Principles Of Microeconomics: Global Financial Crisis Edition (with Global Economic Crisis GEC Resource Center Printed Access Card) 6th Edition John B. Taylor, Akila Weerapana - Solutions

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4.5 Taxes are often imposed on goods imported from foreign countries. Such “tariffs or custom duties”raise revenue and, by increasing the relative price of foreign goods, protect domestic industries from foreign competition. Countries participating in the European Union (EU) have eliminated
4.4 Mark consumes only cookies and books. At his current consumption bundle, his marginal utility from books is 10 and from cookies is 5. Each book costs$10, and each cookie costs $2. Is he maximizing his utility? Explain. If he is not, how can he increase his utility while keeping his total
*4.3 Andy purchases only two goods, apples (q1) and kumquats (q2). He has an income of $40 and can buy apples at $2 per pound and kumquats at $4 per pound. His utility function is U(q1, q2) = 3q1 + 5q2.What is his marginal utility for apples, and what is his marginal utility for kumquats? What
4.2 Elise consumes cans of anchovies, q1, and boxes of biscuits, q2. Each of her indifference curves reflects strictly diminishing marginal rates of substitution.Where q1 = 2 and q2 = 2, her marginal rate of substitution between cans of anchovies and boxes of biscuits equals -1. Will she prefer a
4.1 Suppose that Polish consumers pay twice as much for oranges as they pay for apples, whereas Spanish consumers pay half as much for oranges as they pay for apples. Assuming that consumers maximize their utility, which country’s consumers have a higher marginal rate of substitution of oranges
*3.3 Governments frequently limit how much of a good a consumer can buy. During emergencies, governments may ration “essential” goods such as water, food, and gasoline rather than let their prices rise.Suppose that the government rations water, setting quotas on how much a consumer can
3.2 What happens to a consumer’s optimal choice of goods if all prices and the consumer’s income double? (Hint: What happens to the intercepts of the budget constraint?)
3.1 What is the effect of a 50% income tax on Dale’s budget line and opportunity set?
2.8 Phil’s quasilinear utility function is U(q1, q2) =ln q1 + q2. Show that his MRS is the same on all of his indifference curves at a given q1. (Hint: Look at Solved Problem 3.3.) M
2.7 If José Maria’s utility function is U(q1, q2) = q1 +Aq1 aq2 b + q2, what is his marginal utility from q2? What is his marginal rate of substitution between these two goods? (Hint: Look at Solved Problem 3.2.) M
*2.6 What is the MRS for the CES utility function(which is slightly different from the one in the text)U(q1, q2) = (aq1ρ + [1 - a]q2ρ)1/ρ? (Hint: Look at Solved Problem 3.2.) M
*2.5 Suppose we calculate the MRS at a particular bundle for a consumer whose utility function is U(q1, q2). If we use a positive monotonic transformation, F, to obtain a new utility function, V(q1, q2) = F(U(q1, q2)), then this new utility function contains the same information about the
*2.4 Tiffany’s constant elasticity of substitution (CES)utility function is U(q1, q2) = (q1ρ + q2ρ)1/ρ. What is the positive monotonic transformation such that Tiffany’s utility function is equivalent to (have the same preference ordering) the utility function U(q1, q2) = q1ρ + q2ρ? M
2.3 Fiona requires a minimum level of consumption, a threshold, to derive additional utility: U(X, Z)is 0 if X + Z … 5 and is X + Z otherwise. Draw Fiona’s indifference curves. Which of our preference assumptions does this example violate?
2.2 Sofia will eat one skewer of souvlaki only with one unit of tzatziki sauce. Show her preference map.What is her utility function?
2.1 Giovanni considers tickets to operas at Teatro alla Scala in Milan and to football matches played by the Italian national football team to be perfect substitutes. Show his preference map. What is his utility function?
*1.5 Arthur spends his income on bread and chocolate.He views chocolate as a good but is neutral about bread, in that he doesn’t care if he consumes it or not. Draw his indifference map.
