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microeconomics principles applications

Microeconomics 4th Edition R. Glenn Hubbard, Anthony Patrick O’Brien - Solutions

In a speech, Federal Reserve Chairman Ben Bernanke made the following observation: “Although we Americans strive to provide equality of economic opportunity, we do not guarantee equality of
A U.S. Census Bureau report showed that 46 percent of households living below the poverty line owned their own homes, 76 percent lived in dwellings with air-conditioning, about 75 percent owned cars,
Suppose that a country has 20 million households. Ten million are poor households that each have labor market earnings of $20,000 per year, and 10 million are rich households that each have labor
Suppose that Congress and the president decide on a policy of bringing about a perfectly equal distribution of income.What factors might make this policy difficult to achieve?If it were possible to
Use the following Lorenz curve graph to answer the questions:a. Did the distribution become more equal in 2010 than it was in 2009, or did it become less equal? Briefly explain.b. If area A = 2,150,
[Related to the Chapter Opener on page 581] In his column on MSNBC.com, Robert J. Samuelson wrote, “As for what’s caused greater inequality, we’re also in the dark.The Reagan and Bush tax cuts
[Related to Solved Problem 18.4 on page 602] Evaluate the following statement: “Policies to redistribute income are desperately needed in the United States. Without such policies, the more than 15
Compare the distribution of income in the United States with the distribution of income in other high-income countries.
What is a Lorenz curve? What is a Gini coefficient? If a country had a Gini coefficient of 0.48 in 1960 and 0.44 in 2012, would income inequality in the country have increased or decreased?
[Related to the Don’t Let This Happen to You on page 594]According to an article in the New York Times, during 2009 some New Yorkers were deciding to buy existing condominiums(condos) rather than
Governments often have multiple objectives in imposing a tax. In each part of this question, use a demand and supply graph to illustrate your answer.a. If the government wants to minimize the excess
[Related to the Making the Connection on page 595]Use a demand and supply model for the labor market to show the effect of the corporate income tax on workers.What factors would make the deadweight
[Related to Solved Problem 18.3 on page 596] Explain whether you agree with the following statement: “For a given demand curve, the excess burden of a tax will be greater when supply is less price
[Related to Solved Problem 18.3 on page 596] Use the following graph of the market for cigarettes to answer the questions:a. If the government imposes a 10-cents-per-pack tax on cigarettes, will the
According to the 2004 Economic Report of the President,“The actual incidence of a tax may have little to do with the legal specification of its incidence.” Briefly explain what this statement
[Related to the Making the Connection on page 592]Suppose the government eliminates the income tax and replaces it with a consumption tax. Think about the effect of this on the market for
Almost all states levy sales taxes on retail products, but about half of them exempt purchases of food. In addition, virtually all services are exempt from state sales taxes.Evaluate these tax rate
[Related to the Making the Connection on page 592]Currently, the Social Security and Medicare programs are funded by payroll taxes rather than by the federal personal income tax. In 2011, the payroll
[Related to the Making the Connection on page 589]President Barack Obama in his September 2011 deficit reduction plan proposed the so-called “‘Buffett Rule,’named after billionaire Warren
Use the information in Table 18.2 on page 588 to calculate the total federal income tax paid, the marginal tax rate, and the average tax rate for people with the following incomes.(For simplicity,
Many state governments have begun using lotteries to raise revenue. If we think of a lottery as a type of tax, is a lottery likely to be progressive or regressive? What data would you need to
On April 1, 2009, a 62-cent increase in the federal cigarette tax went into effect. The following data are from the Gallup-Healthways Well-Being Index for 2008:Based on these data, would the federal
In September 2011, President Barack Obama proposed a new deficit reduction plan that included increasing tax rates on families earning $250,000 or more. If President Obama’s proposals are enacted,
Which type of tax raises the most revenue for the federal government? Which type of tax raise the most revenue for state and local governments?
Nobel Laureate James Buchanan, who is one of the key figures in developing the public choice model, wrote: “The relevant difference between markets and politics does not lie in the kinds of
Is the typical person likely to gather more information when buying a new car or when voting for a member of the House of Representatives? Briefly explain.
An article in the Economist magazine made the following observation: “In fact, as public choice theory shows, government has a whole set of special decision-making problems that can make the normal
An article in the Economist magazine made the following observation:People often complain that it is simplistic for economics to assume that individuals are rational and self-interested. Of course
Discuss the distribution of income in the United States and understand the extent of income mobility.
Elasticity, page 594 Understand the effect of price elasticity on tax incidence.
Understand the tax system in the United States, including the principles that governments use to create tax policy.
