Microeconomics, 2/e 2nd Edition Acemoglu, Daron & Laibson, David & List, John - Solutions

Find comprehensive solutions for "Microeconomics, 2/e 2nd Edition" by Daron Acemoglu, David Laibson, and John List with our extensive online resources. Access the answers key, solution manual, and solutions PDF for solved problems. Our detailed questions and answers, test bank, and chapter solutions provide step-by-step answers to enhance your learning. Utilize the instructor manual for in-depth insights into the textbook material. Enjoy the convenience of a free download to aid your studies effectively. Whether you're a student or an instructor, our resources support your educational journey with precision and clarity.

4. Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost$10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is [LO1.5]a. 10 pensb. 5 pensc. No pensd. 4 pens
3. Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease? [LO1.5]a. Your
2. Indicate whether each of the following statements applies to microeconomics or macroeconomics: [LO1.3]a. The unemployment rate in Canada was 5.9 percent in January 2018.b. A software firm discharged fifteen workers last month and transferred the work to India.c. An unexpected freeze in central
1. Match each term with the correct definition. [LO1.2]economics opportunity cost marginal analysis utilitya. The next-best thing that must be forgone in order to produce one more unit of a given product.b. The pleasure, happiness, or satisfaction obtained from consuming a good or service.c. The
10. Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the one additional industrial robot it desires, but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the
9. Specify and explain the typical shapes of marginal benefit and marginal cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be
8. Why is money not considered a capital resource in economics? Why is entrepreneurial ability considered a category of economic resource, distinct from labour? What are the major functions of the entrepreneur? [LO1.6]
7. What are economic resources? What categories do economists use to classify them? Why are resources also called factors of production? Why are they called inputs? [LO1.6]
6. How does the slope of a budget line illustrate opportunity costs and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes? [LO1.5]
5. State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement. [LO1.4]
4. What are the key elements of the scientific method and how does this method relate to economic principles and laws? [LO1.3]
3. What is meant by the term utility and how does the idea relate to purposeful behaviour? [LO1.2]
2. Cite three examples of recent decisions that you made in which you (at least implicitly) weighed marginal cost and marginal benefit. [LO1.2]
1. What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: allocating a square block in the heart of Toronto for a surface parking lot or allocating a square block at the edge of a typical
LOA1.1 (Appendix) Understand graphs, curves, and slopes as they relate to economics.
LO1.8 Explain how economic growth and international trade increase consumption possibilities.
LO1.7 Apply the concepts of production possibilities analysis, increasing opportunity costs, and economic growth.
LO1.6 List the categories of scarce resources and delineate the economic problem.
LO1.5 Explain the individual’s economic problem and how trade-offs, opportunity costs, and attainable combinations can be illustrated with budget lines.
LO1.4 Distinguish microeconomics from macroeconomics, and positive economics from normative economics.
LO1.3 Describe the role of economic theory in economics.
LO1.2 Define economics and the features of the economic way of thinking.
LO1.1 List the ten key concepts to retain for a lifetime.