1.4 Don is altruistic. Show the possible shape of his indifference curves between charitable contributions and all other goods. Does this indifference curve violate any of our assumptions? Why or why not?
1.3 Give as many reasons as you can why we believe that indifference curves are convex and explain.
1.2 Can an indifference curve be downward sloping in one section, but then bend backward so that it forms a “hook” at the end of the indifference curve? (Hint:Look at Solved Problem 3.1.)
1.1 Explain why economists assume that the more-isbetter property holds and describe how these explanations relate to the results in the Application “You Can’t Have Too Much Money.”
*9.2 When a disease like bovine spongiform encephalopathy (mad cow disease) is found, export markets for a country’s beef products close down and domestic sales of beef products plummet. How would these events be reflected in a supply-and-demand model of the country’s domestic market for beef
9.1 In the Challenge Solution, we could predict the change in the equilibrium price of crops but not the quantity when firms start selling GM seeds.For what shape supply and demand curves (or for which elasticities) could we predict the effect on quantity?
8.1 Are predictions using the supply-and-demand model likely to be reliable in each of the following markets?Why or why not?a. Applesb. Convenience storesc. Electronic games (a market dominated by three firms)d. Used cars
*7.4 An increase in the minimum wage could raise the total wage payment, W = wL(w), where w is the minimum wage and L(w) is the demand function for labor, despite the fall in demand for labor services.Show that whether the wage payments rise or fall depends on the elasticity of demand of labor. M
*7.3 Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers. Lowincome households in states with usury laws have significantly lower levels of consumer credit (loans)than comparable households in states without usury laws (Villegas, 1989). Why? (Hint: The
7.2 The Thai government actively intervenes in markets(Nophakhun Limsamarnphun, “Govt Imposes Price Controls in Response to Complaints,” The Nation, May 12, 2012).a. The government increased the daily minimum wage by 40% to Bt300 ($9.63). Show the effect of a higher minimum wage on the number
7.1 Severe disruptions to the supply of petroleum caused by international events or natural disasters can result in sharp spikes in prices within an economy for petroleum products such as gasoline. To keep gasoline prices from rising as much, the government may consider imposing a price ceiling on
6.10 The estimated demand function for coffee is Q = 12 - p (Equation 2.3), and the estimated supply function is Q = 9 + 0.5p (Equation 2.7).a. Write equations for the equilibrium price and quantity as a function of a specific tax t.b. What are the equilibrium price and quantity and the tax
6.9 The United Kingdom has a drinking problem. British per-capita consumption of alcohol rose 19%between 1980 and 2007, compared with a 13%decline in other developed countries. Worried about excessive drinking among young people, the British government increased the tax on beer by 42% from 2008 to
*6.8 Use calculus to show that the less elastic the demand curve, an increase in a specific sales tax t reduces quantity less and tax revenue more. (Hint: The quantity demanded depends on its price, which in turn depends on the specific tax, Q(p(t)), and tax revenue is R = p(t)Q(p(t)).) M
6.7 Canada provided a 35% subsidy of the wage of video game manufacturers’ employees in 2011.a. What is the effect of a wage subsidy of the equilibrium wage and quantity of workers?b. What happens when the wage subsidy rate falls?c. What is the incidence of the subsidy?
6.6 Figure 2.12 shows the effects of a specific tax of$2.40 per unit on equilibrium price and quantity.What is the equation of demand curve, D1, and supply curve, S1? A subsidy is a negative tax. If the government applied a $2.40 specific subsidy (giving people money) instead of a specific tax
6.5 Green et al. (2005) estimated that for almonds, the demand elasticity was -0.47 and the long-run supply elasticity was 12.0. The corresponding elasticities were -0.68 and 0.73 for cotton and -0.26 and 0.64 for processing tomatoes. If the government were to apply a specific tax to each of these
*6.4 Do you care whether a 15¢ tax per gallon of milk is collected from milk producers or from consumers at the store? Why or why not?
