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business
the macro economy
The Economy Today 16th Edition Bradley R. Schiller - Solutions
What share of taxes should the rich pay (see Figure 19.4)? Should the poor pay any taxes?LO-
Is a tax deduction for tuition likely to increase college enrollments? How will it affect horizontal and vertical equities? LO-
If the tax elasticity of supply were zero, how high could the tax rate go before people reduced their work effort? How do families vary the quantity of labor supplied when tax rates change?LO-
If a new tax system not only encouraged more output but also created greater inequality, would it be desirable? LO-
What loopholes reduced the 2018 tax bills of Bernie Sanders and Joe Biden (see Front Page Economics “ Taxes: Bernie vs. Biden”)? What’s the purpose of those loopholes? LO-
Do inequalities stimulate productivity? In what ways? Provide two specific examples. LO-
Why are incomes distributed so unevenly? Identify and explain three major causes of inequality.LO-
What goods or services do you and your family receive without directly paying for them? How do these goods affect the distribution of economic welfare? LO-
Decisions for Tomorrow: What are the three most important sources of funding for financing a start-up? LO-
Which investment has a higher rate of annual cash return? Investment A: $1,000 bond with a coupon rate of 4 percent selling for $1,200 or Investment B: $1,000 stock with a P/E ratio of 10 that pays out half its profits in dividends. LO-
Illustrate with demand and supply shifts the impact of the following events on stock prices:LO-(a) A federal court finds Google guilty of antitrust violations. Which way (right or left) did(i) Demand shift?(ii) Supply shift?(b) Intel announces a new and faster processor. Which way did(i)
How much interest accrued each day on the immediate cash payoff of the MegaMillions jackpot?(See Table 18.1.) LO-Page 409
What is the current yield on a $1,000 bond with a 5 percent coupon if its market price is LO-(a) $900?(b) $1,000?(c) $1,100?
What was the expected return on Columbus’s expedition, assuming that he had a 50 percent chance of discovering valuables worth $1 million, a 25 percent chance of bringing home only $100,000, and a 25 percent chance of sinking? LO-
What is the present discounted value of $10,000 that is to be received in 2 years if the market rate of interest is LO-(a) 0 percent?(b) 4 percent?(c) 8 percent?
If the market rate of interest is 4 percent, what is the present discounted value of $1,000 that will be paid in LO-(a) 1 year?(b) 5 years?(c) 10 years?
What was the market value (capitalization) of Uber (see Front Page Economics “Uber IPO Disappoints”) LO-(a) At the time of its IPO?(b) In November 2019?
According to Table 18.3, which company had LO-(a) The lowest P/E?(b) The biggest one-day percentage gain?(c) The biggest percentage gain from the year low to the year high?(d) A close that was closest to its one-year high?
According to the data in Table 18.3, LO-(a) How much profit per share did Alphabet (Google) earn?(b) How much of that profit did it pay out in dividends per share?
If a $32 per share stock has a P/E ratio of 16 and pays out 40 percent of its profits in dividends, LO-(a) How much profit is it earning per share?(b) How large is its dividend?(c) What is the implied rate of cash return?
If an $140 stock pays a quarterly dividend of $1, what is the implied annual rate of return? LO-
Why do people say “a dollar today is worth more than a dollar tomorrow”? LO-
Could Facebook have become a premier social networking site without venture capitalists? How?LO-
Based on the information in Table 18.3, which stock would you prefer to own? LO-
If Uber is so popular, why has the price of its stock declined since its IPO? LO-
How does a successful IPO affect WHAT, HOW, and FOR WHOM the economy produces?LO-
Why is it considered riskier to own stock in a software company than to hold U.S. Treasury savings bonds? Which asset will generate a higher return? LO-
If you could finance a new venture with either a stock issue or bonds, which option would you choose? What are their respective (dis)advantages? LO-
Why would anyone sell a bond for less than its face (par) value? LO-
Why would anyone buy shares of a corporation that had no profits and paid no dividends? What’s the highest price a person would pay for such a stock? LO-
If there were no organized financial markets, how would an entrepreneur acquire resources to develop and produce a new product? LO-
Decisions for Tomorrow: Identify if the following would likely strengthen or weaken a union membership in the United States. LO-(a) Increase in manufacturing.(b) Faster growth of small companies.(c) Increased global competition.
