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business
economics 14th global

Questions and Answers of Economics 14th Global

Answer true or false:a. ATC falls only when MC falls.b. At the minimum AVC, AVC = MC.c. ATC falls when MC < ATC.d. TC increases by MC.
Mary Jones can work in a factory and earn $16,000 a year or, alternatively, be a farmer. Assume that except for monetary reward, she doesn’t care which she does. To farm, Mary has to invest her
Acme Tables employs workers and machines to produce tables. It has the following production schedule:Between 10 and 30 units of output, does it have increasing, constant, or decreasing returns to
a. A firm has a fixed cost of $900 and a marginal cost of $20 per unit. Write out the equation for its total cost (TC) curve and average total cost (ATC) curve, with Q being its output level. What
What is wrong with the following statements:a. “Even if government spends its money on wasteful projects, it still has worth because it creates jobs.”b. “Even if the savings and loans did go
Consider the cost curves of a trucking firm.a. Suppose there is an increase in the price of diesel. How will each of these cost curves shift up (if they shift at all): MC, ATC, AVC, AFC?b. Suppose
Why does a firm increase Q when MR > MC ?
What will a firm lose if it shuts down in the short run? When can it reduce this loss by producing? Why is the firm better off producing rather than shutting down when AVC < P < ATC ?
What will the firm lose if it shuts down in the long run? When will it do better by producing?
If a competitive firm can sell 1 widget at $10, at what price will it be able to sell 1,000 widgets? How many widgets can it sell at $10.01?
What is the competitive firm’s supply curve in the short run? Long run?
How do you find the industry’s short-run supply curve?
How do you describe the long-run supply of the least efficient firm in an industry?
Does industrial output increase more in the short run or long run when demand goes up? Why?
When do fixed costs affect the industry’s supply?
What forces determine how prices will change in the long run when demand goes up?
In Table 20–1, the fixed cost is $15. Redo the table assuming the fixed cost is $35.Table 20-1:a. Does the change in fixed costs affect marginal cost?b. Does it affect the optimal level of output
Some quick questions:a. At Q = 8, a firm’s profit is $40. At Q = 9, its MR is $60 and its MC is $55. What is its profit at Q = 9?b. At Q = 7, a firm’s profit is $70, and at Q = 8, it’s $75. The
Answer true or false. Assume the firm is a price taker.a. The firm should always produce more when P > ATC.b. The firm should always produce more when P > AVC.c. The firm should always produce more
An airline has signed a long-term contract to rent planes at a cost of$200,000 per month. In a given month, suppose each plane can make 100 flights. Each flight costs $5,000 in labor, gas, and other
Use the following table to answer the questions.a. What is the minimum AVC? (Recall that TVC is the sum of the MCs and AVC is the average MC.) What is this firm’s short-run shutdown price?b. What
Suppose there are 100 firms in an industry. Each has the following cost schedules:Answer the questions below using the following demand curve for the industry.a. What is the industry’s short-run
We begin this problem by assuming that the industry in Questions 5 and 6 above is in the long-run equilibrium. Then demand falls, decreasing by 210 units at each price level. (For example, at $5,
What are the long-run effects of an output tax of $1 per unit on a constant-cost industry? On an increasing-cost industry? On a declining-cost industry?
Assume the fast food industry is competitive and has the following production function: to produce 100 meals in an hour, each firm needs 10 workers (no more or no less), $100 of other variable inputs
Suppose all firms in a competitive industry only have fixed costs(cruise ships are somewhat like this). Each firm produces exactly 100 units a year, and the fixed cost in per year terms is $100,000.
What is market failure? What are some of the causes of market failure?
What are the four elements usually present when there is asymmetric information?
How and when does asymmetric information cause market failure?
How and when does adverse selection raise costs?
What is the moral hazard problem for insurance companies?
How does moral hazard lead to market failure?
How might an expensive advertising campaign be a market signal?
What is a necessary condition for a market signal to work?
How might paying a higher wage solve, at least partially, the principal-agent problem between employers and workers? How might this save the employer money?
