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microeconomics principles applications

Principles Of Microeconomics 12th Global Edition Karl E. Case, Sharon E. Oster, Ray C. Fair - Solutions

1. What do you think happens to the overall marriage rate as a result of the embankment?
5.1 [related to the Economics in Practice on p. 461]The China–Australia Free Trade Agreement (ChAFTA)is a bilateral Free Trade Agreement (FTA) between the governments of Australia and China. It is strongly opposed by Australian trade unions and industrial groups.What are the possible pros and
4.4 [related to the Economics in Practice on p. 456] In 2015, the United States and Cuba re-established diplomatic relations, reopening embassies in each other’s capitals for the first time since 1961. Since the early 1960s, the United States has had an embargo in place on Cuba, virtually
4.3 Refer to the previous problem. Assume the market is opened to trade and Indonesia still enters the market by pricing coal at $40 per ton. But as a response to complaints from domestic coal producers, instead of imposing a $10 per ton tariff, the government imposes an import quota of 90 million
4.2 The following graph represents the domestic supply and demand for coal.a. In the absence of trade, what is the equilibrium price and equilibrium quantity?b. The government opens the market to free trade, and Indonesia enters the market, pricing coal at $40 per ton.What will happen to the
4.1 [related to the Economics in Practice on p. 455] As is stated in the text, NAFTA was ratified by the U.S. Congress in 1993 and went into effect on January 1, 1994, and aside from a few tariffs, all of NAFTA’s commitments were fully implemented by 2003. Go to http://www.usa.gov and do a search
3.3 Some empirical trade economists have noted that for many products, countries are both importers and exporters. For example, India both imports and exports sports goods. How do you explain this?
3.2 You can think of the United States as a set of 50 separate economies with no trade barriers. In such an open environment, each state specializes in the products that it produces best.a. What product or products does your state specialize in?b. Can you identify the source of the comparative
3.1 The following table shows imports and exports of goods during 2014-15 for India:exports(in rupee crores)imports(in rupee crores)Electrical machinery and equipment 6,200 20,276 Petroleum products 18,074.41 47,876.78 Drugs & Pharmaceuticals 8,824.50 2,921.99 Textile yarn/made up articles 2,605
2.4 Great Britain and the United States produce cheddar cheese and blue cheese. Current domestic prices per pound for each type of cheese are given in the following table:Great Britain United States Cheddar cheese £3 $6 Blue cheese £6 $9 Suppose the exchange rate is £1 = $1.a. If the price
2.3 The following table gives recent figures for yield per hectare (in kg/ha) in India and China Wheat Paddy India 1000 3500 China 4000 6600a. If we assume that farmers in India and China use the same amount of labor, capital and fertilizer, which state has an absolute advantage in the production
2.2 India and Pakistan each produce only Wheat and Rice.Domestic prices are given in the following table:Product india Pakistan Wheat INR 400/Kg PKR 600 /Kg Rice INR 700/Kg PKR 900 /Kg If 1 INR = 1 PKR,a. Which country has an absolute advantage in production of Wheat? Rice?b. Which country has a
2.1 Suppose Latvia and Estonia each produce only two goods, tractors and bobsleds. Both are produced using labor alone. Assuming both countries are at full employment, you are given the following information:Latvia: 12 units of labor required to produce 1 tractor 4 units of labor required to
1.1 In terms of value of exports and imports, the top 5 trading partners of India are China, USA, Saudi Arabia, UAE and Republic of Korea. Go to www.infodriveindia.com and search for “India’s trading partners”. Find the total value of exports, imports and balance of trade with each
6.2 The town of Mt. Pilot has a 3-member town council that is considering new infrastructure projects for the town:building a new park, buying a new fire truck, and repaving Main Street. The town only has enough money to pay for one of the projects. The preferences of each council member for each
6.1 Annie, Blake, and Cornelia are triplets who are trying to decide on a name for their new bakery. They have narrowed their decision down to three choices, and the preferences of each are listed in the table. Will their preferences lead to a voting paradox? If yes, explain why. If no, which
5.1 Suppose a special tax was introduced that used the value of one’s automobile as the tax base. Each person would pay taxes equal to 10 percent of the value of his or her car.Would the tax be proportional, regressive, or progressive?What assumptions do you make in answering this question? What
3.3 Assume that at a price of $12 per pound, the quantity of cashews demanded is 50 pounds. Now assume that the government imposes an excise tax on cashews of $3 per pound. Draw a graph showing demand when consumers are relatively responsive to the tax and quantity demanded falls by 40 percent, and
3.2 You are given the following information on a proposed“cigar tax” in the Republic of Panatela. Panatela collects no other specific excise taxes, and all other government revenues come from a neutral lump-sum tax. (A lump-sum tax is a tax of a fixed sum paid by all people regardless of their
2.5 The market demand for product X is given by Qd= 6 - 1/2P and the market supply for good X is given by Qs = 2P -14, where P= price per unit.a. Draw a supply-and-demand graph with these curves.What are the equilibrium price and the equilibrium quantity?b. A per-unit excise tax is imposed on