6.3 If a tax is introduced and the full burden or incidence of the tax is borne by producers, what can we say about the shape of the market supply and demand curves, or the demand and supply elasticities? Use graphs to illustrate your answer. M
6.2 If a tax is introduced and the full burden or incidence of the tax is borne by consumers, what can we say about the shape of the market supply and demand curves, or the demand and supply elasticities? Use graphs to illustrate your answer.
6.1 What effect does a $1 specific tax have on equilibrium price and quantity, and what is the incidence on consumers, if the following is true:a. The demand curve is perfectly inelastic.b. The demand curve is perfectly elastic.c. The supply curve is perfectly inelastic.d. The supply curve is
5.9 Show that the supply elasticity of a linear supply curve that cuts the price axis is greater than 1 (elastic), and the coefficient of elasticity of any linear supply curve that cuts the quantity axis is less than 1(inelastic). (Hint: See Solved Problem 2.4.) M 5.10 Solved Problem 2.5 claims
*5.8 Calculate the price and cross-price elasticities of demand for coconut oil. The coconut oil demand function (Buschena and Perloff, 1991) is Q = 1,200 - 9.5p + 16.2pp + 0.2Y, where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is the price of coconut oil in
5.7 In a commentary piece on the rising cost of health insurance (“Healthy, Wealthy, and Wise,” Wall Street Journal, May 4, 2004, A20), economists John Cogan, Glenn Hubbard, and Daniel Kessler stated, “Each percentage-point rise in healthinsurance costs increases the number of uninsured by
5.6 The World Health Organization has found that youth are more responsive than adults to tobacco tax increases (http://www.who.int/tobacco/economics/meetings/dublin_demand_for_tob_feb2012.pdf). If a 5% increase in the price of cigarettes causes cigarette consumption by youth to fall by 3.2%, what
5.5 According to Borjas (2003), immigration to the United States increased the labor supply of working men by 11.0% from 1980 to 2000, and reduced the wage of the average native worker by 3.2%. From these results, can we make any inferences about the elasticity of supply or demand? Which curve(or
5.4 When a disease like bovine spongiform encephalopathy (mad cow disease) is found, export markets for a country’s beef products close down so that the supply for the domestic market increases in the short run. If the price for domestic beef falls by 1.6% for every 1% increase in supply, by how
5.3 Based on information in the Application “The Demand Elasticities for Google Play and Apple Apps,” the demand function for mobile applications at the Apple App Store is QA = 1.4p-2 and the demand function at Google Play is 1.4p-3.7, where the quantity is in millions of apps. These demand
5.2 Calculate the elasticity of demand, if the demand function isa. Q = 120 - 2p + 4Y, at the point where p = 10, Q = 20. (Hint: See Solved Problem 2.2.)b. Q = 10p-2. (Hint: See Solved Problem 2.3.) M
5.1 According to the World Health Organization, the number of countries with tax shares representing more than 75% of the retail price of the most popular brand of cigarettes increased significantly between 2008 and 2012. If raising tobacco taxes to increase prices by 10% reduces tobacco use by 4%
4.8 Suppose the demand function for carpenters is Q = 100 - w, and the supply curve is Q = 10 + 2w - T, where Q is the number of carpenters, w is the wage, and T is the test score required to pass the licensing exam. By how much do the equilibrium quantity and wage vary as T increases? (Hint: See
4.7 Given the answer to Exercise 2.4, what effect does a quota of Q 7 0 have on the equilibrium in the market? (Hint: The answer depends on whether the quota binds: is low enough to affect the equilibrium.)
