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microeconomics principles
Modern Principles Microeconomics 2nd Edition Tyler Cowen, Alex Tabarrok - Solutions
1.1. For each of the following pairs, which of the two goods is more likely to be inelastically demanded and why? Table 5.1 should help:
1.7. Let's take the idea from the previous question and use it to explain why businesses sometimes try to make their employees happy. If a business can make a job seem fun (by offering inexpensive pizza lunches) or at least safe (by nagging the city government to put police patrols around the
1.6. When the crime rate falls in the area around a factory, what probably happens to wages at that factory?
1.5. Economists often say that prices are a "rationing mechanism." If the supply of a good falls, how do prices "ration" these now-scarce goods in a competitive market?
1.4.a. If oil executives read in the newspaper that massive new oil supplies have been discovered under the Pacific Ocean but will likely only be useful in 10 years, what is likely to happen to the supply of oil today?What is the likely equilibrium impact on the price and quantity of oil today?b.
1.3. Many clothing stores often have clearance sales at the end of each season. Using the tools you learned in this chapter, can you think of an explanation why?
1.2. Think about two products: "safe cars" (a heavy car such as a BMW 530xi with infrared night vision, four-wheel antilock brakes, and electronic stability control), and "dangerous cars" (a lightweight car such as ____ _[name removed for legal reasons, but you can fill in as you wish]) .a. Are
1.1. For many years, it was illegal to color margarine yellow (margarine is naturally white). In some states, margarine manufacturers were even required to color margarine pink! Who do you think supported these laws? Why? Hint: Your analysis in question 8 from the previous section is relevant!
1.12. In recent years, there have been news reports that toys made in China are unsafe. When those news reports show up on CNN and Fox News, what probably happens to the demand for toys made in China? What probably happens to the equilibrium price and quantity of toys made in China? Are Chinese
1.11. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains, became very popular. What do you suppose that did to the price and quantity of bread? Use supply and demand analysis to support your answer.
1.10. If a snowstorm was forecast for the next day, what would happen to the demand for snow shovels? Is this a change in quantity demanded or a change in demand? This shift in the demand curve would affect the price; would this cause a change in quantity supplied or a change in supply?
1.9. The market for sugar is diagramed below:a. What would happen to the equilibrium quantity and price if the wages of sugar cane harvesters increased?b. What if a new study was published that emphasized the negative health effects of consuming sugar?Price per 1,000 lb$30 50 Quantity(1 ,000s lb)
1.8. If the price of margarine decreases, what happens to the demand for butter? What happens to the equilibrium quantity and price for butter? What would happen ifbutter and margarine were not substitutes? Use a supply and demand diagram to support your answer.
1.7. Suppose you decided to follow in Vemon Smith's footsteps and conducted your own experiment with your friends. You give out 10 cards, 5 cards to buyers with the figures for willingness to pay of$1, $2, $3, $4, and $5, and 5 cards to sellers with the ;unounts for costs of$1, $2, $3, $4, and $5.
1.6. The market for marbles is represented in the graph below. What is the total producer surplus? The total consumer surplus? What are the total gains from trade?Price$11 50 50 Quantity
1.5. In the figure below, how many pounds of ugar are sellers willing to sell at a price of $20? How much is demanded at this price? What is the buyer's willingness to pay when the quantity is 20 lb? Is this combination of $20 per pound and a quantity of 20 lb an equilibrium? If not, identifY the
1.4. Detemune the equilibrium quantity and price without drawing a graph.Price of Good X$22$25$30$32 Quantity Supplied 100 115 130 150 170 Quantity Demanded 225 200 175 150 110 What is the equilibrium price and quantity?$40 Equilibrium: How Supply and Demand Determine Prices • CHAPTER 4 • 63
1.3. If the price of a one-bedroom apartment in Washington, D.C., is currently $1,000 per month, but the supply and demand curves look as follows, then is there a shortage or surplus of apartments?What would we expect to happen to prices? Why?Rent for apartments(per month)apartments 100,000
1.2. Consider the following supply and demand tables for bread. Draw the supply and demand curves for this market. What is the equilibrium price and quantity?Price of One Loaf$0.50$1$2$3$5 Quantity Supplied 10 20 35 50 60 Quantity Demanded 75 55 35 25 10
1.1. Suppose the market for batteries looks as follows:Price 10 20 30 Quantity
1.11. What's the best way to think about the rise in oil prices in the last 10 years, as China and India have become richer: Was it a rise in demand, a fall in demand, a rise in supply, or a fall in supply?
1.10. What's the best way to think about the rise in oil prices in the 1970s, when wars and oil embargoes wracked the Middle East? Was it a rise in demand, a fall in demand, a rise in supply, or a fall in supply?