2.4 The graph below represents equilibrium in a competitive labor market both before and after a payroll tax, which is levied on the employer, has been implemented. Before the payroll tax, the equilibrium quantity of labor was 55 units. Supply curve S1 represents supply as a function of what firms
2.3 In calculating total faculty compensation, the administration of Doughnut University includes payroll taxes(Social Security taxes) paid as a benefit to faculty. After all, those tax payments are earning future entitlements for the faculty under Social Security. However, the American Association
2.2 For each of the following statements, do you agree or disagree? Why?a. Economic theory predicts unequivocally that a payroll tax reduction will increase the supply of labor.b. Corporate income taxes levied on a monopolist are likely to be regressive because the monopoly can pass on its burden
2.1 A citizens’ group in the Pacific Northwest has the following statement in its charter:■■ “Our goal is to ensure that large, powerful corporations pay their fair share of taxes in this country.”To implement this goal, the group has recommended and lobbied for an increase in the
1.4 Each year around April 15, discussions heat up regarding the tax system in the United States. A number of people are in favor of replacing the current federal income tax with either a flat tax or a consumption tax.Explain whether the current federal income tax is proportional, progressive, or
1.3 In the United States, 43 states have passed legislation to legalize lotteries, and the states use the lottery proceeds to raise revenue. If you view the price of a lottery ticket as a tax, do you think it would be a proportional, progressive, or regressive tax? What information would you need
1.2 [related to the Economics in Practice on p. 425] Using the tax brackets and rates for 2014 on p. 425, compute the total tax for each of the following income levels for a single taxpayer. In each case, calculate average and marginal tax rates. Assume that in each case the taxpayer chooses the
1.1 Suppose that in 2015, Congress passed and the president signed a new simple income tax with a flat rate of 20 percent on all income greater than $35,000 (no tax on the first $35,000). Assume that the tax is imposed on every individual separately. For each of the following total income levels,
9.1 The following table contains data compiled by the Organisation for Economic Co-operation and Development (OECD). The data reflects the average annual percentage change in real household income by income group from the mid-1980s to the late-2000s for five OECD countries. For each of the listed
8.1 Countries within the European Union vary dramatically by their nominal per capita incomes. Though the per capita income of the European Union countries is$27,400, there are some countries that have a much higher per capita income (Denmark at $45,700) and some countries that have a much lower
7.2 Suppose the prevailing equilibrium wage in a labor market is $24.00 per hour. What would be the impact of a minimum wage law that sets the minimum wage in this market at $32.00 per hour? What if the minimum wage was set at $16.00 per hour?
7.1 Around the world, the minimum wage remains a highly debated issue. In July 2015, 22 out of the 28 European Union Member States had a national minimum wage.While the minimum wage was €194 a month in Bulgaria, it was as high as €1,923 in Luxembourg. Given that the average cost of an apartment
6.1 Countries around the world have many different ways of measuring the poverty line. The European Union and many other countries use 60 percent of median household income as the poverty ‘threshold’. In other ?
5.3 Explain how a state government transfer program such as unemployment compensation may actually result in a higher unemployment rate than would occur if the program did not exist.
5.2 [related to the Economics in Practice on p. 407]According to the Economics in Practice, children often“inherit” their parent’s socioeconomic status. What are some ways that governments try to raise intergenerational income mobility? What are some of the costs and benefits involved with
3.6 [related to the Economics in Practice on p. 405]Executive compensation remains a much-debated topic in the United States. Over the past three decades, compensation for CEOs of U.S. corporations has risen dramatically, both in real dollars and in terms of worker’s earnings, where in 1980 the
3.4 New PhDs in economics entering the job market find that academic jobs (jobs teaching at colleges and universities) pay about 30 percent less than nonacademic jobs such as working at a bank or a consulting firm. Those who take academic jobs are clearly worse off than those who take nonacademic
3.3 Following is a list of establishment categories and average weekly earnings for nonsupervisory employees in a recent year. Using the concepts of “human capital” and“compensating differentials,” explain why they might be expected to differ in these areas:Waste treatment and disposal
3.2 Economists call education “an investment in human capital.” Define capital. In what sense is education capital?Investments are undertaken to earn a rate of return.Describe the return to an investment in a college education. How would you go about measuring it? How would you decide if it is
3.1 [related to the Economics in Practice on p. 402]Some employers offer tuition reimbursement for their employees who wish to further their education. Do a Web search to find a list of companies that contribute to tuition for their employees. Do you notice any similarities among these companies?
