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microeconomics principles applications

Questions and Answers of Microeconomics Principles Applications

Zinc is a vital input to the production of steel. Because the cost of mining zinc varies from one mine to another, the shutdown price varies too. The world price of zinc decreased from roughly $2,300
When the price of zinc dropped below $1,900, the price dropped below Alcoa’s price, the company. Application 3 STRADDLING THE ZINC COST CURVE APPLYING THE CONCEPTS: What is the shutdown
Consider the supply of shipping services. The law of supply suggests that as the price of shipping increases, the quantity of shipping services will increase. At a relatively low freight rate of $2
Pu’er is a city in southern China that is famous for its tea, but is now getting a reputation for its coffee. Between 2009 and 2012, the world price of coffee beans nearly doubled. Farmers in
As the price of shipping services increases, the quantity supplied ________ as firms deploy ships and as each ship travels ________. Application 4 SHORT-RUN SUPPLY CURVE FOR CARGO APPLYING THE
As we saw in the chapter opener, publicity about the health benefits of antioxidants in blueberries increased the demand for blueberries. In the short run, the supply of blueberries is inflexible
An increase in the price of coffee increased the quantity supplied as land was converted from growing ________ to growing coffee. Application 5 CHINESE COFFEE GROWERS OBEY THE LAW OF
Between 2000 and 2009, concerns about the health effects of trans-fatty acids decreased the demand for margarine. Although total consumption in the United States decreased by roughly half, the price
A reliable predictor of a consumer’s willingness to pay for a movie is the consumption of. Application 4 WHY DOES MOVIE POPCORN COST SO MUCH? APPLYING THE CONCEPTS #4: When do firms have an
If the market price equals a firm’s break-even price, the firm earns _________ economic profit because _________ equals _________.
In 1993, seven Native American Tribes in Michigan cut a deal with the state. In exchange for being granted a monopoly in Vegas-style casino gambling, the tribes agreed to pay the state and local
We expect the owner of a major league baseball (MLB) team to choose the quantity (the number of fans at the game) at which marginal revenue equals marginal cost (MR = MC). The marginal cost of an
The profit-sharing agreement between Michigan and the Native American tribes for casinos is an example of . Application 2 RENT SEEKING FOR TRIBAL CASINOS APPLYING THE CONCEPTS #2: What is the value
When a patent expires, new firms enter the market, and the resulting competition for consumers decreases prices and increases quantities. In the pharmaceutical drug market, when the patent for a
That $4 bucket of popcorn you get in the movie theater costs less than $0.10 to produce. What explains the 4,000 percent markup? Economists have struggled with this question for years, and now we
Recall the Application on Native American casinos in Michigan. Why aren’t similar deals proposed for new clothing stores, music stores, or auto repair shops? Application 2 RENT SEEKING FOR TRIBAL
The marginal cost of an additional baseball fan is zero, so the profit-maximizing condition simplifies to _________. Application 1 MARGINAL REVENUE FROM A BASEBALL FAN APPLYING THE CONCEPTS #1: How
Consider a baseball team that has a ticket price of $45 and sells 30,000 tickets at this price. The slope of the demand curve is - $0.002. The typical fan purchases $25 worth of merchandise that
Consider the market for television signals provided to residential consumers. How will an existing cable-TV provider respond to the entry of a firm that provides TV signals via satellite? In most
Perfectly competitive firms sell a product, while monopolistically competitive firms sell a product.
One way to enter a monopolistically competitive market is to get a franchise for a nationally advertised brand. If you’d like to get into the economy motel market, you could pay a $35,000 franchise
Consider the phenomenon of “happy hour.” Many bars and restaurants near workplaces face an increase in demand for food and drink around 5:00 P.M., and many cut their prices for an hour or two.
To enter the motel market by opening a Motel 6, you’ll pay a one-time franchise fee of $ and then pay percent of your sales. Application 2 OPENING A MOTEL APPLYING THE CONCEPTS #2: Are
Arrows up or down. In the application on consumer loans in South Africa, the loan uptake rate as the interest rate decreased and when the model on the offer was switched from a man to a woman.
