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modern principles of economics

Questions and Answers of Modern Principles Of Economics

Some years ago, the New York Times reported that “the inability of OPEC to agree last week to cut production has sent the oil market into turmoil . . . [leading to] the lowest price for domestic
Compare the quantity and price of an oligopoly with that of a perfectly competitive market.
Give two examples other than oligopoly that can be explained by the logic of the prisoners’ dilemma.
Give two examples of events that could shift the supply of labor, and explain why they do so.
Why are roofers paid more than other workers with similar amounts of education?
Explain how the forces of economic competition affect racial discrimination.
Describe some of the trade-offs faced by each of the following: a. A family deciding whether to buy a car.b. A member of Congress deciding how much to spend on national parks.c. A company
What items would you include to figure out the opportunity cost of a trip to an amusement park?
Why isn’t trade between two countries like a game in which one country wins and the other loses?
Explain whether each of the following government activities is motivated by a concern about equality or a concern about efficiency. In the case of efficiency, discuss the type of market failure
Name a way that your family interacts in the markets for the factors of production and a way that it interacts in the markets for goods and services.
Diego and Darnell are roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Diego takes 4 hours to
Consider the markets for video streaming services, TV screens, and tickets at movie theaters. a. For each pair, identify whether they are complements or substitutes: ● Video streaming and
For each of the following pairs of goods, which good would you expect to have more elastic demand and why? a. Required textbooks or mystery novels b. Billie Eilish recordings or pop music
The price of aspirin rose sharply last month, while the quantity sold remained the same. Five people suggest various diagnoses of the phenomenon: Meredith: Demand increased, but supply was
Two drivers, Thelma and Louise, each drive up to a gas station. Before looking at the price, each places an order. Thelma says, “I’d like 5 gallons of gas.” Louise says, “I’d like $20 worth
Lovers of comedy persuade Congress to impose a price ceiling of $50 per ticket for live comedy performances. As a result of this policy, do more or fewer people attend comedy performances? Explain.
Explain why economists frequently oppose price controls.
Kyra buys an iPhone for $360 and gets consumer surplus of $240. a. What is her willingness to pay? b. If she had bought the iPhone on sale for $270, what would her consumer surplus have
In a supply-and-demand diagram, show producer surplus and consumer surplus at the market equilibrium.
A friend of yours is considering two movie-streaming services. Provider A charges $120 per year regardless of the number of movies streamed. Provider B does not have a fixed service fee but instead
Give two examples of externalities in the healthcare system.
Describe the three sets of rules that are necessary in a healthcare market with an insurer.
Give three reasons why life expectancy has been increasing over time.
How does spending on healthcare in the United States compare with spending 50 years ago? Give four economic forces that might help explain the trend.
How does healthcare spending in the United States compare with spending in other developed nations?
Explain the rationale for a “Cadillac tax” on expensive health insurance plans.
Prior to 2018, state and local taxes (SALT) could be fully deducted when calculating taxable income for the federal income tax. Starting in 2018, the SALT deduction was limited to $10,000.a. Who
Give two arguments why people with high incomes should pay more taxes than people with low incomes.
Buffy is thinking about opening an amulet store. She estimates that it would cost $350,000 per year to rent the location and buy the merchandise. In addition, she would have to quit her $80,000 per
How and why does a firm’s average-total-cost curve in the short run differ from its average-total-cost curve in the long run?
Define overvalued exchange rate. Discuss four ways in which government policymakers can respond to an overvaluation. What are the drawbacks of each approach?
Suppose your school is considering whether to spend $20 million building a new state-of-the-art recreation facility. All of the students agree that the existing facility is in disrepair and that a
Suppose there is only one electric scooter company in Adriana’s hometown. Currently, the company charges 20 cents per minute, and there is no fee to unlock a scooter. The scooter company is
Which of the following U.S. jobs is likely to be the most vulnerable to outsourcing: an in-home health care provider, a hairstylist, or a computer programmer? Explain.
In March 2020, global crude oil prices tumbled from over $50 a barrel to below $23 per barrel, bringing prices to their lowest level in nearly two decades. This precipitous drop in crude oil prices
The price elasticity of supply for basmati rice (an aromatic strain of rice) is likely to be which of the following?a. Higher in the long run than in the short run because farmers cannot easily
What important characteristic do all three types of imperfectly competitive firms share?
Only two moving companies, United and North American, provide local delivery service in a small western city. United operates 20 percent of the trucks, North American the remaining 80 percent. On a
How does the representativeness heuristic explain why people might think, mistakenly, that a randomly chosen shy person is more likely to be a librarian than a salesperson?
Kaela, a tennis player, has been struggling to develop a more consistent serve. She made the following remark to her partner during the second set of a recent match: “I feel like I’m making
Explain why thinking of costs or benefits in proportional terms might lead to suboptimal choices.
Explain why traditional economic models find it difficult to explain why people would pay to attend weight-loss camps that restrict their daily calorie intake.
How does loss aversion help explain why attempts to repeal the Affordable Care Act have met such strong resistance?
Cite two examples of behavior that appear to contradict the assumption that people are narrowly self-interested.