2.3 The tiny Kingdom of Arugula has five residents, and the following table lists the annual income of each of these people. Fill in the table and draw a Lorenz curve showing the distribution of income for Arugula.
2.2 Refer to the following Lorenz curve to answer the questions.a. Explain whether the distribution of income was more equal in 2014 or 2015.b. If area A= 2,450 and area B= 450, what is the value of area C? What is the value of the Gini coefficient for 2014 and for 2015?
1.1 Identify which of the three basic sources of income is represented by each of the following:a. Sally receives $240 per week in unemployment compensation.b. Damon receives $100 in dividend payments each year from his shares of stock in Coca-Cola.c. Mei rents a room in her house for $650 per
1. given what you have read thus far, can you suggest a few factors that might impede intergenerational mobility?
3.5 Most casino game dealers in Las Vegas are paid minimum wage, and therefore rely on tips for a large portion of their income. Within the past few years, a majority of Las Vegas casinos have instituted tippooling policies for their dealers, whereby dealers are not allowed to keep the tips they
3.3 The issue of misinformation is news has acquired a greater importance in the age of the Internet. In a 2013 Oxford Internet Survey, traditional media like TV and the radio ranked lower than the Internet in people’s trust when it came to misinformation in news reporting. Using an analogy with
3.2 The five busiest airports in the United States are in Atlanta, Chicago, Los Angeles, Dallas-Ft. Worth, and Denver. At these airports there are more than 450 food outlets, with each airport offering a number of dining options that feature regional cuisines. Passengers will also see many familiar
2.5 [related to the Economics in Practice on p. 390] Do you think companies that issue health insurance should be allowed to inquire about family medical history and the results of genetic testing before deciding to issue insurance policies? Why or why not?2.6 Valentino wants to purchase a classic
2.2 An important and nerve-wracking step in the hiring process is the dreaded interview. Explain the nature of asymmetric information is this setting and employ the ideas of adverse selection and moral hazard to explain why sometimes the process might not bring optimal results. What techniques have
2.1 The “marriage market” involves an arrangement by which couples meet, get to know each other and eventually may decide to enter in to a marriage contract.a. Explain the nature and role of asymmetric information in this “market”.b. Explain the nature of problems like adverse selection and
1.3 At the beginning of 2015 I bought a fire insurance policy for my vacation home in Aspen; at the end of the year, my vacation home had not burned down. Was my purchase a mistake? Explain.
3.1 Iceland faced a problem of overfishing and witnessed their cod and herring populations nearly disappearing in the 1960s and 1970s. The overuse of a common resource like fish is often referred to as “The Tragedy of the Commons”.a. Explain how fisheries exemplify the overuse of a common
2.6 The recent economic growth resulting from government policies of newly industrializing nations such as India and China has increased environmental strains on global air and water systems. The negative externalities associated with this economic growth demonstrate that the best economic system
2.5 Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods—once produced, information can be shared at virtually no cost. A new production technology in an industry could be made available to all firms, reducing costs of
2.4 Bonnie and Clyde share a street on their way to their homes and wish to illuminate it. Bonnie’s demand for street lamps is given by P = $4, while Clyde’s demand for streetlamps is given by P = $6. Street lamp production involves marginal costs given by MC = 5Q, where Q = number of street
2.3 Explain why you agree or disagree with each of the following statements:a. The government should be involved in providing health care for all citizens because health care is a “public good.”b. From the standpoint of economic efficiency, an unregulated market economy tends to underproduce
2.2 For the following goods state whether each falls in the category of private goods, mixed goods or public goods by employing the criteria of exclusivity and rivalry in consumption. Explain your answers.a. Cable TVb. A piece of cheesecakec. Grades in a classd. Street lamps in Main Street, USA
1.11 Velma, a book editor for a local publishing company, and Daphne, an opera singer in a local opera company, share a townhouse in Miami. Velma enjoys reading and editing books at home, and Daphne enjoys rehearsing her arias at home. Daphne is willing to pay Velma $200 per week if she will find
1.10 Two firms, Vesuvius and Etna, are each emitting 9 units of pollution, and the government wants to reduce the total level of pollution from the current level of 18 to 6. To do this, the government caps each firm’s allowed pollution level at 3. Each firm must now pay to cut pollution levels by
1.7 [related to the Economics in Practice on p. 363] The Economics in Practice suggests that economists often distinguish between short-run and long-run effects of policies or actions when adjusting to environmental disasters.Research a recent environmental disaster (such as the New England
1.6 The Coase theorem implies that we never need to worry about regulating externalities because the private individuals involved will reach the efficient outcome through negotiations. Is that statement true or false? Justify your answer and use examples.
