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business
the macro economy
The Economy Today 16th Edition Bradley R. Schiller - Solutions
Suppose that the monthly market demand schedule for Frisbees is LO-Suppose further that the marginal and average costs of Frisbee production for every competitive firm areFinally, assume that the equilibrium market price is $6 per Frisbee.(a) Draw the cost curves of the typical firm and
If a competitive firm has fixed costs of $15,000 per month and a minimum average variable cost of$26, at what price will it shut down? LO-
According to Table 9.1, LO-(a) What was the prevailing computer price in 1978?(b) How much total profit did the typical firm earn?(c) At what price would profits have been zero?(d) At what price would the firm have shut down?
Suppose the typical catfish farmer was incurring an economic loss at the prevailing price p1. LO-(a) Illustrate these losses on the market and firm graphs. Include the supply and demand curves on the market graph and average total cost, marginal cost, and price in the firm graph.(b) Identify
Suppose the following data describe the demand for fruit smoothies: LO-Five identical, perfectly competitive firms are producing these smoothies. The cost of producing these smoothies at each firm is the following:(a) What price will prevail in this market?(b) What quantity is produced?(c)
Suppose the following data summarize the costs of a perfectly competitive firm: LO-(a) Draw the firm’s MC curve on graph (a).(b) Draw the market supply curve on graph (b), assuming there are 8 firms identical to the onejust described.(c) What is the equilibrium price in this market?
According to Figure 9.3b, if the market price for computers is $800, LO-(a) What is the profit-maximizing quantity?(b) Calculate the profits (or losses) for this typical firm.(c) At this market price, will firms enter or exit the market?(d) Will this entry or exit cause prices to rise or fall?
According to Table 9.1, LO-(a) What were the fixed costs of production for the firm?(b) At what rate of output was profit per computer maximized? (Choose the highest output level.)(c) At what output rate was total profit maximized?
What happens to the factors of production that exit an industry? LO-
Identify two products that have either (a) fallen sharply in price or (b) gotten significantly better without price increases. How did these changes come about? LO-
Why don’t catfish farmers raise the price of their fish and create better profits? LO-
Is “long-run” equilibrium permanent? What forces might dislodge it? LO-
Will the price of AirPods really get as low as $29? LO-
As the price of computers fell, what happened to their quality? How is this possible? LO-
What drives prices down in competitive markets? What stops prices from falling? LO-
Why do TV prices continue to fall so much? (See World View “ Flat Panels, Thin Margins.”)LO-
What industries do you regard as being highly competitive? Can you identify any barriers to entry in those industries? LO-
Why wouldn’t producers necessarily want to produce output at the lowest average cost? Under what conditions would they end up doing so? LO-
Why would anyone want to enter a profitable industry knowing that profits would eventually be eliminated by competition? LO-
Decisions for Tomorrow: Using the data from Problem 7 (at the original price of $21), determine the impact on marginal costs and identify if the profit-maximizing output would increase, decrease, or remain unchanged given the following tax changes. ; LO-(a) A tax of $2 per tie were collected
A firm has leased plant and equipment to produce video games, which can be sold in unlimited quantities at $13 each. The following figures describe the firm's costs of production:(a) How much are fixed costs?(b) Draw total revenue and cost curves on the first graph.(c) Draw the average total cost
Complete the following table: LO-According to the table above, (a) If the price is $10, how much output will the firm supply?(b) How much profit or loss will it make?(c) At what price will the firm shut down?Output Total Cost Marginal Cost Average Total Cost Average Variable Cost
Illustrate on the accompanying graph the changes to the cost curves due to LO-(a) Higher feed prices.(b) Lower wage rates.(c) Higher worker productivity.Does the profit-maximizing rate of output increase, decrease, or stay the same with (d) Higher feed prices?(e) Lower wage rates?(f) Higher
Assume the price of silk ties in a perfectly competitive market is $21 and that the typical firm confronts the following costs: LO-(a) What is the profit-maximizing rate of output for the firm?(b) How much profit does the firm earn at that rate of output?(c) If the price of ties fell to $15,
Complete the following cost schedules: LO-Assuming the price of this product is $12, at what output rate is (a) Total revenue maximized?(b) ATC minimized?(c) Profit per unit maximized?(d) Total profit maximized?Quantity Total cost $ $ $ $
Complete the following cost and revenue schedules: LO-(a) Graph MC and p.(b) What quantity maximizes profit?(c) What is MC at that quantity? Quantity Price Total Revenue Total Cost Marginal Cost 0 $50 $ 50 1 50 60 2 50 90 3 50 140 4 50 200 5 50 280
If the price of catfish fell from $13 to $7 per bushel, use Figure 8.7 to determine the LO-(a) Profit-maximizing output.(b) Profit or loss per bushel.(c) Total profit or loss.