1.9.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to price and quantity in equilibrium?d. When demand decreases, what happens to price and quantity in
1.8.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to price and quantity in equilibrium?d. When demand decreases, what happens to price and quantity in
1.7. When supply falls, what happens to quantity demanded in equilibrium? (This should get you to notice that both suppliers and demanders change their behavior when one curve shifts.)
1.6. What happened in Vernon Smith's lab? Choose the right an wer:a. The price and quantity were close to equi librium but gain from trade were far from the maximum.b. The price and quantity were far from equilibrium and gains from trade were far from the maximum.c. The price and quantity were far
1.5. Jules wants to purchase a R oyale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing
1.4. Now, Jon is in Japan, trying to get a job a a full-time translator; he wants to tran late English TV shows into Japanese and vice versa.He notices that the wage for translator is very low. Who is the "competition" that is pushing the wage down: Does the competition come from businesses who
1.3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:The Dark Knight Returns. In this market, who is Jon competing with: the seller of the graphic novel or the other bidders?
1.2. When the price is above the equilibrium price, does greed (in other words, self-intere t) tend to push the price down or does it push it up?
1.1. If the price in a market is above the equilibrium price, does this create a surplus or a shortage?
1.7. Let's take the idea from the previous question and use it to explain why businesses sometimes try to make their employees happy. If a business can make a job seem fun (by offering inexpensive pizza lunches) or at least safe (by nagging the city government to put police patrols around the
1.6. When the crime rate falls in the area around a factory, what probably happens to wages at that factory?
1.5. Economists often say that prices are a "rationing mechanism." If the supply of a good falls, how do prices "ration" these now-scarce goods in a competitive market?
1.4.a. If oil executives read in the newspaper that massive new oil supplies have been discovered under the Pacific Ocean but will likely only be useful in 10 years, what is likely to happen to the supply of oil today?What is the likely equilibrium impact on the price and quantity of oil today?b.
1.3. Many clothing stores often have clearance sales at the end of each season. Using the tools you learned in this chapter, can you think of an explanation why?
1.2. Think about two products: "safe cars" (a heavy car such as a BMW 530xi with infrared night vision, four-wheel antilock brakes, and electronic stability control), and "dangerous cars" (a lightweight car such as ____ _[name removed for legal reasons, but you can fill in as you wish]) .a. Are
1.1. For many years, it was illegal to color margarine yellow (margarine is naturally white). In some states, margarine manufacturers were even required to color margarine pink! Who do you think supported these laws? Why? Hint: Your analysis in question 8 from the previous section is relevant!
1.12. In recent years, there have been news reports that toys made in China are unsafe. When those news reports show up on CNN and Fox News, what probably happens to the demand for toys made in China? What probably happens to the equilibrium price and quantity of toys made in China? Are Chinese
1.11. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains, became very popular. What do you suppose that did to the price and quantity of bread? Use supply and demand analysis to support your answer.
1.10. If a snowstorm was forecast for the next day, what would happen to the demand for snow shovels? Is this a change in quantity demanded or a change in demand? This shift in the demand curve would affect the price; would this cause a change in quantity supplied or a change in supply?
1.9. The market for sugar is diagramed below:a. What would happen to the equilibrium quantity and price if the wages of sugar cane harvesters increased?b. What if a new study was published that emphasized the negative health effects of consuming sugar?Price per 1,000 lb$30 50 Quantity(1 ,000s lb)
1.8. If the price of margarine decreases, what happens to the demand for butter? What happens to the equilibrium quantity and price for butter? What would happen ifbutter and margarine were not substitutes? Use a supply and demand diagram to support your answer.
1.7. Suppose you decided to follow in Vemon Smith's footsteps and conducted your own experiment with your friends. You give out 10 cards, 5 cards to buyers with the figures for willingness to pay of$1, $2, $3, $4, and $5, and 5 cards to sellers with the ;unounts for costs of$1, $2, $3, $4, and $5.
1.6. The market for marbles is represented in the graph below. What is the total producer surplus? The total consumer surplus? What are the total gains from trade?Price$11 50 50 Quantity
1.5. In the figure below, how many pounds of ugar are sellers willing to sell at a price of $20? How much is demanded at this price? What is the buyer's willingness to pay when the quantity is 20 lb? Is this combination of $20 per pound and a quantity of 20 lb an equilibrium? If not, identifY the
1.4. Detemune the equilibrium quantity and price without drawing a graph.Price of Good X$22$25$30$32 Quantity Supplied 100 115 130 150 170 Quantity Demanded 225 200 175 150 110 What is the equilibrium price and quantity?$40 Equilibrium: How Supply and Demand Determine Prices • CHAPTER 4 • 63
1.3. If the price of a one-bedroom apartment in Washington, D.C., is currently $1,000 per month, but the supply and demand curves look as follows, then is there a shortage or surplus of apartments?What would we expect to happen to prices? Why?Rent for apartments(per month)apartments 100,000
1.2. Consider the following supply and demand tables for bread. Draw the supply and demand curves for this market. What is the equilibrium price and quantity?Price of One Loaf$0.50$1$2$3$5 Quantity Supplied 10 20 35 50 60 Quantity Demanded 75 55 35 25 10
1.1. Suppose the market for batteries looks as follows:Price 10 20 30 Quantity
1.11. What's the best way to think about the rise in oil prices in the last 10 years, as China and India have become richer: Was it a rise in demand, a fall in demand, a rise in supply, or a fall in supply?