1.5 [related to the Economics in Practice on p. 371]Microsoft and Disney are just two of a growing number of organizations using internal carbon taxes in an attempt to reduce carbon emissions, and the carbon prices being used to set the internal taxes vary widely. (In 2015, Microsoft priced carbon
1.4 A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial as an impartial expert. The court is considering four possible solutions, and you are asked to
1.1 In October, 2015, a 5p carrier plastic bag charge went into effect in England for supermarkets and major retailers; similar charges were already in effect in Wales, Scotland, and Ireland that had shown a steep drop in plastic bag usage.a. Explain the rationale behind this “Pigovian” tax.b.
1. Why might the social cost of capital be a good carbon fee to use from an economic efficiency perspective?
1. Why do you think adjustment to the Dust Bowl was so slow?
4.1 For each of the following, state whether you agree or disagree. Explain your answer.a. Monopolistically competitive firms generate economic profits because they are protected by barriers to entry.b. Monopolistically competitive firms are efficient because in the long run, price falls to equal
3.3 Explain the relationship between price and marginal revenue for a perfectly competitive firm and for a monopolistically competitive firm. Why is the relationship different for these markets?
3.2 The following diagram shows the structure of cost and demand facing a monopolistically competitive firm in the short run.a. Identify the following on the graph and calculate each one.i. Profit-maximizing output level ii. Profit-maximizing price iii. Total revenue iv. Total cost v. Total profit
3.1 Raul is operating a studio house in La Palma de Majorca.Hundreds of hotels, motels, villas, apartment, and studio houses are offered as tourist accommodations in the area.Raul opened up his studio house the previous year and he rents an average of 12 studios per day over the whole season at
2.7 If one were to do a research on olive oil and its producers around the world, they would come up with many varieties and producers of olive oil. Carry out such a search for Greek olive oil from Greece, considered to be the third leading producer of olive oil in the world. Do you expect to find
1.1 Plaza Mayor, one of Madrid’s central squares, attracts many young people who frequent its many stores for entertain and to meet new people. As friendships and partnerships are created, this can be seen as a “market”where young people meet each other, get to know each other, and spend time
3.4 Simon likes to watch movies and his Internet service provider offers streaming movies on a pay-per-view basis for$3 each. The provider also offers a service for unlimited streaming of movies for $15 per month. Simon predicts that he will watch three movies per month, so the value of the movies
3.3 The issue of misinformation is news has acquired a greater importance in the age of the Internet. In a 2013 Oxford Internet Survey, traditional media like TV and the radio ranked lower than the Internet in people’s trust when it came to misinformation in news reporting. Using an analogy with
3.2 The five busiest airports in the United States are in Atlanta, Chicago, Los Angeles, Dallas-Ft. Worth, and Denver. At these airports there are more than 450 food outlets, with each airport offering a number of dining options that feature regional cuisines. Passengers will also see many familiar
3.1 In the past 15–20 years there have been numerous business/accounting scandals with fraudulent behaviour amounting to billions of dollars. In discussing incentive mechanisms the textbook mentions that the great proportion of CEOs remuneration comes in the form of performance-based bonuses. How
2.7 One way insurance companies reduce adverse selection problems is by offering group medical coverage to large firms and requiring all employees to participate in the coverage. Explain how this reduces adverse selection?
2.6 Valentino wants to purchase a classic motorcycle and sees a 1974 Triumph Bonneville T140 listed on Cycletrader.com for $5,950. He is willing to pay $7,500 if the motorcycle is reliable, but only $2,000 if the motorcycle is not reliable. What additional information might Valentino find helpful
2.5 [related to the Economics in Practice on p. 390] Do you think companies that issue health insurance should be allowed to inquire about family medical history and the results of genetic testing before deciding to issue insurance policies? Why or why not?