In the 2012 Machinists’-Caterpillar confrontation, the workers’ average pay was $26 per hour. If their demand for a 1.5 percent pay hike per year had been granted, what would their hourly wage have been LO-(a) In the following year?(b) Three years later?Suppose instead that Caterpillar
In the Silicon Valley hiring-conspiracy case (Front Page Economics “ Judge OKs $415 Million Settlement of ‘No Poaching’ Charges”), attorneys for the 64,446 plaintiffs asked for $3 billion in damages. LO-(a) How much did this work out per worker?(b) How much did the judge approve
The graphs show unionized and nonunionized labor markets. LO-(a) Identify a likely wage and employment outcome when the market becomes unionized on the unionized labor market graph.(b) Show the impact of this unionization on the nonunionized labor market. W (a) Unionized labor market
Suppose the following supply and demand schedules apply in a particular labor market: LO-Graph the relevant curves and identify the (a) Competitive wage rate.(b) Union wage rate.(c) Monopsonist’s wage rate.Wage rate (per hour) $ $ $ $ $ $ $Quantity of labor
At the time of the National Football League strike in 1987, the football owners made available the following data: LO-(a) Compute total revenue, total expense, and profit both before and during the strike.(b) Who was better positioned to endure the strike: NFL owners or the players? Total
Based on the data in Problems 1 and 2 above, LO-(a) What is the competitive wage rate?(b) Approximately what wage will the union seek?(c) How many workers will the union have to exclude in order to get that wage?
Complete the following table: LO- Wage rate $6 $7 $8 $9 $10 $11 $12 Quantity of labor supplied 80 120 155 180 200 210 215 Marginal factor cost
Complete the following table: LO-(a) What is the marginal wage when the nominal wage is $11?(b) At what wage rate does the marginal wage first become negative? Wage rate Quantity of labor demanded Marginal wage $14 $13 $12 $11 $10 $9 $8 $7 0 5 20 50 75 95 110 120 |
Why do pro basketball players want team owners to limit roster size to 40 players (Front Page Economics “ NBA and Players Strike a Deal”)? Why would owners like larger rosters? LO-
Why did Walmart choose to close its store rather than hire 30 more workers (World View “Walmart Shutters Quebec Store as Union Closes In”)? LO-
Why did the NBA players avert a strike (Front Page Economics “ NBA and Players Strike a Deal”and Collective Bargaining Section)? LO-
In 1998 teaching assistants at the University of California struck for higher wages and union recognition, something they had sought for 14 years. How might the availability of replacement workers have affected their power? LO-
Why are farmworkers much less successful than airplane machinists in securing higher wages?LO-
Nonunionized firms tend to offer wage rates that are close to rates paid by unionized firms in the same industry. How do you explain this? LO-
Are large and powerful firms easier targets for union organization than small firms? Why or why not?LO-
Why do some college professors join a union? What are the advantages or disadvantages of campus unionization? LO-
Does a strike for a raise of 5 cents an hour make any sense? What kinds of long-term benefits might a union gain from such a strike? LO-
Collective bargaining sessions often start with unreasonable demands and categorical rejections. Why do unions and employers tend to begin bargaining from extreme positions? LO-
Decisions for Tomorrow: If the typical Disney worker is paid an annual salary of $25,000, how much higher is the CEO’s annual salary in percentage terms? LO-
By how much would the quantity of labor demanded decrease if a minimum wage hike raised prevailing wages from $8 to $10 an hour and if the elasticity of labor demand were 0.15?LO-
The Los Angeles Angels agreed to pay Mike Trout $426.5 million over 12 years (see Front Page Economics “ Angels Sign Mike Trout for $426 Million”). If this salary were to be covered by ticket sales only, how many tickets per game would the Angels have to sell to cover Trout’s salary if there
The following table depicts the number of grapes that can be picked in an hour with varying amounts of labor: LO-(a) Illustrate the supply and demand of labor for a single farmer, assuming that the local wage rate is $6 an hour and a flat of grapes sells for $2.(b) How many pickers will be
Assume that the following data describe labor market conditions: LO-On a graph, illustrate (a) The equilibrium wage.(b) A government-set minimum wage of $6 per hour.When the minimum wage is implemented, (c) How many workers lose jobs?(d) How many additional workers seek jobs?(e) How many
Illustrate on the graph below LO-(a) An ineffective hike in the minimum wage.(b) An effective hike in the minimum wage. WAGE RATE (dollars per hour) Labor demand Labor supply QUANTITY OF LABOR (hours per year) Minimum wage
According to Figure 16.8, LO-(a) How many workers are unemployed at the equilibrium wage?(b) How many workers are unemployed at the minimum wage?