Kanesha is an entrepreneur and has recently opened her first coffee shop, The Coffee Cat. She pays$5,000 rent each month, $4,800 for monthly employee payroll, and $1,200 for supplies each month. She was planning on selling several of her own tables and chairs on Craigslist for $1,500, but instead
If the owner of the Table 8.1 drugstore hired a manager for $10 an hour to take his place, how much of a change would show up in LO-(a) Accounting profits?(b) Economic profits?
According to Front Page Economics “ The Lure of Catfish,” LO-(a) How many fish did farmer Hollingsworth have in inventory?(b) If each of his fish weighed 3 pounds, what percent of the market did he have?
Why do so many people think profits are a bad thing? LO-
How does an employer-paid Social Security tax on wages affect a competitive firm’s supply curve?LO-
Under what conditions would a firm decide to shut down in the short run but remain invested in the market in the long run? LO-
If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices? If so, when? LO-
Is Apple Computer a perfectly competitive firm? LO-
What was the opportunity cost of Hiroshi Fujishige’s farm? (See Front Page Economics “ The Value of Hiro’s Strawberry Farm.”) Is society better off with another Disney theme park? Explain.LO-
What costs did Boeing eliminate when it shut down its production? (See Front Page Economics “Boeing Halts 737 MAX Production.”) How about GM? LO-
What rate of output is appropriate for a nonprofit corporation (such as a hospital)? LO-
Why isn’t the rate of output that minimizes average total cost the most profitable rate of output?LO-
If a firm is incurring an economic loss, would society be better off if the firm shut down? Would the firm want to shut down? Explain. LO-
How many fish should a commercial fisher try to catch in a day? Should he catch as many as possible or return to dock before filling the boat with fish? Under what economic circumstances should he not even take the boat out? LO-
How can the demand curve facing a firm be horizontal if the market demand curve is downwardsloping? LO-
What economic costs will a large corporation likely overlook when computing its profits? How about the owner of a family-run business or farm? LO-
Decisions for Tomorrow: Suppose the hourly wage rate is $24 in the United States and $3 in China, and productivity is 20 units per hour in the United States and 4 units per hour in China.LO-(a) What are per unit labor costs in the United States?(b) What are per unit labor costs in China?(c)
Kanesha is an entrepreneur and has recently opened her first coffee shop, The Coffee Cat.She pays $5,000 rent each month, $4,800 for employee payroll, and $1,200 for supplies.She was planning on selling several of her own tables and chairs on Craigslist for $1,500, but instead she brought them to
Complete the following table: LO- Quantity Total Cost Marginal Cost Average Variable Cost Average Total Cost 0 20 1 10 10 2 21
Complete the following table: LO- Quantity Fixed Cost Variable Cost Total Cost 0 100 10 40 20 100 30 100 270 40 260
Table 7.2, repeated here, shows the total cost of production for producing 15 pairs of jeans per day. LO-(a) Which two inputs are most likely to be fixed in the short run?(b) Which two inputs are most likely to be variable in the short run?To produce 15 pairs of jeans, calculate:(c) Fixed
Given the following productivity information, LO-(a) Calculate marginal physical product.(b) When does marginal productivity first diminish? Labor Output 0123456 0 10 22 30 36 38 37 MP MP
Using the information in World View “ Tesla Starts Rolling Out Cars from Shanghai Gigafactory,” LO-(a) Calculate the average fixed cost at the Shanghai factory if the 2020 output level (= 35,000 cars annually) were maintained for 10 years.(b) Calculate average fixed cost if Tesla ramps up
The following table indicates the average total cost of producing varying quantities of output from three different plants: LO-(a) Plot the ATC curves for all three firms on the graph.(b) Which plant(s) should be used to produce 40 units?(c) Which plant(s) should be used to produce 100
Refer to the production table for jeans ( Table 7.1). Suppose a firm has two sewing machines and can vary only the amount of labor input. LO-(a) Graph the production function for jeans given the two sewing machines.(b) Compute and graph the marginal physical product curve.(c) At what amount
Suppose a company incurs the following costs: labor, $1,200; equipment, $300; and materials,$200. The company owns the building, so it doesn’t have to pay the usual $900 in rent.LO-(a) What is the total accounting cost?(b) What is the total economic cost?(c) If the company sold the building
At what level of labor input in Figure 7.2 does marginal physical product LO-(a) First diminish?(b) Become zero?(c) Turn negative?