2.4 [related to the Economics in Practice on p. 392] Find a product advertisement in a magazine, in a newspaper, or on a Web site, for which the missing information tells you something important about this product. Explain what information is missing, why you think it is missing, and what it is
2.3 Signals are also used in social settings. In a new place, what signals do you look for to find people who share your interests?
1.4 Video poker is a popular form of gambling in casinos, second only to slot machines. Some video poker games offer a “double-up” feature, where players receiving a paying hand are offered the chance to double their winnings. If a player chooses to play the double-up feature, the machine deals
1.3 At the beginning of 2015 I bought a fire insurance policy for my vacation home in Aspen; at the end of the year, my vacation home had not burned down. Was my purchase a mistake? Explain.
1.2 Your current salary is a fixed sum of $115,600 per year.You have an offer for another job. The salary there is a flat$75,000 plus a chance to earn $350,000 if the company does well. Assume that your utility from income can be expressed as U = 1Income. So, for example, at an income level of
1.1 Attitudes towards risk for Anna, Bill and Joe are given by the following utility functions:UA = I + 1, UB = 2I2, and UJ = 21I, where U is level of utility and I level of income.Through graphical representation, show utility (U) versus income (I) for each individual and explain whether each
2.5 Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods—once produced, information can be shared at virtually no cost. A new production technology in an industry could be made available to all firms, reducing costs of
2.3 Explain why you agree or disagree with each of the following statements:a. The government should be involved in providing health care for all citizens because health care is a “public good.”b. From the standpoint of economic efficiency, an unregulated market economy tends to underproduce
2.2 For the following goods state whether each falls in the category of private goods, mixed goods or public goods by employing the criteria of exclusivity and rivalry in consumption. Explain your answers.a. Cable TVb. A piece of cheesecakec. Grades in a classd. Street lamps in Main Street, USA
2.1 The existence of “public goods” is an example of potential market failure and suggests that a government or public sector can improve the outcome of completely free markets. Write a brief summary of the arguments for government provision of public goods. (Make sure you consider the
1.11 Velma, a book editor for a local publishing company, and Daphne, an opera singer in a local opera company, share a townhouse in Miami. Velma enjoys reading and editing books at home, and Daphne enjoys rehearsing her arias at home. Daphne is willing to pay Velma $200 per week if she will find
1.10 Two firms, Vesuvius and Etna, are each emitting 9 units of pollution, and the government wants to reduce the total level of pollution from the current level of 18 to 6. To do this, the government caps each firm’s allowed pollution level at 3. Each firm must now pay to cut pollution levels by
1.9 Refer to the previous question but assume that the government has imposed a per-unit tax on this product that is exactly equal to the marginal damage costs. Use the diagram to show what will happen to production, output, and price.
1.7 [related to the Economics in Practice on p. 363] The Economics in Practice suggests that economists often distinguish between short-run and long-run effects of policies or actions when adjusting to environmental disasters.Research a recent environmental disaster (such as the New England
1.4 A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial as an impartial expert. The court is considering four possible solutions, and you are asked to
1.1 In October, 2015, a 5p carrier plastic bag charge went into effect in England for supermarkets and major retailers; similar charges were already in effect in Wales, Scotland, and Ireland that had shown a steep drop in plastic bag usage.a. Explain the rationale behind this “Pigovian” tax.b.
4.1 For each of the following, state whether you agree or disagree. Explain your answer.a. Monopolistically competitive firms generate economic profits because they are protected by barriers to entry.b. Monopolistically competitive firms are efficient because in the long run, price falls to equal
3.3 Explain the relationship between price and marginal revenue for a perfectly competitive firm and for a monopolistically competitive firm. Why is the relationship different for these markets?
3.2 The following diagram shows the structure of cost and demand facing a monopolistically competitive firm in the short run.a. Identify the following on the graph and calculate each one.i. Profit-maximizing output level ii. Profit-maximizing price iii. Total revenue iv. Total cost v. Total profit
3.1 Raul is operating a studio house in La Palma de Majorca.Hundreds of hotels, motels, villas, apartment, and studio houses are offered as tourist accommodations in the area.Raul opened up his studio house the previous year and he rents an average of 12 studios per day over the whole season at
2.8 Professor Econsmart teaches a course in principles of economics at a large university. This semester hehas decided to enrich his lectures by adding a number of different techniques in addition to the standard lecture format; some of these techniques include: asking students to prepare a topic

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