasticity of demand?
What is the cross-price elasticity of demand?
How does price elasticity of demand change along a linear demand curve?
How does the price elasticity of demand impact total revenue?
What determines the price elasticity of demand?
How do we use the “midpoint method” in calculating price elasticities of demand?
How do we measure consumers’ responses to price changes?
What is price elasticity of demand?
19. What happens when both supply and demand shift in the same time period?
18. What happens to equilibrium price and equilibrium quantity when the supply curve shifts?
17. What happens to equilibrium price and equilibrium quantity when the demand curve shifts?
16. What is a shortage and what is a surplus?
15. The intersection of the supply and demand curve shows the equilibrium price and equilibrium quantity in a market.
14. What is the equilibrium price and the equilibrium quantity?
What effect is this likely to have on the market for movies in this particular city? What will happen to the quantity of tickets demanded? What will happen to the quantity supplied? Who gains? Who loses?
13. Giving in to pressure from voters who claim that local theatre owners are gouging their customers with ticket prices as high as $10 per movie, the city council of a local municipality imposes a price ceiling of $2 on all movies.
12. What would be the impact of a price floor set above the equilibrium price for dairy products? Below the equilibrium price?
11. What would be the impact of a rental price ceiling set above the equilibrium rental price for apartments? Below the equilibrium rental price?
10. What happens to the quantity supplied, the quantity demanded, and the surplus if, for a given price floor, the supply curve shifts to the ?
9. What happens to the quantity supplied, the quantity demanded, and the surplus if, for a given price floor, the demand curve shifts to the right?
8. What happens to the quantity supplied, the quantity demanded, and the surplus if the price floor is raised? If it is lowered?
7. What would happen to the equilibrium price and equilibrium quantity in the following cases?
3. In what ways do large businesses have advantages over smaller businesses in establishing their own level of equilibrium? Give some specific examples of how these advantages would affect equilibrium.
2. What role do time and time lags have on a business that is attempting to establish its own market equilibrium? What items would you think would be affected by time lags?
1. What tools do you think businesses can use to establish their own demand and supply issues?
4. How much? Here, you will need to draw a simple demand and supply model, shift the demand curve rightward a little, and then draw a second curve, shifting it rightward a lot
3. A positive or negative change? The ad campaign is successful, so it will shift the demand curve rightward.
2. Is the issue price or something else? It’s something else, so it will shift the demand curve—what causes the shift is a change in tastes or preferences, which is one of the factors that shift demand.
1. Is the ad campaign a demand or supply issue? Clearly, it’s a demand issue, so it will affect the demand curve.
3. Is the change an increase or a decrease?
2. Is price the issue, or is it something else? (If it’s price, it’s a movement along the curve; if it’s something else, it’s a shift of the curve. Numerous factors can shift demand and supply—work at finding which factor is affecting the change.)
1. Which curve is affected? (Is it a demand or supply issue?)
3. Is the event in question having an expansionary or contractionary impact on the market?
2. Is the event in question a “shift” or a “movement”?
1. Which side of the market is being affected by the event in question, demand or supply?
What happens when both supply and demand shift in the same time period?
What happens to equilibrium price and equilibrium quantity when the supply curve shifts?
What happens to equilibrium price and equilibrium quantity when the demand curve shifts?
Molasses is a marketable by-product of sugar refining. That is, the more product that sugar refineries produce, the more molasses they generate.Molasses itself is used as an additive in livestock feed as well as the principal ingredient in the distillation of rum. If the price of sugar increased,
The following graph shows three market supply curves for cantaloupe.Compared to point A, which point representsa. an increase in quantity supplied?b. an increase in supply?
What would be the effect of each of the following on the supply of automobiles in Canada? In each case, identify the responsible determinant of supply.a. North American automobile makers are successful in negotiating wage reductions with their unionized workforce.b. Automobile manufacturers in
What would be the effects of each of the following on the supply of coffee worldwide? In each case, identify the responsible determinant of supply.a. Freezing temperatures wipe out half of Brazil’s coffee crop.b. The wages of coffee workers in Latin America rise as unionization efforts succeed.c.
Many farmers in western Canada have the choice between growing fields of wheat or growing fields of corn, due to the nearly identical resources required to cultivate each crop. If the price of corn increased, what would be the effect ona. the supply of corn?b. the supply of wheat?
Using the graph on the next page, answer the following questions:a. What is the shift from to called?b. What is the movement from (B) to (A) called?c. What is the movement from (A) to (B) called?d. What is the shift from to called?
Draw the demand curves for the following goods. If the price of the first good listed rises, what will happen to the demand for the second good, and why?
Using the demand curve, show the effect of the following events on the market for beef?
What would be the effect of each of the following on the demand for Chevrolets in Canada? In each case, identify the responsible determinant of demand
What would be the effects of each of the following on the demand for hamburger in Swift Current, Saskatchewan. In each case, identify the responsible determinant of demand.
The following table shows Hillary’s demand schedule for Cherry Blossom lotion. Graph Hillary’s demand curve. Price (dollars Quantity per mL) Demanded (mL per week) 15 5 12 10 10 9 15 6 20 20 3 25
Sid moves from downtown Toronto, where he lived in a small condominium, to rural Alberta, where he buys a big house on two hectares of land. Using the law of demand, what do you think is true of land prices in downtown Toronto relative to those in rural Alberta?
3. There is a plethora of “dollar stores” that purchase the oversupply of many manufacturers and sell it at a discount. Do you think this is efficient for the economy? Thinking broadly, do you think consumers and businesses benefit or not? Explain.
2. In your opinion, has the rise of e-commerce and online purchasing increased growth in the economy? In what other ways has e-commerce affected the economy?
Can we review the distinction between a change in supply and a change in quantity supplied?
What are the determinants of supply?
What is a market supply curve?
What is an individual supply curve?
What is the law of supply?
Can we review the distinction between changes in demand and changes in quantity demanded?
What are the determinants of demand?
What is a market demand curve?
What is an individual demand schedule and curve?
What is the law of demand?
14. Identify whether each of the following transactions takes place in the factor market or the product market?
13. Prices communicate information about the relative value of resources. Which of the following would cause the relative value and, hence, the price, of potatoes to rise?
12. What role do buyers and sellers have in a market?
11. Evaluate the validity of the following statement: "Canadians spend millions of dollars every year shopping online, buying everything from investment products to children's toys. However, due to the virtual nature of these transactions (buyers and sellers do not actually meet in person), these
10. Why one nation experiences economic growth and another does not is a question that has intrigued economists since Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. Explain why each of the following would limit economic growth.
9. A politician running for prime minister of Canada promises to build new schools and new prisons if elected, without sacrificing any other goods and services. Using the production possibilities curve between schools and prisons, explain under what conditions the politician would be able to keep
8. How does a technological advance that increases the efficiency of shoe production affect the production possibilities curve between shoes and pizza? Is it possible to produce more shoes and pizza or just more shoes? Explain.
7. Economy A produces more capital goods and fewer consumer goods than Economy B. Which economy will grow more rapidly? Draw two production possibilities curves, one for Economy A and one for Economy B. Demonstrate graphically how one economy can grow more rapidly than the other.
6. Which of the identified production alternatives is currently attainable but inefficient? What must happen in order for this production alternative to become efficient?
5. Which of the identified production alternatives is currently impossible for this economy to achieve? What must happen in order for this production alternative to become attainable?
4. Which of points A–E is the most efficient? Explain.
3. What is the opportunity cost of moving from point C to point B?
2. What is the opportunity cost of moving from point I to point D? Explain.
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