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Microeconomics 11th Edition David Colander - Solutions
What are four concerns about behavioral economic policies?
Could anyone object to a Pareto optimal policy?Why?
Would it be wrong for economists to propose only Pareto optimal policies?
Would all economists oppose price controls? Why or why not?
In the early 1990s, the 14- to 17-year-old population fell because of low birthrates in the mid-1970s. Simultaneously the combined decisions of aging baby boomers to have kids resulted in an increase in the number of babies and hence in an increase in the number of parents needing babysitters. What
Should the buying and selling of body organs be allowed?Why or why not?
In the 1970s legislators had difficulty getting laws passed requiring people to wear seat belts. Now not only do most people wear seat belts, but many cars have airbags too. Do people value their lives more today?
Economist Steven D. Levitt estimated that, on average, for each additional criminal locked up in the United States, 15 crimes are eliminated. In addition, although it costs about $30,000 a year to keep a prisoner incarcerated, the average prisoner would have caused $53,900 worth of damage to
If one uses a willingness-to-pay measure in which life is valued at what people are willing to pay to avoid risks that might lead to death, the value of a U.S. citizen’s life is$2.6 million, a Swede’s life is worth $1.2 million, and a Portuguese’s life is worth $20,000. a. What policy
Economists Robin R. Jenkins, Nicole Owens, and Lanelle Bembenek Wiggins estimate the value of the lives of children by using parents’ willingness to purchase bicycle helmets. Wearing a helmet reduces the probability of death from bicycling by 0.0000041. The annualized cost of a helmet is $6.51.a.
What are three ways in which a well-functioning market might have undesirable results?
Until recently, China had a strict one-child-per-family policy.For cultural reasons, families favor boys and there are now many more male than female children born in China. How is this likely to affect who pays the cost of dates in China in 15 to 20 years? Explain.
As organ transplants become more successful, scientists are working on ways to transplant animal organs to humans.Pigs are the odds-on favorites as “donors” since their organs are about the same size as human organs. a. What would the development of such organ farms likely do to the price of
Why are economists’ views of politicians cynical?
Anthony Zielinski, a former member of the Milwaukee Board of Supervisors, proposed that the county government sell the organs of dead welfare recipients to help pay off the welfare recipients’ welfare costs and burial expenses.What was the likely effect of that proposal? Why?
What is the basis for the opinions of public choice economists about government’s ability to correct market failures?
Even though a policy’s stated goals may be laudable, its actual outcome can often cause serious problems.a. How much does it matter to an economist how closely a policy’s goals match its outcome?b. How much does it matter to a politician? (Austrian)
In standard textbook economic analysis, institutions are often portrayed as creating market failures.a. Give an example of market failure caused by an institution not discussed in the text.b. What would a free market advocate likely say should be done about the failure?c. How would an
The text deemphasizes the fact that people are social creatures who feel a need to conform to norms; Post-Keynesians emphasize norms.a. Who shapes these social norms?b. Does society as a whole benefit from these norms?c. How does the existence of these norms affect the analysis presented in the
Critics have pointed out a number of flaws in cost/benefit analysis: It assigns a dollar value to things that are not commodities such as human life; it places a price on public goods that we consume collectively (such as air quality);it downgrades the importance of the future through its discount
In his paper “Why Did the Economist Cross the Road? The Hierarchical Logic of Ethical and Economic Reasoning,”economist Andrew Yuengert of Pepperdine University argues that “economists often give truncated justifications for their activities as economists out of fear that
In cost/benefit terms, explain your decision to take an economics course.
How much do you value your life in dollar terms? Are your decisions consistent with that valuation?
If someone offered you $1 million for one of your kidneys, would you sell it? Why or why not?
The technology is now developing so that road use can be priced by computer. A computer in the surface of the road picks up a signal from your car and automatically charges you for the use of the road.a. How could this technological change contribute to ending bottlenecks and rush-hour
According to U.S. government statistics, the cost of averting a premature death differs among various regulations.Car seat belt standards cost $100,000 per premature death avoided, while hazardous waste landfill disposal bans cost$4.2 trillion per premature death avoided. If these figures are
Technology will soon exist such that individuals can choose the sex of their offspring. Assume that technology has now arrived and that 70 percent of the individuals choose male offspring.a. What effect will that have on social institutions such as families?b. What effect will it have on
In a study of hospital births, the single most important prediction factor of the percentage of vaginal births as opposed to caesarean (C-section) births was ownership status of hospitals—whether they were for-profit or nonprofit.a. Which had more C-sections, and why?b. What implications about
Why might an economist propose a policy that has little chance of adoption?