1.10. What's the best way to think about the rise in oil prices in the 1970s, when wars and oil embargoes wracked the Middle East? Was it a rise in demand, a fall in demand, a rise in supply, or a fall in supply?
1.9.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to price and quantity in equilibrium?d. When demand decreases, what happens to price and quantity in
1.8.a. When demand increases, what happens to price and quantity in equilibrium?b. When supply increases, what happens to price and quantity in equilibrium?c. When supply decreases, what happens to price and quantity in equilibrium?d. When demand decreases, what happens to price and quantity in
1.7. When supply falls, what happens to quantity demanded in equilibrium? (This should get you to notice that both suppliers and demanders change their behavior when one curve shifts.)
1.6. What happened in Vernon Smith's lab? Choose the right an wer:a. The price and quantity were close to equi librium but gain from trade were far from the maximum.b. The price and quantity were far from equilibrium and gains from trade were far from the maximum.c. The price and quantity were far
1.5. Jules wants to purchase a R oyale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing
1.4. Now, Jon is in Japan, trying to get a job a a full-time translator; he wants to tran late English TV shows into Japanese and vice versa.He notices that the wage for translator is very low. Who is the "competition" that is pushing the wage down: Does the competition come from businesses who
1.3. Jon is on eBay, bidding for a first edition of the influential Frank Miller graphic novel Batman:The Dark Knight Returns. In this market, who is Jon competing with: the seller of the graphic novel or the other bidders?
1.2. When the price is above the equilibrium price, does greed (in other words, self-intere t) tend to push the price down or does it push it up?
1.1. If the price in a market is above the equilibrium price, does this create a surplus or a shortage?
1.5. The industrial areas in northeast W ashington, D.C., were relatively dangerous in the 1980s.Over the last two decades, the area has become a safer place to work (although there are still several times more violent crimes per person in these areas compared with another D. C. neighborhood,
1.4. What should happen to the "demand for speed"(measured by the average speed on highways)once airbags are included on cars?
1.3. For most young people, working full time and going to school are substitutes: You tend to do one or the other. When it's tough to find a job, does that raise the opportunity cost of going to college or does it lower it? When it's tough to find a job, does the demand for college rise or fall?
1.2. The economist Bryan Caplan recently found a pair of $10 arch supports that saved him from the pain of major foot surgery. As he stated on his blog (econlog.econlib.org), he would have been willing to pay $100,000 to fix his foot problem, but instead he only paid a few dollars.a. How much
1.1. Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year.Instead, he earns $80,000 per year. (Note: This is the average salary of new economists with a Ph.D. degree.) How much producer surplus does Michael enjoy?
1.14. Suppose that the supply curve for solar panels i as shown in the diagram:Price $80 70 60 so 40 30 20 10 020 40 60 80 100 Quantity The government decides that it would like to increase the quantity of solar panels in use, so it offers a $20 subsidy per panel to producers. Draw the new supply
1.13. Cars and gasoline are complements. What will happen to the demand curve for gasoline if the price of cars decreases? Why? (Hint: What happens to the quantity demanded of cars?)
1.12. Assume that butter and margarine are substitute .What will happen to the demand curve for butter if the price of margarine increases? Why?
1.11. If income increases and the demand for good X shifts as shown below, then is good X a normal or inferior good? Give an example of a good like good X.Price Quantity
1.10. Let's think about the demand for plasma TVs.a. If the price for a 50" plasma TV is $2,010, and Newhart would be willing to pay$3,000, what is Newhart's consumer surplus?b. Consider the figure below for the total de mand for plasma TVs. At $2,010 per TV, 1,200 TV s were demanded. What would be
1.9. If the price of glass dramatically increases, what are we likely to see a lot less of: glass windows or glass bottles? Why?