When will profit sharing be effective in motivating workers to work harder?
John’s daily productivity depends upon his skill, his time on the job, and the effort he makes. Suppose that in a given day of work, he has a choice of how much effort (E) to expend. The following
There are nine people in a town. Person 1 eats $1 of food at a meal, person 2 eats $2 of food at a meal, and so forth (so person 9 eats $9 of food at a meal). Each person is willing to pay a price
If a computer is good, customers value one year of its services at$1,000 and a second year at $1,000. Assume that if the computer is good, 10 percent of its customers will sell it after one year. If
In a small town, there are two people who paint homes. Jim does a bad job such that when customers find out (too late) how bad his work is, they do not use him again. Mary does a good job such that
Suppose the federal government insures deposits at savings and loan banks and charges a premium that did not vary with the risk of loans.What type of asymmetrical information problem will likely be
A salesperson if lucky can sell $200,000 if she works hard, and if the salesperson is lucky but does not work hard she will sell $150,000. If she is unlucky, she can sell $150,000 if she works hard
The Smiley Face Fire Insurance Company was insuring $100,000 homes for 90 percent of their value (that is, $90,000). Its premium was $900 a year. It decides to offer a new fire insurance policy that
The interest rate one pays on a loan depends on one’s credit record(which is available from one of the major credit reporting companies).The worse one’s credit record, the higher the interest
Workers in large workplaces (with over 1,000 workers at one location)get paid more than they do in smaller work places. If workers are similar in skill and quality, why might an employer with a large
Car Insurance X advertises that they will pay the full cash value of a car if it is stolen. In contrast, most insurance companies pay back the cash value of the car less a sizable deductible. Why is
How do scarcity and poverty differ?
Why does scarcity imply there will be opportunity costs?
Does an economy that is inside its production possibility curve face any trade-offs?
How can a good be costly yet not scarce?
What factors cause the production possibility curve to bow out? And when the curve is bowed out, how does the opportunity cost of each good change if more of the good is produced?
How are trade and the division of labor related?
If the marginal cost of an action exceeds its marginal benefit, why will net benefits fall?
Why do people value each unit of a good by its marginal value?
On an island, a worker, in an hour, can produce one fish or two baskets.a. What is the opportunity cost of a fish?b. Suppose the worker becomes twice as efficient, producing in an hour two fish or
You have ten workers who are all equally skilled and who can do each other worker’s job with the same efficiency. The first worker does a task worth $100, the second, $90, the third, $80, and so on
On Monday, John B. Burr paid $50 for a ticket to concert A on Tuesday night: This concert gives John a benefit of $60. The ticket is nonrefundable and cannot be sold. On Tuesday morning, John learns
What is wrong (from an economic point of view) with the following argument? “Marketing is vitally important. After all, without marketing, we wouldn’t sell anything and our firm would be
If a firm faces the following costs and benefits, how many plants should it build? Use marginal analysis. Plants 1 2 3 Total Revenues $10,000,000 18,000,000 24,000,000 Total Costs $5,000,000
Currently, our military is voluntary; the armed forces sets its wages and benefits so it can attract an adequate and presumably skilled body of soldiers. In the past, our nation has used the draft,
How will the following events affect the production possibility curve of an economy?Event A: A large fraction of the work force becomes unemployed.Event B: The productivity of all workers
An economy produces two goods, A and B. Then there is technological progress but in Good A only. Can the economy then consume more of both goods?
The FDA (Food and Drug Administration) can require drug companies to spend more time and money testing the safety of new drugs. With more testing, fewer bad drugs (drugs that do not work or have
If X and Y are positively related, when X decreases, what will happen to Y ? (In these questions, X is the variable on the horizontal axis.)
What do Points A and C represent in Figure 2–3?Figure 2-3: Sodas 11 10 A 9+ 8+ 7+ 9 5 3+ 2+ B Susan's Budget Constraint C 1 2 3 4 5 6 Hamburgers
Indicate which panel in Figure 2–2 best represents the relationships below. Assume that the first term is the X variable on the horizontal axis (such that X is the cause and Y is the effect).a.