4.6 DeCicca and Kenkel (2015) report that the price elasticity of demand for cigarettes is -0.4. Suppose that the daily market demand for cigarettes in New York City is Q = 20,000p-0.4 and that the market supply curve of cigarettes in the city is a horizontal line at a price, p, which equals 1.5pw,
4.5 Recessions lower incomes and reduce rental prices for beachfront properties. Suppose that the demand function for renting a beachfront property in Barcelona, Spain, during the first week of August is Q = 1,000 - p + Y/20, where Y is the median annual income of the people involved in this
*4.4 The demand function is Q = 220 - 2p, and the supply function is Q = 20 + 3p - 20r, where r is the rental cost of capital. How do the equilibrium price and quantity vary with r? (Hint: See Solved Problem 2.1.) M
4.3 Production of ethanol in the European Union (EU), primarily from wheat, increased more than 2.4 times from 570 million gallons in 2007 to 1,387 million gallons in 2015 (http://www.ethanolrfa.org/pages/statistics). In a supply-and-demand model of the market for wheat in the EU, how would this
4.2 The 9/11 terrorist attacks caused the U.S. airline travel demand curve to shift left by an estimated 30% (Ito and Lee, 2005). Use a supply-and-demand diagram to show the likely effect on price and quantity (assuming that the market is competitive). Indicate the magnitude of the likely
*4.1 Use a figure to explain the fisher’s comment about the effect of a large catch on the market price in the cartoon about catching lobsters in this chapter. What is the supply shock?
3.4 The demand function for milled rice in India in Question 1.1 is Q = 17 - 3p + 5pw + 6pm + 0.1Y and the supply function in Question 2.1 is Q = 8 + 9p - 12pr. Solve for the equilibrium price and quantity in terms of the price of wheat, pw, the price of maize, pm, and average annual income, Y. If
3.3 Suppose that the supply function for copra (dried coconut meat) for processing into coconut oil in the Philippines is ln Q = 0.2 + 0.22ln p, where Q is the quantity of copra in millions of tons per year and p is the price of copra in thousands of pesos per ton.If the demand function for copra
3.2 If the demand function is Q = 110 - 20p, and the supply function is Q = 20 + 10p, what are the equilibrium price and quantity? M
3.1 Use a supply-and-demand diagram to explain the statement “Talk is cheap because supply exceeds demand.” At what price is this comparison being made?
*2.4 Various governments have, from time to time, set limits on how much of certain goods produced in ?
2.3 If the supply curve for fresh oranges in Egypt is Qe = 0.7 + 5p and the supply curve for fresh oranges for the rest of the world is Qrow = 38.2 + 10p, what is the world supply curve? M
2.2 Given an estimated supply function for avocados of Q = 58 + 15p - 20pf, determine how much the supply curve for avocados shifts if the price of fertilizer rises by $1.10 per lb. Illustrate this shift in a diagram. M
2.1 Suppose that the supply function for milled rice in India is Q = 8 + 9p - 12pr, where Q is the quantity in millions of tons of rice per year, p is the price of milled rice in thousands of rupees per ton, and pr is the price of rough rice in thousands of rupees per ton. How does the supply curve
1.6 Based on information in the Application “The Demand Elasticities for Google Play and Apple Apps,” the demand function for mobile applications at the Apple App Store is QA = 1.4p-2 and the demand function at Google Play is 1.4p-3.7, where the quantity is in millions of apps. What is the
1.5 Soybean oil is sold directly to consumers and used as an ingredient in a wide variety of processed foods. Soybean meal, the residue from producing soybean oil, is used as animal feed. Suppose the demand curves for soybean oil and soybean meal in Brazil are Qoil = 17 - 4p and Qmeal = 27.9 -10p,
*1.4 Suppose that the demand function for movies is Q1 = 120 - p for college students and Q2 = 60 - 0.5p for other town residents. What is the town’s total demand function (Q = Q1 + Q2 as a function of p)? Carefully draw a figure to illustrate your answer. M
1.3 Given an estimated demand function for avocados of Q = 104 - 40p + 20pt + 0.01Y, show how the demand curve shifts as per capita income, Y, increases by $1,000 a year. Illustrate this shift in a diagram. M
1.2 Using the demand function for milled rice from Question 1.1, show how the quantity demanded at a given price changes if per capita income, Y, increases by 10,000 rupees. M
1.1 Suppose that the demand function for milled rice in India is Q = 17 - 3p + 5pw + 6pm + 0.1Y, where Q is the quantity in millions of tons of rice per year, p is the price of milled rice in thousands of rupees per ton, pw is the price of wheat in thousands of rupees per ton, pm is the price of
Would there be economic rent?3. Suppose a company owns a computer that costs$5,000 and depreciates $1,000 per year. If the interest rate is 5 percent, what is the implicit rental price of the computer? Explain why the implicit rental price depends on the interest rate.