Apples can be harvested by hand or machine. Handpicking yields 80 pounds per hour; mechanical pickers yield 120 pounds per hour. LO-(a) If the wage rate of human pickers is $8 an hour and the rental on a mechanical picker is $15 an hour, which is more cost effective?(b) If the wage rate
If the price of strawberries doubled, how many pickers would be hired at $4 an hour, according to Table 16.1? LO-
Suppose a wage increase from $12 to $16 an hour for Disney tour guides increases the number of daily job applicants from 48 to 58.What is the price elasticity of labor supply? LO-
By what percentage did the federal minimum wage increase between LO-(a) September 1997 and July 2009? (See Table 16.2.)(b) July 2009 and January 2019?(c) If the “Raise the Wage Act” (see Front Page Economics “ House Approves $15 Minimum Wage”) becomes law, by what percent will the
According to the Front Page Economics “ Thousands Line Up for Amazon Jobs,” if Amazon increased wages to $16 per hour, what do you predict will happen to that market surplus?LO-
According to the Front Page Economics “ Thousands Line Up for Amazon Jobs,” LO-(a) How many jobs were immediately available?(b) How many job applicants were there?(c) Was there a surplus or shortage in this market?
The Congressional Budget Office (CBO) estimated the job losses that would result from minimumwage hikes to $10, $12, and $15 an hour. Why didn’t CBO look at $8 an hour or $20 an hour?LO-
The minimum wage in Mexico is less than $1 an hour. Does this make Mexican workers more costeffective than U.S. workers? Explain. LO-
Why is Mike Trout’s $426 million pay package admired while Bob Iger’s $423 million pay package is criticized? LO-
In 2020 the president of the University of Michigan was paid $900,000 and the football coach was paid $9 million. Does this make any sense? LO-
Who is hurt and who is helped by an increase in the legal minimum wage? Under what circumstances might a higher minimum not reduce employment? LO-
How might you measure the marginal revenue product of (a) a quarterback and (b) the team’s coach?LO-
Is this course increasing your marginal productivity? If so, in what way? LO-
Explain why marginal physical product would diminish as LO-(a) More waiters are hired in a restaurant.(b) More professors are hired in the economics department.(c) More carpenters are hired to build a house.
Why might Chinese and Brazilian workers have a stronger preference for leisure time over money than American workers (see World View “ More Time or More Money”)? LO-
Would you continue to work after winning a lottery prize of $100,000 a year for life? Would you change schools, jobs, or career objectives? What factors besides income influence work decisions?LO-
Why are you doing this homework? What are you giving up? What utility do you expect to gain?LO-
Decisions for Tomorrow: LO-(a) According to Figure 15.7, how much did farm incomes change (in percentage terms) in 2016–2019?(b) If a law is passed that limits immigration, what is the predicted impact on farm incomes?(c) If subsidies are extended to agricultural products like
Suppose there are 100 grain farmers, each with identical cost structures, as shown in the following tables: LO-Under these circumstances, graph the market supply and demand.(a) What is the equilibrium price for grain?(b) How much grain will be produced at the equilibrium price?(c) How much
Assume that the unregulated supply schedule for milk is the following: LO-(a) Draw the supply and demand curves for milk, assuming that the demand for milk is perfectly inelastic (vertical) and consumers will buy 53 billion pounds of it.(b) What is the equilibrium price?Now suppose the
Suppose that consumers’ incomes increase 10 percent, which results in a 0.4 percent increase in consumption of farm goods at current prices. What is the income elasticity of demand for farm goods? LO-
Suppose the market price of corn is $2.00 per bushel. LO-(a) Would a farmer sell corn to the market or use it for loans from the government (CCC)? (See Table 15.2.)(b) If the market price rose to $2.50, what would the farmer do with her corn?