Describe the public choice model and explain how it is used to analyze government decision making.
In a competitive labor market, imposing a minimum wage should reduce the equilibrium level of employment.Will this also be true if the labor market is a monopsony?Briefly explain.
In 1879, economist Henry George published Progress and Poverty, which became one of the best-selling books of the nineteenth century. In this book, George argued that all existing taxes should be
Many people have predicted, using a model like the one in panel (b) of Figure 17.12 on page 570, that the price of natural resources should rise consistently over time in comparison with the prices
[Related to the Making the Connection on page 567]What effect did the incentive pay system have on Safelite’s marginal cost of installing replacement car windows? If all firms that replace car
[Related to the Making the Connection on page 563]Why might employers be more likely to interview a job applicant with a white-sounding name than an applicant with an African-American–sounding
[Related to Solved Problem 17.4 on page 561] In most universities, economics professors receive larger salaries than English professors. Suppose that the government requires that from now on, all
[Related to Solved Problem 17.4 on page 561] Use the following graphs to answer the questions:a. What is the equilibrium quantity of trash collectors hired, and what is the equilibrium wage?b. What
[Related to the Making the Connection on page 559]Some policymakers have proposed that all firms be required to make contributions to retirement plans for their employees. If such a proposal is
The following table is similar to Table 17.2 on page 560, except that it includes the earnings of Asian males and females.Does the fact that Asian males are the highest-earning group in the table
Prior to the early twentieth century, a worker who was injured on the job could collect damages only by suing his employer. To sue successfully, the worker—or his family, if the worker had been
Goldwyn, a movie producer during Hollywood’s Golden Age, once remarked about one of his stars: “We’re overpaying him, but he’s worth it.”a. In what sense did Goldwyn mean that he was
[Related to the Making the Connection on page 557]According to Alan Krueger, an economist at Princeton University, the share of concert ticket revenue received by the top 1 percent of all acts rose
In early 2007, Nick Saban agreed to leave his job as head coach of the Miami Dolphins National Football League team to take a job as head football coach at the University of Alabama at a salary of $4
Buster Olney, a columnist for ESPN.com, wondered why baseball teams pay the teams’ managers and general managers less than they pay most baseball players:About two-thirds of the players on the [New
[Related to the Don’t Let This Happen to You on page 556]Joe Morgan is a sportscaster and former baseball player.After he stated that he thought the salaries of Major League Baseball players were
[Related to the Chapter Opener on page 545] A student remarks, “I don’t think the idea of marginal revenue product really helps explain differences in wages. After all, a ticket to a baseball
Writing on the Baseball Prospectus Web site, Dan Fox argued,“What a player is really worth depends a great deal on the teams that are interested in signing him.” Do you agree? Shouldn’t a
The journalist Michael Kinsley argued, “Free-market capitalism. . . works well for almost all by rewarding some people more than others.” Discuss whether you agree.From Michael Kinsley, “Curse
Is the fraction of U.S. workers in labor unions larger or smaller than in other countries?
In what sense do employers who discriminate pay an economic penalty? Is this penalty enough to eliminate discrimination?Briefly explain.
Define economic discrimination. Is the fact that one group in the population has higher earnings than other groups evidence of economic discrimination? Briefly explain.
In 541 a.d., an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by flea-infested rats that often lived on ships, ports were hit particularly hard. In some ports,
A newspaper article summarizes a study showing that “a standout kindergarten teacher is worth about $320,000 a year. That’s the present value of the additional money that a full class of students
Sean Astin, who played Sam in the Lord of the Rings movies, wrote the following about an earlier film he had appeared in: “Now I was in a movie I didn’t respect, making obscene amounts of money
Reread the discussion on page 555 of changes in the salaries of software engineers. Use a graph to illustrate this situation. Make sure your graph has labor demand and supply curves for 2009 and 2011
[Related to the Making the Connection on page 554]Over time, the gap between the wages of workers with college degrees and the wages of workers without college degrees has been increasing.
If the labor supply curve shifts to the left and the labor demand curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment?Illustrate your answer with
If the labor demand curve shifts to the left and the labor supply curve remains unchanged, what will happen to the equilibrium wage and the equilibrium level of employment?Illustrate your answer with
State whether each of the following events will result in a movement along the market supply curve of agricultural labor in the United States or whether it will cause the market supply curve of
The fraction of the U.S. population older than age 65 is increasing.What is the likely effect of the aging of the U.S.population on the supply curve for labor?