(a) Complete the following cost schedule: LO-(b) Use the cost data to plot the ATC and MC curves on a graph.(c) At what output rate is ATC minimized? Rate of Total Marginal Average Average Average Total Output Cost Cost Fixed Cost Variable Cost Cost 0 $ 600 1 800 2 1,050 3 1,400 4 1,800 5
What causes unit labor costs to rise in some nations and fall in others? LO-
What is the economic cost of doing this homework? LO-
What will happen to the cost of producing Teslas if the Shanghai gigafactory doesn’t achieve economies of scale? LO-
Why don’t more U.S. firms move to Mexico to take advantage of low wages there? Would an identical plant in Mexico be as productive as its U.S. counterpart? LO-
Are colleges subject to economies of scale or diseconomies? LO-
Corporate funeral giants have replaced small family-run funeral homes in many areas, in large part because of the lower costs they achieve. What kind of economies of scale exist in the funeral business? Why doesn’t someone build one colossal funeral home and drive costs down further?LO-
Owner/operators of small gas stations rarely pay themselves an hourly wage. How does this practice affect the economic cost of dispensing gasoline? LO-
Would an Uber driver have a U-shaped average total cost curve? LO-
Suppose all your friends offered to help wash your car. Would marginal physical product decline as more friends helped? Why or why not? LO-
What are the production costs of your economics class? What are the fixed costs? The variable costs?What’s the marginal cost of enrolling more students? LO-
Decisions for Tomorrow: In 2019, 360,000 electric vehicles (EVs) were sold in the United States.(a) Suppose the average price of these cars was $40,000. Calculate price elasticity of demand if a$2,000 tax credit caused an increase in sales by 20,000 EVs. LO-(b) Calculate cross-price
Will demand for Netflix increase or decrease if LO-, LO-(a) The price of Disney+ falls?(b) Cell phone providers offer lower-priced unlimited data plans?(c) The economy falls into a recession?(d) Cable TV becomes more expensive?
Use the following data to illustrate the demand curve and total revenue curve on the accompanying graphs: LO-(a) At what price is total revenue maximized?(b) At that price, what is the elasticity of demand? Price $10 9 8 7 6 5 4 3 2 1 Quantity 2 4 6 8 10 12 14 16 18 20 20
Suppose that in a week the price of Greek yogurt decreases from $1.75 to $1.25 per container. At the same time, the quantity of Greek yogurt demanded increases from 10,000 to 18,000 containers per week. What is the price elasticity of demand for Greek yogurt? LO-
If the cross-price elasticity of demand between printed textbooks and ebooks is +0.70, LO-(a) Are ebooks and textbooks complementary or substitute goods?(b) If textbook prices increase by 10 percent, by how much will ebook demand change?
According to the World View “ Rebounding Oil Price Spurs More Rigs,” based on the estimated price elasticity of supply, calculate the change in the quantity of oil supplied if the price of oil increased by 20 percent. LO-Page 140
According to the calculation in the section “ Income Elasticity,” by how much will popcorn sales increase if average income goes up by 6 percent? LO-
From Figure 6.1, compute LO-(a) The price elasticity between the points listed in the table.(b) The total revenue at each point listed in the table.(c) If there is a price decrease, will total revenue increase when demand is elastic or inelastic? Point C to D H to / Price Elasticity At point
Suppose consumers buy 40 million packs of cigarettes per month at a price of $5 per pack. If a $2 tax is added to that price, LO-(a) By what percentage does price change? (Use the midpoint formula in “Computing Price Elasticity.”)(b) By what percentage will cigarette sales decline in the
What is the price elasticity of demand for cigarettes implied in Front Page Economics “ Californ ians Vote to Triple Cigarette Tax” by LO-(a) The state’s legislative analyst office?(b) Anti-smoking advocates?If the actual price elasticity of demand for California-tax cigarettes is
According to Professor Becker (Front Page Economics “ Professor Becker Rejects Clinton’s Tax Math”), by how much would cigarette prices have to rise to get a 20 percent reduction in smoking in LO-(a) One year?(b) Three years?
