Microeconomics 5th Global Edition R. Glenn Hubbard; Anthony Patrick O'Brien - Solutions

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Bank robberies are on the rise in New Jersey, and according to the FBI, this increase has little to do with the economic downturn. The FBI claims that banks have allowed themselves to become easy targets by refusing to install clear acrylic partitions, called “bandit barriers,” which separate
Briefly discuss each of the following economic ideas: People are rational; people respond to incentives; and optimal decisions are made at the margin.
[Related to the Making the Connection on page 625] President Barack Obama proposed legislation that Congress failed to enact that would have included the so-called “Buffett Rule,” named after billionaire Warren Buffett, who noted that he was paying a lower tax rate than his secretary. The
Use the information in Table 18.2 on page 624 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, assume that these people have no exemptions or deductions from their incomes.)a. $25,000b. $125,000c.
The French philosopher Voltaire is often quoted to have said that the lottery is a tax on stupidity. Why is it reasonable to label the lottery as a tax? With reference to this analogy, do you think this tax would be regressive or progressive?
Suppose that the Japanese government decides to increase the VAT on books, and that the following table represents the percentages of income spent in books across different income groups:Percentage of Income Spent in Books, by Annual Individual Income Income Groups Percentage Spent in Books Less
Why does the federal government raise more tax revenue from taxes on individuals than from taxes on businesses?
Briefly discuss each of the five goals and principles governments consider when deciding which taxes to use.
What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the effect of a change in taxes on economic behavior?
In 2012, Congress and President Barack Obama passed legislation raising tax rates on families earning $450,000 or more. Did this change in the law make the U.S. tax system more progressive or less progressive? Be sure to provide a definition of progressive tax and regressive tax in your answer.
Which type of tax raises the most revenue for the federal government? Which type of tax raises the most revenue for state and local governments?
Nobel Laureate James Buchanan, who was 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 values/interests that persons pursue, but in the conditions under which they pursue their various
In the early nineties most Italian political parties dissolved, beset by major corruption scandals. What type of government failure do you think this is evidence of?
An article in the Economist magazine on the work of James Buchanan made the following observation: “It was important … to understand the ways that government could fail systematically.”a. What does government failure mean in this context?How does public choice theory help us to understand how
An article in the Economist magazine made the following observation: “Public-choice economics assumes that government figures are merely human.” What are the implications of this assumption for understanding government policy?Source: “The Voice of Public Choice,” Economist, January 19, 2013.
According to Hollanders and Koster, in 30 OECD countries, between 1980–2005, an increase in the age of median voters has not been significantly associated with an increase in retirement spending relative to GDP. It has led to lower benefits per retiree. Does this evidence contradict the median
It can be said that in a dictatorship the only individual with voting powers is the dictator. Therefore, unless the dictator’s preferences are somehow inconsistent, the dictatorship system ensures that the voter’s preferences are translated into policy choices. Do you think that a dictatorship
Will the preferences shown in the following table lead to a voting paradox? Briefly explain.Policy Lena David Kathleen Cancer research 1st 2nd 3rd Mass transit 2nd 1st 1st Border security 3rd 3rd 2nd
What is the relationship between market failure and government failure?
What is rent seeking, and how is it related to regulatory capture?
What is the difference between the voting paradox and the Arrow impossibility theorem?
What is the public choice model?
The price of gold is extremely volatile. Yet, the world supply of gold is fixed; as a result, its supply should be inelastic. Do you see any contradiction at work in this particular market?
The total amount of oil in the earth is not increasing. Does this mean that in the market for oil, the supply curve is perfectly inelastic? 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 replaced with a single tax on land. Tax incidence refers to the actual division of the burden of a tax
Many people have predicted, using a model like the one in panel (b) of Figure 17.12 on page 606, that the price of natural resources should rise consistently over time in comparison with the prices of other goods because the demand curve for natural resources is continually shifting to the right,
Adam operates a pin factory. Suppose Adam faces the situation shown in the following table and the cost of renting a machine is $550 per week.a. Fill in the blanks in the table and determine the profitmaximizing number of machines for Adam to rent.Briefly explain why renting this number of machines
What is the marginal productivity theory of income distribution?roblems and pplications
Is the defense industry a monopsony? Explain.
In equilibrium, what determines the price of capital? What determines the price of natural resources? What is an economic rent?