3. The total opportunity cost of 7 units of robots isa. 1 unit of pizzasb. 2 units of pizzasc. 3 units of pizzasd. 4 units of pizzas
2. The marginal opportunity cost of the second unit of pizzas isa. 2 units of robotsb. 3 units of robotsc. 7 units of robotsd. 9 units of robots
1. 12. You must decide whether to eat at Burger Hut or Pizza King, two local restaurants that are right next to each other. You have heard a few good things about Burger Hut, so your prior is that there is a 60% chance it is better; thus there is a 40% chance Pizza King is better. However, when you
1. 10. A field experiment was conducted to see how others’ opinions affect a user’s ratings online. Whenever a comment was added on a certain social news site, researchers randomly assigned an up vote, a down vote, or no vote. The researchers conducting the experiment noted that comments that
1. 8. What if the Trust Game were played in reverse? Gary first decides whether to cooperate (Gary gets $15, Jen gets $15) or defect(Gary gets $30, Jen gets $0). Jen then decides whether to accept this outcome or give $10 to both players. What is the equilibrium?How does this compare to the outcome
1. 7. Consider the Ultimatum Game played in reverse: The Responder moves first and decides preemptively whether to accept or reject whatever split the Proposer eventually determines. If the Responder chooses to reject, both players get nothing; but if the Responder accepts, then the Proposer
1. 6. In Mario Puzo’s The Godfather, Michael Corleone (played by Al Pacino in the movie version of the book) would like to meet with Virgil “The Turk” Sollozzo. Michael is concerned that if he meets with Sollozzo, Sollozzo will kill him. We can think of their problem as a game. First, Michael
1. 5. Assume that a charity hired you to improve its results on donations. You decide to mail letters asking for donations. You use three different types of letters:Letter A: Control—standard letter asking for money.Letter B: “Once and Done”—standard letter but with a statement at the front
1. 4. Let’s add a twist to the Ultimatum Game: there is $10.00 to be split, but if the Responder rejects the offer, then he gets $2.00 and the Proposer gets $4.00. Use backward induction to determine the equilibrium. Assume that $0.01 is the smallest increment of money possible.
1. 3. There are five people in a village. Each has $10. The village is prone to flooding. Flooding is reduced if people contribute to flood-control efforts. In particular, each person in the village receives $0.50 of benefits when someone contributes $1 to flood control (flood control is a public
1. 2. Consider a three-person version of the Ultimatum Game: The Responder does not receive any money but instead decides whether to accept on behalf of a third-party bystander. Otherwise the structure is like that of the Ultimatum game in which the Proposer first decides how to split $10.00.
1. 13. What is an information cascade? Explain with examples.
1. 12. What does herding mean? Why do individuals decide to herd?
1. 11. What does it mean to say that a good exhibits network externalities? Can you think of a good that you use because it has network externalities?
1. 10. How does indoctrination affect our preferences? Explain with an example.
1. 5. In the context of this chapter, what is meant by having a preference for fairness?
1. 9. The Johnson Steel Company generates water pollution when it makes steel. It could eliminate this pollution at a cost of $700.The Smith family lives downstream. It suffers $1,000 of damages from the water pollution Johnson creates. Assume that transaction costs are zero.a. Suppose first that
1. 8. Consider what would happen in the ultimatum game (with offers between $0 and $10) if the Responder were able to fully commit in advance. It would be as if the Responder had moved first; he would declare which offers he plans to accept, and which he plans to reject. This means that the
1. 4. A town wants to build a new bridge. Construction firms are asked to submit sealed bids. The town will award the contract to the firm that submits the lowest bid and will pay the firm the amount of the second-lowest bid, that is, the town will conduct a second price procurement auction. So,
1. 2. According to this chapter, in a first-price sealed bid auction (or a Dutch auction), a bidder should multiply her willingness to pay by the number of other bidders, then divide by the total number of bidders. Suppose you are willing to pay $60 for a pair of shoes that are being auctioned on
1. 13. Explain why in situations where the Coase Theorem applies, bargaining power does not influence whether the efficient outcome is reached, but it does affect the distribution of gains.
1. 12. How does the ultimatum game work? What does experimental evidence show about the outcome of the ultimatum game?
1. 11. What is meant by bargaining power? What are the two factors that determine an individual’s bargaining power?
1. 10. What does the revenue equivalence theorem state?
1. 9. What are the similarities between an English auction and a Dutch auction?
1.7. What is meant by risk neutrality?
1. 6. What is a Dutch auction?
1. 5. What is meant by sniping in an auction? Does it make sense to snipe to win an auction?
1. 4. What is the dominant strategy for a bidder in an English auction?
1. 3. What is an English auction?
1. 2. What is the difference between an open-outcry auction and a sealed bid auction?