In the long-run equilibrium in a perfectly competitive market, price is equal to both ________ and ________.
Consider the numbers provided in Application 4 on South African consumer loans. Suppose a lender initially charges an interest rate of 10 percent and uses male models in its advertisements.The firm
A South African consumer lender decided to use a mass mailing of 53,000 loan offers to test the sensitivity of consumers to variations in interest rates and other features of loan offers. The
The phenomenon of “happy hour” pricing (________ prices when demand is relatively high) results from relatively ________ (elastic/inelastic) demand. Application 3 HAPPY HOUR PRICING APPLYING
Arrows up or down: The entry of a satellite TV firm consumer surplus, in part because the cable company the quality of service while either price or price by a relatively small amount. Application
Consider the “Satellite versus Cable” Application. Use a graph to show that the entry of satellite TV decreases the profit-maximizing price of a cable TV company from $40 to $35. Application
At the beginning of the nineteenth century, high overland transportation costs protected salt producers from competition with one another, generating local salt monopolies. Over the course of the
In two successive months (November and December), a Florida tire retailer listed prices for 35 types of tires in newspaper advertisements. In November the average price was $45, and in December the
An economics professor discovered three students cheating on the final exam. Speaking to the students individually in his office, he gave each student two options:1 If the student confessed, he or
A careful study of the retail tire market suggests that low-price guarantees __________ (increase/decrease) prices by about __________ (1, 10, 25, 37) percent. Application 2 LOW-PRICE GUARANTEE
Microsoft has a virtual monopoly in the market for personal computer operating systems and business software. But there is a constant threat that another firm will launch competing products, so
Between 1993 and 2014, the National Fluid Milk Producers, an industry group financed by a tax on milk producers, ran the Got Milk? advertising campaign. Milk is a standardized good, so advertising
Microsoft is a(n) _________ (secure/insecure) monopolist, and the limit price is roughly _________ (10, 20, 40, 60, 90, 100) percent of the pure monopoly price. Application 4 MICROSOFT AS AN INSECURE
The salt cartels of the nineteenth century were _________ (short/long) lived, in part because individual firms _________ on the cartel. 1 Application FAILURE OF THE SALT CARTEL THE CONCEPTS #1: Why
In 2008, the nation’s only two satellite radio providers, Sirius Satellite Radio and XM Satellite Radio, merged into a single firm. Together the two firms had 14 million subscribers, each paying
In 1998, Pennzoil Motor Oils purchased Quaker State Motor Oils in an acquisition valued at $1 billion. The merger brought together two of the five brands of premium motor oil, with a combined market
In 2013 the Federal Trade Commission (FTC) approved the merger of office supply superstores Office Depot and OfficeMax. The FTC concluded that the merger of the second and third largest office
The merger of companies with two of the top five brands of motor oil (Pennzoil and Quaker State) increased the price of one of the brands by roughly ________ (1, 5, 20, 50) percent. Application
The FTC ________ the merger of the second and third largest office supplies superstores because of increased competition in the office-supplies market from ________. Application 4 MERGER OF OFFICE
The Genetic Information Nondiscrimination Act (GINA) protects people from genetic discrimination in insurance, but not in insurance. Application 3 GENETIC DISCRIMINATION APPLYING THE CONCEPTS #3:
Genetic discrimination occurs when an insurance company treats a person differently because he or she has a gene mutation that increases the risk of an inherited disorder. At the national level, the
A recent study explores the relationship between consumer search and income. The opportunity cost of search depends on income because 1 hour of search means 1 less hour available for earning income.
Professional baseball pitchers are like used ________ because there is ________ information: A player’s ________ has better information about the pitcher’s health and likelihood of injury.
A study of consumer search for liquid detergents estimated that a doubling of income decreased the amount of search by roughly _________ (1, 14, 50, 70) percent. Application 5 INCOME AND CONSUMER
Car insurance increases traffic because insured drivers _________.