Suppose that a large oil field is discovered in Michigan. By imposing a tax on the oil, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the
Most labor economists believe that many adult males are on the vertical section of their labor supply curves. Use the concepts of income and substitution effects to explain under what circumstances
A columnist writing in the Wall Street Journal during the recession of 2007–2009 made the following observation about the “price of time”:The recession is doing funny things with the price of
Daniel was earning $65 per hour and working 45 hours per week. Then Daniel’s wage rose to $75 per hour, and as a result, he now works 40 hours per week. What can we conclude from this information
What are the three most important variables that cause the market supply curve of labor to shift?
How can we measure the opportunity cost of leisure? What are the substitution effect and the income effect resulting from a wage change? Why is the supply curve of labor usually upward sloping?
Baseball writer Rany Jazayerli assessed the Kansas City Royals outfielder Jose Guillen as follows: “Guillen has negative value the way his contract stands.” How could a baseball player’s
State whether each of the following events will result in a movement along the market demand curve for labor in electronics factories in China or whether it will cause the market demand curve for
[Related to Solved Problem 17.1 on page 548] Complete the following table for Terrell’s Televisions:a. From the information in the table, can you determine whether this firm is a price taker or a
Frank Gunter owns an apple orchard. He employs 87 apple pickers and pays them each $8 per hour to pick apples, which he sells for $1.60 per box. If Frank is maximizing profits, what is the marginal
What are the five most important variables that cause the market demand curve for labor to shift?
What is the difference between the marginal product of labor and the marginal revenue product of labor?
In what sense is the demand for labor a derived demand?
Show how equilibrium prices are determined in the markets for capital and natural resources.
Discuss the role personnel economics can play in helping firms deal with human resources issues.
Use demand and supply analysis to explain how compensating differentials, discrimination, and labor unions cause wages to differ.
Explain how equilibrium wages are determined in labor markets.
Explain how people choose the quantity of labor to supply.
Explain how firms choose the profitmaximizing quantity of labor to employ.
Thomas Kinnaman, an economist at Bucknell University, has analyzed the pricing of garbage collection:Setting the appropriate fee for garbage collection can be tricky when there are both fixed and
[Related to the Chapter Opener on page 519] If you visited Disneyland between 1955 and 1982, you could not go on most rides without buying a ticket for the ride—in addition to the ticket necessary
During the nineteenth century, the U.S. Congress encouraged railroad companies to build transcontinental railways across the Great Plains by giving them land grants. At that time, the federal
Some professional sports teams charge fans a one-time lump sum for a personal seat license. The personal seat license allows a fan the right to buy season tickets each year. No one without a personal
[Related to the Making the Connection on page 532]Would you expect a publishing company to use a strict cost-plus pricing system for all its books? How might you find some indication about whether a
An article in the Wall Street Journal gave the following explanation of how products were traditionally priced at Parker-Hannifin Corporation:For as long as anyone at the 89-year-old company could
According to an article in the Wall Street Journal, McDonald’s and Burger King have much larger markups on French fries and sodas than on hamburgers. Is it likely that the companies believe that
One leading explanation for odd pricing is that it allows firms to trick buyers into thinking they are paying less than they really are. If this is true, in what types of markets and among what
Why did the Walt Disney Company switch from charging for admission to Disneyland and charging for the rides to charging for admission and not charging for the rides?
What is cost-plus pricing? Is using cost-plus pricing consistent with a firm maximizing profits? How does the elasticity of demand affect the percentage markup?
What is odd pricing?
Draw a graph that shows producer surplus, consumer surplus, and deadweight loss (if any) in a market where the seller practices perfect price discrimination. Profit-maximizing firms select an output
[Related to the Making the Connection on page 530]Some Netflix subscriptions have a higher price and allow more—or unlimited—movies to be rented per month. Others have a lower price and allow
Briefly explain whether supermarket coupons are a form of price discrimination.
[Related to the Chapter Opener on page 519] Why does Walt Disney World charge a lower admission price for children aged 3 to 9 than for adults? Why does Disney categorize a 10-year-old as an adult
[Related to the Making the Connection on page 527]Assume that the marginal cost of admitting one more student is constant for every university. Also assume that at every university, the demand for
[Related to Solved Problem 16.2 on page 524] In addition to discounting the price of computers purchased by students and faculty, Apple also sells certain computer models only to schools and
[Related to Solved Problem 16.2 on page 524] In the fall of 2011, Apple was offering a $100 discount to students on MacBook Pro laptops but only $50 on MacBook Air laptops. The MacBook Air is a very
[Related to Solved Problem 16.2 on page 524] Use the graphs on the next page to answer the following questions.a. If this firm wants to maximize profits, what price will it charge in Market 1, and

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