1.1. How do auctions help in price discovery?
1. 11. Suppose there are 1,001 sellers with used cars that they value at(i.e., their willingness to accept is) $0, $100, $200, $300, . . . ,$9,900, $10,000. There are many buyers who place a higher value on each car than the current owners: $1,000 higher, to be exact.For example, a car worth $3,700
1.8. The problem of public goods provision (discussed earlier in the textbook) can also be thought of as a problem of asymmetric information. Suppose there is a house with five roommates. Each roommate places the following value on having a communal fridge, which costs $500. Given that the total
1. 7. Steven Levitt and Chad Syverson compared instances of home sales in which real estate agents were hired by others to sell a home to instances in which an agent sold his or her own home.They found that homes owned by real estate agents sold for 3.7 percent more than other houses and stayed on
1. 3. Consider used mattresses. There are three types: “like-new”(value of $600), “lightly-used” (value of $300), and “bed-bug infested” (value of $0). Only the seller knows the type.a. Suppose the price of used mattresses is $400. Which sellers would attempt to sell? Based on this
1. 2. There are fifty low-risk people in a town and fifty high-risk people. A low-risk person has an average of $1,000 in medical expenses each year and is willing to pay $1,200 for medical insurance (because his expenses could be much greater than$1,000 and he is risk averse). A high-risk person
1.1. Your new car is stolen just days after you buy it. You purchased it for $20,000 but the insurance company believes it is worth only$16,000.a. Why would the insurance company believe it is only worth $16,000?b. Is it worth more than $16,000 to you given your private information on the car?
1. 10. How can crime and punishment be modeled as a principal–agent problem? What does the model suggest about crime prevention?
1. 8. How might unemployment benefits create a moral hazard problem?
1. 7. Does the presence of asymmetric information necessarily imply that governments should intervene in a market?
1. 6. When do firms pay efficiency wages? What is the relationship between moral hazard and efficiency wages?
1. 5. Explain the following terms:a. Principal–agent relationshipb. Moral hazard
1. 3. Why does adverse selection occur in the health insurance market?
1. 2. Explain why “bad cars drive out the good ones” in the market for used cars.
1.1. What is asymmetric information? What are the two kinds of asymmetric information?
1. 12. Assume the interest rate is 50 percent. What is the present value of a payment of $60 paid 1 year from now? How about the present value of $60 paid today and $60 paid a year from now?Challenge question: What about $60 paid today, plus $60 paid a year from now, plus $60 paid the year after
1. 11. You are a venture capitalist who has just purchased a stake in a small company. You believe that a year from now this company may no longer exist, in which case your stake is worthless; there is an 80 percent chance of this happening. However, there is a 10 percent chance your stake will be
1. 10. Your house is worth $400,000, and you have $300,000 in a savings account. There is a 1 percent chance of a fire in your house during the next year. If the fire occurs, there will be$300,000 in damage.a. Suppose you do not have fire insurance. If the fire occurs, you will have to pay $300,000
1. 9. You are considering playing a card game. The rules of the game are such that you pick a card from a standard deck of fifty-two cards and if the card is a diamond, you win $30. The catch is, you have to pay the dealer a fee of $10 to play this game. What is the expected value of this gamble?
1. 8. Say whether or not each of the following statements assumes independence between events:a. “There is no such thing as a ‘hot hand’: A basketball player is just as likely to make her next shot regardless of whether she made her last shot.”b. “I notice that when one student scores
1. 7. This chapter talked about the idea of independent events.a. Suppose you draw a card from a standard deck of cards, you put that card back in the deck, and draw a second card. Are the events “Draw a diamond the first time” and“Draw a diamond the second time” independent events?b.