[elated to the Making the onnection on page 603]What effect did the incentive pay system have on Safelite’s marginal cost of installing replacement car windows? If all firms that replace car windows adopted an incentive pay system, what would happen to the price of replacing automobile glass? Who
For years, the Goodyear Tire & Rubber Company compensated its sales force by paying a salesperson a salary plus a bonus, based on the number of tires he or she sold. Eventually, Goodyear made two changes to this policy: (1) The basis for the bonus was changed from the quantity of tires sold to the
In most jobs, the harder you work, the more you earn.Some workers would rather work harder and earn more;others would rather work less hard, even though as a result they earn less. Suppose, though, that all workers at a company fall into the “work harder and earn more” group.Suppose also that
Many companies that pay workers an hourly wage require some minimum level of acceptable output. Suppose a company that has been using this system decides to switch to a piece-rate system under which workers are compensated on the basis of how much output they produce. Is it likely that workers
According to a study, the number of jobs in which firms used bonuses, commissions, or piece rates to tie workers’pay to their performance increased from an estimated 30 percent of all jobs in the 1970s to 40 percent in the 1990s.Why would systems that tie workers’ pay to how much they produce
If piece-rate or commission systems of compensating workers have important advantages for firms, why don’t more firms use them?roblems and pplications
Do you think a firm can increase the productivity of its employees without spending money in training schemes?Explain how this could be possible.
What is personnel economics?
Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University, recently noted that even among college graduates, unemployment rates can vary quite a bit. However, Carnevale also found that unemployment rates during 2010 and 2011 “were 9 to 10 percent for
Daniel Hamermesh is an economist at the University of Texas who has done a great deal of research on labor markets. According to an article in Forbes, Hamermesh writes that “below-average-looking men earn 17% less than those considered good-looking, while below-average-looking females earn 12%
According to data of the Office for National Statistics, in the United Kingdom at the end of 2011 the unemployment rate for black 16 to 24 year olds available for work (i.e., not students) was two times than that for their white counterparts.The unemployment rate for the former group was almost
[elated to the Making the onnection on page 598]Why might employers be more likely to interview a job applicant with a white-sounding name than an applicant with an African-American–sounding name? Leaving aside legal penalties, will employers who follow this practice incur an economic penalty?
[elated to Solved Problem 17.4 on page 597] In most universities, economics professors receive larger salaries than English professors. Suppose that the government requires that from now on, all universities must pay economics professors the same salaries as English professors. Use demand and
[elated to Solved Problem 17.4 on page 597] 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 is the equilibrium quantity of receptionists hired, and what is the equilibrium wage?c. Briefly
Lawrence Katz, an economist at Harvard, was quoted in a newspaper article as arguing that differences between the incomes of male physicians and female physicians “are largely explained by individual choices.” He also noted that discrimination could account for part of the gap “though it
During the 1970s, many women changed their minds about whether they would leave the labor force after marrying and having children or whether they would be in the labor force most of their adult lives. In 1968, the National Longitudinal Survey asked a representative sample of women aged 14 to 24
The following table is similar to Table 17.2 on page 596, except that it includes the earnings of Asian males and females. Does the fact that Asian males are the highestearning group in the table affect the likelihood that economic discrimination is the best explanation for why earnings differ
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 killed—had to show that the injury was due to the employer’s negligence, that the worker did not
[elated to the hapter Opener on page 581] Sam 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 overpaying this star?b. If he was overpaying the star, why
[elated to the Making the onnection on page 594]Why are there superstar basketball players but no superstar plumbers?
[elated to the Making the onnection on page 594]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 from 26 percent in 1982 to 56 percent in 2003. Does this information indicate that the top acts in 2003
Suppose that a university has recently had and opening for two lecturer positions, which are required to be filled starting from the next academic year. The interview panel has shortlisted five candidates, and then has offered the positions to two of them: a man and a woman. After one month the
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 York] Mets’ roster will make more money than [manager Willie] Randolph; Willie will get somewhere
[elated to the Don’t Let This Happen to You on page 594] It is a well known fact that professional football players are paid much more than professional teachers, and keeping marginal values in mind may help in understanding why this occurs. However, why would Barcelona F.C.then pay very
[elated to the hapter Opener on page 581] 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 game costs much less than college tuition, yet baseball players are paid much more than college
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 baseball player with a particular level of ability be worth the same to every team? Briefly
Is the fraction of U.S. workers in labor unions larger or smaller than in other countries?roblems and pplications
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.
What is a compensating differential? Give an example.
[elated to the Making the onnection on page 592] If the incomes of veterinarians are falling, why has the number of students enrolling in schools of veterinary medicine in the United States not declined?
In 541 a.d., an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by fleainfested rats that often lived on ships, ports were hit particularly hard. In some ports, more than 40 percent of the population died. The emperor, Justinian, was concerned that the wages of
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 can expect to earn over their careers. This estimate doesn’t take into account social gains, like
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 (five times what a teacher makes, and teachers do infinitely more important work).”Are salaries
Reread the discussion on page 591 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 2013 and that the equilibrium point for each year is clearly indicated.
[elated to the Making the onnection on page 590]Over time, the gap between the wages of workers with college degrees and the wages of workers without college degrees has been increasing. Shouldn’t this gap have increased the incentive for workers to earn college degrees, thereby increasing the
The Japanese population is projected to decrease by 25 percent by 2050, and the elderly proportion of the population to increase from 20 percent to about 40 percent. Illustrate the effects of those changes on the labor market using a graph.roblems and pplications
Suppose the British government decides to change its policy on university education and makes it free for every citizen. This leads to a huge increase in student population.Illustrate the likely effects on the labor market ten years on using a graph.