What was the quarterly price elasticity of demand for iPhones in 2007 (Front Page Economics “After iPhone Price Cut, Sales Are Up by 200 Percent” and section “ Computing Price Elasticity”)? LO-
What do oil producers have to do in order to increase the supply of oil (a) in the short run and (b) in the long run? Will they? LO-
Why did Disney+ price itself so low at the outset? Will the price go up? LO-
Is the demand for iPhones price inelastic or elastic? Why? Is income elasticity high or low?LO-
If the elasticity of demand for coffee is so low ( Table 6.1), why doesn’t Starbucks raise the price of coffee to $10 a cup? LO-
Why are the price and cross-price elasticities for Netflix so small? LO-, LO-
If you owned a movie theater, would you want the demand for movies to be elastic or inelastic?LO-
In California, 15.7 percent of low-income households smoke, but only 9.4 percent of high-income households do so. So, the burden of higher cigarette taxes (Front Page Economics “ Californians Vote to Triple Cigarette Tax”) falls disproportionately on the poor. Is this fair? LO-
Why does the price elasticity of demand for cigarettes differ for teenagers and adults (see Table 6.2)? LO-
Identify two goods each whose demand exhibits (a) high income elasticity, (b) low income elasticity,(c) high price elasticity, and (d) low price elasticity. What accounts for the differences in elasticity?LO-
If the price of gasoline doubled, how would consumption of (a) cars, (b) public transportation, and(c) restaurants be affected? How quickly would these adjustments be made? LO-
Is the demand for enrollments in your college price-elastic? How could you find out? LO-
Decisions for Tomorrow: Use the following data to illustrate the relevant demand Page 114 curve: LO-(a) If the price increases from $4 to $8, by how much does the quantity demanded decline?(b) If a successful advertising campaign increases the quantity demanded at every price by 4 units, (i)
A consumer downloads 4 movies and 3 apps per week. Suppose the price is $5 per movie and$3 per app, and the marginal utility for this consumption level is 12 for a movie and 10 for an app. LO-(a) Calculate marginal utility per dollar.(b) Is this optimal consumption?(c) If not, how should the
Suppose the following table reflects the total satisfaction derived from consumption of pizza slices and Pepsis. Assume that pizza costs $1 per slice and a large Pepsi costs $2. With $20 to spend, what consumption mix will maximize satisfaction? LO- Quantity consumed 2 3 5 6 Total units of
Suppose the graph below depicts the demand for football tickets at Grand University. LO-(a) If current demand is represented as Demand 2, what is total revenue at the price of $24?(b) If the price drops to $12, how many tickets would consumers purchase?(c) What is total revenue at that
Suppose movie downloads cost $2 apiece and game downloads cost $3. If the marginal utility of movie downloads at the optimal mix of consumption is 10 utils, what is the marginal utility of a game download? LO-
The following data reveal how much each consumer is willing to pay for an Alaskan cruise:LO-(a) Draw the market demand for these eight consumers.(b) If the cruise costs $1,000, how many passengers will there be?(c) If the cruise costs $1,000, how much total revenue will be collected?(d) If
If the price of a Spyder drops to $700,000 in Figure 5.4, LO-(a) How many Spyders can be sold at that price?(b) How much consumer surplus will there be if all the cars are sold at that price?(c) How much revenue will the car dealer get if he sells all the cars at(i) the same price
In Figure 5.4, if Bob’s maximum price increased by 50 percent, LO-(a) Would he buy a Spyder?(b) How much consumer surplus would he have?
In Figure 5.4, how much consumer surplus is received by LO-(a) Fred?(b) Hua?(c) Carlos?
According to Table 5.1, LO-(a) With which box of popcorn does marginal utility first diminish?(b) With which box does marginal utility become negative?
Why does anyone care what cosmetics Kylie Jenner uses? LO-
Why do airlines charge different fares for the same flight? LO-
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