1. 6. You observe a banker give $75 for a bond that pays out $100 in one year. Based on this observation, what do you conclude about the interest rate? Suppose that the price of this bond today suddenly increases to $80. Now what do you conclude about the interest rate? (Remember even though the
1. 5. Stafford loans are student loans that the federal government provides to graduate and undergraduate students to fund their education. Since Stafford loans can be extended up to 30 years, the Congressional Budget Office calculates the cost of these loans by discounting the future cash flows
1. 4. You are considering purchasing a new piece of equipment for your factory. The equipment will cost $3,000 right now and can be used for 3 years. If you purchase it, the machine will generate earnings of $1,100 at the end of its first year of operation, $1,210 at the end of its second year of
1. 3. Suppose you won the Powerball lottery on January 1, 2017. You can choose to receive the entire amount of $400 million either as a lump sum on January 1, 2017, or you can receive four equal annual payments of $102 million paid on January 1 in 2017, 2018, 2019, and 2020. Assume that your
1.1. The “Rule of 70” is a simple way to estimate how long it will take something to double in value: divide 70 by the annual percentage growth rate; the number you calculate is the doubling time, in years. For example, 70/4 = 17.5;thus it takes about 17.5 years for a bank account to double in
1. 11. Why might it make sense to avoid paying for extended warranties on TVs and small home appliances?
1. 10. What is meant by expected value? How is it calculated?
1. 9. When are outcomes said to be independent? What is meant by the gambler’s fallacy?
1. 8. How is the probability of an event defined?
1. 7. When is an outcome risky?
1. 6. What is meant by a preference reversal?
1. 5. What is meant by present bias?
1. 4. The greater your discount weight, the more your current decisions are driven by the future consequences of those decisions. Do you agree? Explain.
1. 3. How is net present value used to decide whether a project should be undertaken?
1. 2. How is the present value of a future payment calculated?
1.1. Is $1,000 received today worth as much as $1,000 received 1 year from now? Explain your answer.
1.13. A firm in a monopolistically competitive environment discovers that in the long run it faces inverse demand which means its marginal revenue is marginal cost is a constant P =10−(1/2)Q, MR=10−Q. The firm’s.MC=$4a. Sketch these three curves on a graph.b. Based on the profit-maximizing
1. 12. Suppose all you know about Boeing and Airbus is that Boeing sells about 40 percent of all comercial aircraft, while Airbus sells around 25 percent.a. Based on this information, what is the largest the Herfindahl-Hirschman Index (HHI) might be? (Hint:Assume there is just one other firm in the
1. 11. Suppose there are five firms in an industry. Their sales (that is, total revenue) are as follows:Firm 1: $90 million Firm 2: $50 million Firm 3: $36 million Firm 4: $14 million Firm 5: $10 million Compute the Herfindahl-Hirschman Index (HHI) for this industry.
1. 9. Telesource and Belair are two of the largest firms in the wireless carrier market in a certain country. Together, these firms account for more than 80 percent of the market.a. Given that both firms differentiate their products, how is a Nash equilibrium achieved in this market?b. Suppose both
1. 8. Major league baseball teams have imposed what is commonly called the “luxury tax” on themselves. A team is subject to the tax if its payroll exceeds a specified level. The annual threshold for the luxury tax is $189 million for 2014–16. A team that exceeds the threshold must pay 17.5 to
1. 7. Coke and Pepsi each choose one of two prices: “Low”“High”(P =$3)(P =$2). There are 50 buyers who will pick the lowest or price option. However, if the prices are the same, 25 will buy from Coke and 25 from Pepsi. For simplicity, assume there are no costs, so profit is just price times
1. 6. Tobacco companies have often argued that they advertise to attract more people who already smoke and not to persuade more people to begin smoking. Suppose there were just two cigarette manufacturers, Jones and Smith. Each can either advertise or not advertise. If neither advertises, they each
1.5. Make three copies of the following diagram and label them (i),(ii) and (iii). Add three different residual demand curves faced by a monopolist: (i) very steep (inelastic), (ii) relatively flat (elastic), and (iii) horizontal (perfectly elastic). Draw the residual demand such that a monopolist
1. 3. Consider a duopoly with homogeneous products, where two competing firms pick price (Bertrand duopoly). In this chapter you learned that both firms will choose price equal to the marginal cost (MC). But what happens if the the two firms have unequal marginal costs? Suppose that Dogwood has and

Showing 4400 - 4500 of 6303

First
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
Last

Microeconomics, 2/e 2nd Edition Acemoglu, Daron & Laibson, David & List, John - Solutions

Step by Step Answers