1.8. From the following chart, draw the demand curve for pencils (in hundreds):Price$5$15$25$35 Quantity Demanded(in hundreds)60 45 35 20
1.7. Consider the following demand curve for oil:Price of oil per barrel$40 25 15 10 10 20 40 55 Quantity of oil {MBD)a. Using the above demand curve, fill in the following table:Price$25 Quantity Demanded 55b. Ifthe price was $10, how much oil would be demanded?c. What is the maximum price (per
1.6. Consider the farmers talked about in the chapter who have land that is suitable for growing both wheat and soybeans. Suppose all farmers are currently farming wheat but the price of soybeans rises dramatically.a. Does the opportunity cost of producing wheat rise or fall?b. Does this shift the
1.5. In Sucrosia, the supply curve for sugar is as follows:Price(per 1 00 pound bag)$30$50$70 Price of sugar$70 so 30 Quantity 10,000 15,000 20,000 Supply of sugar 10 15 20 Quantity of sugar{1000s)Under pressure from nutrition activists, the government decides to tax sugar producers with a5 tax per
1.4. Using the following diagram, identify and calculate total producer surplus if the price of oil is $50 per barrel. Recall that for a triangle, Area = (1 / 2) X Base X Height. (You never thought you'd use that equation unless you became an engineer, did you?)Price of oil per barrel$60 40 20
1.3. Suppose LightBright and Bulbs4You were the only two suppliers of 60-watt lightbulbs in Springfield. Draw the supply curve for the 60-watt lightbulb industry in Springfield from the following tables for the two companies. To create this "light bulb industry supply curve," note that you'll add
1.2. From the following table of prices per 100 pencils and quantities supplied (in hundreds of pencils), draw the supply curve for pencils:Quantity Price$5$15$25$35 Supplied 20 40 50 55
1.1. Consider the following supply curve for oil.Note that MBD stands for "millions of barrels per day," the usual way people talk about the supply of oil:Price of oil per barrel$50 30 20 15 12 20 Supply of oil 25 30 40 48 Quantity of oil(MBD)a. Based on the above supply curve, fill in the table
1.13. Do taxes usually increase the supply of a good or reduce the supply?
1.12. When oil companies expect the price of oil to be higher next year, what happens to the supply of oil today?
1.11. Imagine that a technological innovation reduces the costs of producing high-quality steel. What happens to the supply curve for steel?
1.10. When is a pharmaceutical business more likely to hire highly educated, cutting-edge workers and use new, experimental research methods:When the business expects the price of its new drug to be low or when it expects the price to be high?
1.9. If the price of cars falls, are carmakers likely to make more cars or fewer cars, according to the supply curve? (Notice that the "person on the street" often thinks the opposite is true!)
1.8. Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied? Why?
1.7.a. If everyone thinks that the price of tomatoes will go up next week, what is likely to happen to demand for tomatoes today?b. If everyone thinks that the price of gasoline will go up next week, what is likely to happen to the demand for gasoline today?(Note: Is this change in demand caused by
1.6.a. When the price of olive oil goes up, what probably happens to the demand for corn oil?b. When the price of petroleum goes up, what probably happens to the demand for natural gas? To the demand for coal? To the demand for solar power?
1.5. When the price of Apple computers goes down, what probably happens to the demand for Windows-based computers?
1.4. What are three things that you'll buy less of once you graduate from college and get a good job? What kinds of goods are these called?
1.3. Your roommate just bought an iPod for $200.She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod?
1.2. When will people search harder for substitutes for oil: When the price of oil is high or when the price of oil is low?
1.1. When the price of a good increases, the quantity demanded --· When the price of a good decreases, the quantity demanded --·
1.2. Go to www. Ted.com and watch Thomas Thwaites's talk, "How I built a toaster-from scratch." How much money and time do you think Thwaites spent building his toaster?How long do you think it would have taken Thwaites to earn enough money in, say, a minimum wage job to buy a toaster? Comment on
1.1. In the computers and shirts example from the chapter, the United States traded one computer to Mexico in exchange for three shirts. This is not just an arbitrary ratio of shirts to computers, however. Let's explore the terms of trade a little bit more.a. Why is trading away a computer for
1.7. Suppose the table below shows the number of labor hours needed to produce airplanes and automobiles in the United States and South Korea, but one of the numbers is unknown.Number of Hours to Produce One Airplane South Korea United States 2,000 800 Number of Hours to Produce One Auto?5a.
1.6. Many people talk about manufacturing jobs leaving the United States and going to other places, like China. Why isn't it possible for all jobs to leave the United States and go overseas(as some people fear)?
1.5. Here's another specialization and exchange problem. This problem is wholly made-up, so that you won't be able to use your intuition about the names of countries or the products to figure out the answer.a. Consider the productivity table below:Which country has an absolute advantage at making
1.4. In this chapter, we've often emphasized how specialization and exchange can create more output. But sometimes the output from voluntary exchange is difficult to measure and doesn't show up in GDP statistics. In each of the following cases, explain how the two parties involved might be able to
1.3. The federal education reform law known as No Child Left Behind requires every state to create standardized tests that measure whether students have mastered key subjects. Since the same test is given to all students in the same grade in the state, this encourages all schools within a state to
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