Shobhana is a gourmet. She makes it a point never to visit a restaurant a second time unless she has been served a superb meal on her first visit. She is puzzled at how seldom the quality of her
Tom has said he would be willing to drive across town in order to save $10 on the purchase price of a $20 clock radio. If Tom is rational, this implies that hea. Believes that the opportunity cost of
When students in a large class were surveyed about how much they would be willing to pay for a coffee mug with their university’s logo on it, their median willingness to pay was $5. At random, half
Explain why rational voters whose happiness depends on relative consumption might favor laws that require them to save a certain portion of each year’s earnings for retirement.
For each of the goods listed below, discuss whether the good is likely to entail an external cost or an external benefit. In addition, discuss whether the market is likely to provide more or less
Imagine that, all else equal, it takes U.S. workers a quarter of the time it takes Chinese workers to design a new mobile phone model. Also, imagine that it takes U.S. workers half the time it takes
Sketch a PPC for a four-worker economy that produces two goods, hot dogs and hamburgers. Give an economic interpretation of the vertical intercept, the horizontal intercept, and the slope of the
What is meant by the “consumption possibilities” of a country? How are consumption possibilities related to production possibilities in a closed economy? In an open economy?
A small, open economy is equally productive in producing coffee and tea. What will this economy produce if the world price of coffee is twice that of tea? Half that of tea? What will the country
Suppose that a U.S. worker can produce 1,000 pairs of shoes or 10 industrial robots per year. For simplicity, assume there are no costs other than labor costs and firms earn zero profits. Initially,
Show graphically the effects of a tariff on imported automobiles on the domestic market for automobiles. Who is hurt by the tariff and why? Who benefits and why?
Show graphically the effects of a quota on imported automobiles on the domestic market for automobiles. Who does the quota hurt and who benefits? Explain.
How did the experience of the Great Depression motivate the development of the field of macroeconomics?
Over the next 50 years the Japanese population is expected to decline, while the fraction of the population that is retired is expected to increase sharply. What are the implications of these
Generally, how does the standard of living in the United States today compare to the standard of living in other countries? To the standard of living in the United States a century ago?
Is it possible for average living standards to rise during a period in which average labor productivity is falling? Discuss, using a numerical example for illustration.
Why is average labor productivity a particularly important economic variable?
The Bureau of Economic Analysis, or BEA, is a government agency that collects a wide variety of statistics about the U.S. economy. From the BEA’s website (www.bea.gov), find data for the most
True or false: Economic growth within a particular country generally proceeds at a constant rate. Explain.
Which of the following statements are positive and which are normative?a. If the Federal Reserve raises interest rates, demand for housing is likely to fall.b. The Federal Reserve should raise
True or false: Differences of opinion about economic policy recommendations can always be resolved by objective analysis of the issues. Explain.
Which of the following would be studied by a macroeconomist? By a microeconomist?a. The worldwide operations of General Motors.b. The effect of government subsidies on sugar prices.c. Factors
What type of macroeconomic policy (monetary, fiscal, structural) might include each of the following actions?a. A broad government initiative to reduce the country’s reliance on agriculture and
Baseball statistics, such as batting averages, are calculated and reported for each individual player, for each team, and for the league as a whole. What purposes are served by doing this? Relate to
What are the costs of increasing economic growth?
List and discuss the five important labor market trends given in the first section of the chapter. How do these trends either support or qualify the proposition that increasing labor productivity
What is a banking panic? Prior to the introduction of deposit insurance, why might even a bank that had made sound loans have reason to fear a panic?
Define velocity. How has the introduction of new payment technologies affected velocity? Explain.
What other methods does the Fed have for affecting short-run interest rates besides open-market operations? Discuss whether these methods can be used for only lowering short-run interest rates, for
Suppose you are much less concerned about risk than the typical person. Are stocks a good financial investment for you? Why or why not?
If the natural rate of unemployment is 5 percent, what is the total rate of unemployment according to Okun’s law if output is 2 percent below potential output? What if output is 2 percent above
In a situation where short-run interest rates have hit their zero lower bound, can the Fed still lower other, higher, longer-term interest rates? Discuss specific actions that the Fed can take and
What is the demand for money? How does the demand for money depend on the nominal interest rate? On the price level? On income? Explain in terms of the costs and benefits of holding money
How would increased political instability in a country likely affect capital inflows, the domestic real interest rate, and investment in new capital goods? Show graphically.
Why does the overall rate of inflation tend to adjust more slowly than prices of commodities, such as oil or grain?
Most central banks place great value on keeping inflation a low and stable. Why do they view this objective as so important?
Use a supply and demand diagram to illustrate the effects of a speculative attack on an overvalued exchange rate. Why do speculative attacks often result in a devaluation?
Contrast fixed and flexible exchange rates in terms of how they affect (a) The ability of monetary policy to stabilize domestic output and (b) The predictability of future exchange rates.

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