In the book Why Not? Yale professors Barry Nabalof and Ian Ayres suggest that computers that record driver behavior(similar to the black boxes in planes that record crashes) be installed in cars. In trials where such computers were installed in cars, crash rates fell by one-third.a. If these boxes
According to economists Henry Saffer of Kean University, Frank J. Chaloupka of the University of Illinois at Chicago, and Dhaval Dave of CUNY Graduate Center, using the criminal justice system to deter one person from using drugs costs $1,733, and using treatment centers costs $1,206.a. Which of
Economists Michael Tanner and Stephen Moore of the Cato Institute recently calculated the hourly wage equivalent of welfare for a single mother with two children for each of the 50 United States. Their estimates ranged from $17.50 an hour for Hawaii to $5.33 in Mississippi.What do you suppose were
If someone suggests that economists should focus only on Pareto optimal policies, how would you respond?
How does a radical analysis of labor markets differ from a mainstream analysis?
When can “being mean” actually be “being nice”?
If the text correctly describes the valuation individuals place on life with regard to smoke detector purchases and premium tire usage, how would you advise them to alter their behavior in order to maximize utility?
Why should you be very careful about any cost/benefit analysis?
When using marginal cost/marginal benefit analysis, do “other things remain constant”? Explain.
True or false? The goal of society is efficiency.
A cocaine addict purchases an ounce of cocaine from a drug dealer.Since this was a trade both individuals freely entered, is society better off?
True or false? If someone chooses to sell himself into slavery, the individual, and thus society, is better off.
In what way does government positively contribute to economic policy? In what way does it negatively contribute to economic policy?
List one recent choice you made and explain why you made the choice in terms of marginal benefits and marginal costs.
Suppose you currently earn $60,000 a year. You are considering a job that will increase your lifetime earnings by$600,000 but that requires an MBA. The job will mean also attending business school for two years at an annual cost of $50,000. You already have a bachelor’s degree, for which you
Why are modern economists more likely to “let the data speak” than are earlier economists?
Say you bought a share of Oracle for $100 and a share of Cisco for$10. The price of each is currently $15.Assuming taxes are not an issue, which would you sell if you needed $15?
Can you think of a reason why a cost/benefit approach to a problem might be inappropriate? Can you give an example?
John, your study partner, has just said that the opportunity cost of studying this chapter is about 1/38 the price you paid for this book, since the chapter is about 1/38 of the book. Is he right? Why or why not?
Ali, your study partner, states that rationing health care is immoral—that health care should be freely available to all individuals in society.How would you respond?
Your study partner, Joan, states that market forces are always operative.Is she right? Why or why not?
There has been a superb growing season and the quantity of tomatoes supplied exceeds the quantity demanded. What is likely to happen to the price of tomatoes?
True or false? Economists should focus their policy analysis on institutional changes because such policies offer the largest gains.
John, your study partner, is a free market advocate. He argues that the invisible hand theorem tells us that the government should not interfere with the economy. Do you agree?Why or why not?
Tell whether the following five statements belong in positive economics, normative economics, or the art of economics.1. We should support the market because it is efficient.2. Given certain conditions, the market achieves efficient results.3. Based on past experience and our understanding of
Say that the hourly cost to employers per German industrial worker is $43. The hourly cost to employers per U.S. industrial worker is $39, while the average cost per Taiwanese industrial worker is $10.a. Give three reasons why firms produce in Germany rather than in a lower-wage country.b. Germany
In the graph below, what is the opportunity cost of producing an extra unit of good X in terms of good Y? LO 5 4 3 Y 2 1 0 1 2 3 4 5 X The production possibility curve is a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs.
If no resource had a comparative advantage in the production of any good, what would the shape of the production possibility curve be? Why?
Identify the point(s) of inefficiency and efficiency. What point(s) is (are) unattainable? Y B A X C D
Your firm is establishing a trucking business in Saudi Arabia. The managers have noticed that women are generally paid much less than men in Saudi Arabia, and they suggest that hiring women would be more efficient than hiring men. How should you respond?
When a natural disaster hits the midwestern United States, where most of the U.S. butter is produced, what happens to the U.S. production possibility curve for guns and butter?
What argument underlies the general laissez-faire policy argument?
Steve can bake either 4 loaves of bread or 8 dozen cookies a day.Sarah can bake either 4 loaves of bread or 4 dozen cookies a day. Show, using production possibility curves, that Steve and Sarah would be better off specializing in their baking activities and then trading, rather than baking only
True or false? Two countries can achieve the greatest gains from trade by each producing the goods for which it has a comparative advantage and then trading those goods.
How does globalization reduce the costs of production?
Is it likely that all U.S. jobs one day will have moved abroad?Why or why not?
John, your study partner, is telling you that the best way to allocate property rights is through the market.How do you respond?
Which would be more likely to attempt to foster individualism:socialism or capitalism?
The uncertainty caused by terrorist attacks makes consumers reluctant to spend on luxury items.This reduces ________. Should the missing words be demand for luxury goods or quantity of luxury goods demanded?