Plot the following production possibility schedule:Put houses on the horizontal axis. Give the slope between A and B, B and C, and so forth. What does the slope represent? Is this cost increasing or
Draw a line that starts at the origin (at 0) and begins to rise with a slope of
What does this line mark off ?
Draw a curve relating the tax rate (from 0 to 100 percent) to the total tax revenues that are collected. Put the tax rate on the horizontal axis.The curve should describe the following statement:
Does demand change when the price changes?
When there is a shortage, how will the price change? What willhappen to the quantity demanded and supplied?
Why does an individual usually buy more of a good when its pricefalls? Give two reasons.
How do you find in a demand and supply diagram the quantity thatwill be bought and sold at each price?
How will some demanders be hurt by a price ceiling? To see how, Isuggest googling “food shortage in Venezuela.”
How would you expect a minimum wage (that is above the marketclearing wage) to affect the working conditions and the on-the-jobtraining supplied by employers?
There are 100 demanders, each of whom would pay up to $1,000 forone truck horn (none needs a second horn). There are 200 sellers; 150of them can produce and sell a truck horn at $50 per unit, the
In a demand and supply diagram, at unit 5, the price on the demandcurve is $20 and the price on the supply curve is $14. The marketprice is $16. What is the marginal benefit and cost of this unit to
When John earned $10, he bought four hamburgers at $2 each and two sodas at $1 each. In the following month, he earned $20, but the price of hamburgers had risen to $3 and the price of sodas had
Why do we hold price constant when we talk about increasing ordecreasing demand?
Is it the same when people are willing to (1) buy more at each priceand (2) pay a higher price for each quantity?
If consumers buy fewer burner covers for their stoves when theirincome goes up, are burner covers a normal good or an inferior good?
When the price of a good’s complement goes up, what happens to thedemand for the good?
How does the supply curve move vertically when supply increases or“goes up”? What do up and down refer to in demand and supplydiagrams?
A new higher demand curve causes the price to increase. How will thehigher price shift the demand curve?
Does an increase in both price and output violate the law of demand?
If the cost of production goes up, does the supply curve shift to theleft or to the right?
What is the only factor that changes the quantity demanded (andsupplied) but not demand (and supply)?
If world demand for wheat goes up and at the same time farmers find a cheaper way to grow wheat, what will happen to wheat prices and output?
Refer to Figures A, B, C, and D. Select the figure that best illustrates the likely effect of the following events. The dotted line shows the shift caused by the event.Event A: Computer chips,
Assume markets are initially in equilibrium. Then the following events occur. Beside each of the events, place a +, –, or 0 to indicate the shift in the demand and supply curves and the change in
Fill in the following table with +, –, 0, and ? to describe the effect of the combination of events. The + sign is for increase, – for decrease, 0 for no change, and ? for uncertain. For example,
a. Beginning in 2006, the price of housing started to decline. It stopped declining in 2012. During this period, the quantity of new homes built also declined. If only one curve shifted to cause
Draw a supply and demand diagram for Good A—a free good and for Good B—a good too costly to produce.
By using demand and supply diagrams, show the effect of the following events on the market for sport utility vehicles (SUVs). SUVs are a substitute for cars.a. Government regulations, applied only
The market for air-conditioning systems is in equilibrium. A long heat wave then causes each demander to increase the price he or she is willing to pay for an air-conditioning system by $500. Will
As an application of Table 4–2, consider the effect of a freeze thata. reduces the supply of corn. Choose the correct italicized choices: Because of the freeze, the price of corn will go [up or
In Yorkville, rent controls have created a shortage of apartments. If rent controls (which impose a price ceiling on rents) were removed, what would happen to the quantity of apartments demanded? To
Burr’s Burgers keeps its meat frozen. A hurricane cuts off electricity to Burr’s freezer. Burr will lose $3,000 in meat without electricity. Electric generators (of the type that would help Burr)
The following shows the production possibilities for a plant that can manufacture iron or steel. Columns A–D show the number of tons of each metal that can be produced for each alternative.a. Draw

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