Suppose that Marshall’s stones were dropped all over the earth and finding them was difficult. Would the supply curve for capital still be perfectly inelastic?
What do economists mean when they say that financial markets are efficient?
What is diversification? How does it affect risk?
What does it mean for an individual to be risk averse?
What determines the rate of return on stocks? On bonds?
What is the difference between a stock and a bond?
What is the difference between physical capital and financial capital?
10. In recent years, we have heard much about the rise of extremely ideologically rigid attachments of segments of the population to particular political parties. Suppose that 25 percent of the population remains attached to Republicans, no matter what the party does, and a similar fraction stays
9. Use the set of preferences for Ali, Betty, and Camilla shown in the following table to show that the paradox of voting does not always occur. First Second Third Ali Betty Camilla CAB BAC ABC
8. The world’s oceans are in trouble. Recently, experts have noted that stocks of fish are declining as the seas’ resources are overused. Governments are increasingly becoming interested in ways of preserving fish stocks by limiting the catch. Consider the following four ways of doing so.•
7. After September 11, the media paid closer attention to the potential use of shipped cargo containers to smuggle weapons and terrorists into the United States.a. Discuss why there may be a negative externality associated with the use of shipping containers.b. Graphically show the market for ship
6. Consider two college roommates, one who smokes and one who does not. The smoker wishes to smoke in the room, and the nonsmoker dislikes smoking in the room. Suppose the smoker would be willing to pay $500 to be allowed to smoke in the room during the semester, and the nonsmoker would be willing
5. Is public education a public good? Does it have positive externalities? Explain what the implications are for whether public education should be provided by the government. Could the same outcomes be achieved if private education were subsidized by the government?
8. The following table gives hours worked and the welfare payment received.a. Calculate the missing data in the table, given that the hourly wage is $5 and total income is the sum of the wage payment and the welfare payment.b. Draw a graph that shows how much total income a worker earns with and
Why is the demand for labor downward-sloping?
Why do we say that the demand for labor is a derived demand?
6. Why is it better to break up monopolies that are not natural monopolies rather than regulate them, even if it is possible to regulate them?
5. In 2007, the European Union sued Apple under its antitrust laws. Apple has established country-specific web sites for European customers of iTunes. The music inventory and prices vary among the different country-specific sites, and customers are prohibited from purchasing music from an iTunes
3. Consider Al’s gasoline station, which sells Texaco at a busy intersection along with three other stations selling Shell, Conoco, and Chevron.a. Draw the marginal cost, average total cost, demand, and marginal revenue curves for Al’s station, assuming that the profit-maximizing price is
How does price discrimination reduce deadweight loss?
What is price discrimination?
What is the deadweight loss from a monopoly?
What forces tend to cause monopolies?
What market power does a monopoly have?
8. List some external economies of scale that might be realized by a computer manufacturing firm that locates in a high-tech industrial park. List some diseconomies of scale that might be realized by a computer programming firm that locates in an area of India that is attracting dozens of other
7. Since there are zero profits in the long run for any firm in a competitive industry, what incentive is there for a firm in a competitive industry to pursue cost-cutting measures?
6. Suppose the government imposes a sales tax on a good sold by firms in a competitive industry.Describe what happens to the price of the good in the short run and in the long run when firms are free to enter and exit. What happens to the number of firms in the industry and to total production in
3. What are the key characteristics of an economy that is in a long-run competitive equilibrium?
2. What are some possible sources of the rise of industries? Of the fall of industries?
1. What is the definition of an industry?

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Principles Of Microeconomics: Global Financial Crisis Edition (with Global Economic Crisis GEC Resource Center Printed Access Card) 6th Edition John B. Taylor, Akila Weerapana - Solutions

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