The clearing of space debris is an example of a _________ that suffers from the _________ problem. Application 1 CLEARING SPACE DEBRIS APPLYING THE CONCEPTS #1: How can we respond to the free-rider
The labor agreements of the National Basketball Association favor players with close to the (lowest/average/median/highest) salaries. 5 THE MEDIAN VOTER IN THE NBA APPLYING THE CONCEPTS #5: What is
The National Basketball Association (NBA) uses labor agreements between players and owners to control player salaries. In the absence of a collective bargaining agreement regarding salaries, the
One option to address the problem of CO2 in the atmosphere is large machines to wash CO2 out of the air. The removal of carbon will at least partly offset current emissions, and could actually be
If a CO2 washing machine can trap CO2 at a cost of $30 per ton, a gasoline tax of roughly __________ per gallon of gasoline would cover the cost of capturing the CO2 it generates. Application
International shipping is responsible for about 3% of global CO2 emissions, and there are many ways to reduce (abate) CO2 emissions. As a tool for comparing the cost of alternative reduction methods,
Arrange the following CO2 abatement techniques for international shipping in order of increasing MAC (marginal abatement cost): reduce speed, switch to gas-powered engines, propeller maintenance, tap
In 2011, the average salary in Major League Baseball (MLB) was $3.3 million. Are players really worth that much? A team will pay $3.3 million for a player only if the player’s marginal revenue
Under President Barak Obama’s 2014 plan to expand EITC, most of the additional workers are _________ or _________ and do not have _________. Application 5 EXPANDING THE EITC APPLYING THE CONCEPTS
Fill the blanks with 75, 100, 117, 200, or 360. In major league baseball, the marginal revenue product of the typical free agent is roughly ________ percent of his salary, compared to ________
In response to stagnant wages for low-income workers, policymakers have proposed the expansion of wage subsidy programs. Under President Barack Obama’s 2014 plan, EITC coverage would be expanded to
The wage premium for beautiful people is about _________ percent, while the wage penalty for unattractive people is about _________ percent. Application 3 THE BEAUTY PREMIUM APPLYING THE CONCEPTS
Economists have found that tariffs in the United States fall most heavily on lower-income consumers. In the United States, tariffs are very high on textiles, apparel items, and footwear. These goods
Do imports from China really make a difference in U.S. labor markets? Economists David Autor, David Dorn, and Gordon Hanson examined detailed data on Chinese imports into local communities. Some
In July 2014, the World Trade Organization ruled that the United States had violated international trade laws by imposing excessive tariffs on Chinese imports on a range of goods, including solar
From the perspective of the government, a quota is better than a tariff because you raise money. _________ (True/False)
During the recent financial crisis, the U.S. government took strong steps to keep the automobile industry alive. These efforts appeared to be a great success story, with record U.S. exports of
Countries will always export the goods in which they have comparative advantage. _________ (True/False)
If it rains very hard during a major storm, the drains in the streets may not be able to handle all the water and flooding will temporarily occur. Use this analogy to explain why the pace of imports
In Chapter 7 of the 2015 Economic Report of the President (http://www.gpo.gov/fdsys/pkg/ERP-2015/pdf/ERP-2015-chapter7.pdf), the authors of the report present evidence that free-trade agreements have
Trade in international property (for example, patents, licenses, royalty agreements) has been particularly controversial. The 2015 Economic Report of the President discusses this issue in Chapter 7
In a famous tale, French economist Frédéric Bastiat (1801–1850) wrote a fake petition for relief from trade for the candle makers. They were complaining that the sun was hurting their business.
The National Atmospheric and Space Administration (NASA) estimates that over 20,000 pieces of junk at least as large as a softball are orbiting the earth. There are roughly 300,000 pieces of orbiting
As price decreases and we move downward along the market demand for cigarettes, the quantity of cigarettes demanded increases for two reasons. First, people who smoked cigarettes at the original
One role of government in a market economy is to enforce property rights. Roughly 10 percent of the world’s population lives in urban squatter settlements, with little security in housing. A
When a meteoroid, a chunk of debris in the solar system, enters Earth’s atmosphere, it becomes a meteor, and if a meteor reaches the ground and survives impact, it becomes a meteorite. Meteorites
Recall the chapter opener about the nation of Latvia, which in the 1990s was much less productive than nations in the European Community. The question is, Why would a member of the EC, whose workers

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