The following table shows the market demand and supply for soybeans. LO-(a) What is the equilibrium price?(b) What is the equilibrium quantity?Suppose the CCC loan rate is $6.(c) What is the new quantity supplied?(d) What is the new quantity demanded?(e) How much is this shortage or
According to the World View “ U.S.–China Trade War Takes Soybean Farmers as Victims,” in 2016–2018, LO-(a) By how much did soybean prices fall as a result of the trade war?(b) What was this decline in percentage terms?After steps were taken to end the trade war in January 2020,(c)
According to Figure 15.2, how much did corn prices change between 2000 and 2012 in percentage terms? LO-
If this year’s harvest is greater than last year’s by 6 percent, to sell all of the crop, how much does price have to change if the price elasticity of demand is 0.2? LO-
The number of bushels of corn produced decreased from 14.3 billion bushels in 2018 to 13.7 billion bushels in 2019. LO-(a) By what percent did the quantity of corn supplied decrease in 2019?(b) If the price elasticity of demand for corn is 0.15, by how much did price rise?
Identify at least four groups that were hurt by the Chinese tariffs on soybeans and two that were helped. LO-
How have farmers increased milk production per cow so much (see section Technological Advance)? How does this affect milk prices? LO-
Why are the price and income elasticities for food so low? LO-
You need a government permit (allotment) to grow tobacco. Who gains or loses from such regulation? LO-
How do farmers of unsubsidized crops survive and thrive? LO-
Farmers can eliminate the uncertainties of fluctuating crop prices by selling their crops in futures markets (agreeing to a fixed price for crops to be delivered in the future). Who gains or loses from this practice? LO-
Why doesn’t the United States just give its crop surpluses to poor countries? What problems might such an approach create? LO-
Are large price movements inevitable in agricultural markets? What other mechanisms might be used to limit such movement? LO-
Would the U.S. economy be better off without government intervention in agriculture? Who would benefit? Who would lose? LO-
Decisions for Tomorrow: Calculate the annual household cost of a carbon-free program if the program costs $6.5 trillion evenly spread over 10 years (assume there are 110 million households). LO-
Suppose the marginal cost of pollution abatement is constant and equal to 3% of GDP for each 10% increase in pollution control. Given the following data for a $22 trillion economy, LO-(a) identify the optimal rate of pollution abatement.Now suppose that the marginal costs of pollution
The following cost schedule depicts the private and social costs associated with the weekly use of dicamba, a strong fertilizer that can damage nearby crops that are not genetically modified to resist the fertilizer. The sales price of dicamba is $26 per ton. LO-(a) Graph the private and
The table shows the total benefits and total costs to reduce solid waste pollution in a local river. LO-(a) Calculate the marginal benefits of pollution abatement.(b) Calculate the marginal costs of pollution abatement.(c) What is the optimal level of pollution abatement? Quantity of
Suppose three firms confront the following costs for pollution control: LO-(a) If each firm must reduce emissions by one ton, how much will be spent in total by all three firms?(b) If the firms can trade pollution rights, what would be the cheapest way of attaining a net threeton
How much more per ton is New York City paying to recycle rather than just dump its garbage(Front Page Economics “ Recycling Wastes Money”)? LO-
Many people pay nothing for each extra pound of garbage they create, yet the garbage is a type of solid waste pollution. In view of this, we can view garbage collection as creating external benefits to society. So what’s an appropriate price for garbage collection? Answer the questions based on
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