Explain the effect of each of the following on the demand for new computers:1. The price of computers falls by 30 percent.2. Total income in the economy rises.
Derive a market demand curve from the following two individual demand curves: Price $10 9 8765432 1 D Dz 0 1 2 3 4 5 6 7 8 9 10 Quantity
Assume that the price of gasoline rises, causing the demand for hybrid cars to rise. As a result, the price of hybrid cars rises. This makes _______ rise. Should the missing words be the supply or the quantity supplied?
Explain the effect of each of the following on the supply of romance novels:1. The price of paper rises by 20 percent.2. Government provides a 10 percent subsidy to book producers.
Demonstrate graphically the effect of a heavy frost in Florida on the equilibrium quantity and price of oranges.
Is the marginal social benefit of a good that exhibits positive externalities greater or less than the private social benefit of that good? Why?
How would an economist likely respond to the statement “There is no such thing as an acceptable level of pollution”?
Would a high tax on oil significantly reduce the amount of pollution coming from the use of oil? Why or why not?
The marginal cost, marginal social cost, and demand for fish are represented by the curves in the graph below. Suppose that there are no restrictions on fishing.a. Assuming perfect competition, demonstrate graphically what the catch is going to be, and at what price it will be sold.b. What are the
Which is more efficient: a market incentive program or a direct regulatory program? Why?
There’s a gas shortage in Gasland. You’re presented with two proposals that will achieve the same level of reduction in the use of gas. Proposal A would force everybody to reduce their gas consumption by 5 percent. Proposal B would impose a 50-cent tax on the consumption of a gallon of gas,
List the public-good aspects (if any) of the following goods: safety, street names, and a steak dinner.
Why are both nonexcludability and nonrivalry important elements of public goods?
Why are voluntary contributions to provide for public goods such as city parks unlikely to lead to an efficient quantity of parks in a city?
Use the table below, which shows the demand for a public good in an economy consisting of two households, A and B, to answer a to d below.a. Graph the individual demand curves and the market demand curve.b. What would make you doubt that the table is an accurate reporting of the individual demand
If you are willing to pay $5,000 for a used car that is a“cherry” and $1,000 for a used car that is a “lemon,” how much will you be willing to offer to purchase a car if there is a 50 percent chance that the car is a lemon? If owners of cherry cars want $4,000 for their cherries, how will
Give three examples of signaling in the real world.
Automobile insurance companies offer low-premium contracts with high deductibles and high-premium contracts with low deductibles. How is this an example of screening?
The book titles this chapter “Market Failure versus Government Failure.”a. Does the fact that the author spends most of the chapter discussing market failure rather than government failure suggest an ideological bias in the book?b. If so, how would you characterize that bias? (Austrian)
Institutional economists define economics as the study of how people use institutions to socially interact in the process of extracting materials from the biophysical world to produce and exchange goods and services to reproduce culture and better the human condition. If you accept this definition
Post-Keynesians suggest that contractual agreements might be a way to deal with asymmetric information.a. Name a business or consumer transaction where asymmetric information might occur.b. How could a contractual agreement overcome the problems of asymmetric information in that market?c. Would
Water privatization in South Africa has been guided by what the World Bank calls the “cost recovery” approach:Water should be made available to people only if the company providing it can recover its costs plus a profit.In 1995, private companies began taking over the provision of water in
Most economists believe that the federal gasoline tax should be raised to $1 per gallon or higher. What do you suppose were their reasons?
In his book At the Hand of Man, Raymond Bonner argues that Africa should promote hunting, charging large fees for permits to kill animals (for example, $7,500 for a permit to shoot an elephant).a. What are some arguments in favor of this proposal?b. What are some arguments against?
Suppose an air-quality law is passed that requires 3.75 percent of all the cars sold to emit zero pollution.a. What would be the likely impact of this law?b. Can you think of any way in which this law might actually increase pollution rather than decrease it?c. How might an economist suggest
Should government eliminate the Food and Drug Administration’s role in restricting which drugs may be marketed?Why or why not?
Financial analysts are not currently required to be licensed.Should they be licensed? Why or why not?
Scientists have identified a gene that accounts for 5 percent of thrill-seeking behavior. People with this gene are likely to take more risks such as smoking and bungee jumping in search of the next thrill. Provide two arguments—one for and one against—requiring people to undergo testing to
List five ways you are affected on a daily basis by government intervention in the market. For what reason might government be involved? Is that reason justified?
Would a high tax on oil significantly reduce the total amount of pollution in the environment?
A debate about dairy products concerns the labeling of milk produced from cows that have been injected with the hormone BST, which significantly increases milk production.Since the FDA has determined that this synthetically produced copy of a milk hormone is indistinguishable from the hormone
Why does the existence of an externality prevent the market from working properly?
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