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 agricultural labor to shift. If the supply curve shifts, indicate whether it will shift to the left or to
A columnist in the New York Times notes that the U.S. labor supply “in the next decade is expected to expand at less than half the pace of the 1960s, 1970s and 1980s.” What explains these changing growth rates in the U.S. labor supply?Source: Eduardo Porter, “The Payoff in Delaying
Suppose that the Italian government decides to take action against the long-standing issue of stagnating population by starting to accept higher numbers of legal migrants from Northern African countries. Also, suppose most of these migrants are in their twenties. How will the Italian labor supply
Do you think it possible for a labor supply curve to be backward bending, rather than simply upward sloping? Briefly explain the circumstances under which such a curve is likely to occur.
A columnist writing in the Wall Street Journal argues that because “hourly wages in real terms” rose, the “price of time” also rose. What is the “price of time”? Is the columnist correct that when real hourly wages rise, the price of time increases? Briefly explain.Source: Brett Arends,
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 about the income effect and the substitution effect of a wage change for Daniel?
What are the three most important variables that cause the market supply curve of labor to shift?roblems and pplications
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?
Human capital is defined in the chapter as the accumulated training and skills that workers possess. But do you think those are the only factors affecting the ability and productivity of workers? For example, may health be considered as human capital? Briefly explain your answer.
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 labor to shift. If the demand curve shifts, indicate whether it will shift to the left or to the right
[elated to Solved Problem 17.1 on page 584] 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 price maker?Briefly explain.b. Use the information in the table to draw a graph like Figure 17.1 on
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 profit, what is the marginal revenue product of the last worker he hired? What is that worker’s marginal product?
What are the five most important variables that cause the market demand curve for labor to shift?roblems and pplications
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?
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 marginal costs of garbage collection.… A curbside price set equal to the average total cost of
[elated to the hapter Opener on page 555] 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 to enter the park. Explain why this pricing strategy earned Disney a lower profit than the current
According to a research note by Judith Holdershaw, Philip Gendall, and Ron Garland (1997), the overwhelming majority of prices (for goods and services) can be defined as odd prices. Their data showed that about 60 percent of prices ended in the digit 9, and a further 30 percent in the digit 5. They
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 seat license can buy season tickets. After the original purchase from the team, the personal seat
[elated to the Making the onnection on page 569]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 publishing company actually was using cost-plus pricing for all its books?
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 recall, Parker used the same simple formula to determine prices of its 800,000 parts—from
Cuba has recently opened new/used car sales for the first time since 1959. However, customers found it very hard to buy those cars, as they reported price markups as high as 400percent, resulting in prices even eight times higher in Cuba than in other Central American countries (and even more in
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 the demand for French fries and sodas is more elastic or less elastic than the demand for hamburgers?
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 explanation is correct, in what types of markets and among what groups of consumers would you be most likely to find odd pricing? Should the government
Give an example of a firm using a two-part tariff as part of its pricing strategy.roblems and pplications
What is cost-plus pricing? Is using cost-plus pricing consistent with a firm maximizing profit? How does the elasticity of demand affect the percentage price markup that firms use?
Yasiel has a monopoly on sales of pizzas in the small town of North Key Largo, Florida. Use the following information on the demand for Yasiel’s pizzas to answer the questions:Price Quantity Demanded$30 0 25 1 20 2 15 3 10 4 5 5 0 6a. If Yasiel can produce pizzas at a constant cost of $5 per
General Mills periodically puts $1 coupons in Sunday newspapers and online for large boxes of its Cheerios breakfast cereal. Why doesn’t General Mills just charge $1 less for Cheerios instead of using coupons? Is issuing coupons a form of price discrimination? Briefly explain.
One company sells underpads that can be used on the beds of people who are ill or the sleeping area for dogs that are being house trained. The packages for dogs are different and have a different brand name than the packages for people, but the pads in the packages are identical. Recently on
[elated to the Making the onnection on page 566]Many supermarkets provide regular shoppers with “loyalty cards” that the shoppers swipe each time they checkout. By swiping the card, the shopper receives reduced prices on a few goods and the supermarket compiles information on all the
[elated to the hapter Opener on page 555] Walt Disney World charges residents of Florida lower prices for various theme park ticket packages than it charges nonFlorida residents. For example, in 2013 an adult Florida resident was charged $190.64 for a three-day “Magic Your Way” package that
[elated to the Making the onnection on page 563]Assume that the marginal cost of admitting one more student is constant for every university. Also assume that at every university, the demand for places in the freshman class is downward sloping. Now, suppose that the public becomes upset that

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Microeconomics 5th Global Edition R. Glenn Hubbard; Anthony Patrick O'Brien - Solutions

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