Questions and Answers of Principles Of Microeconomics

State whether each of the following events will result in a movement along General Motor’s (GM’s) demand curve for labor in their U.S. automobile factories or whether it will cause its demand
Dalia owns a small public relations firm and wants to contract with her insurance provider to offer her employees the option to purchase short-term disability insurance.The insurance will pay out
What is the elasticity of demand for season ski passes?When the price of a season ski pass is $400, buyers, whose demand curve for passes is linear, wish to purchase 10,000 passes per year, but when
What is the price elasticity of demand when P = 4 on the demand curve in Figure 4.4?Data from Figure 4.4 FIGURE 4.4 Calculating Price Elasticity of Demand. 20 (8/3)x(1/4) The price elasticity of
If a 10 percent increase in income causes the number of students who choose to attend private universities to go up by 5 percent, what is the income elasticity of demand for private universities?
For the supply curve shown in Figure 4.14, calculate the elasticity of supply when P = 6.Data from Figure 4.14 FIGURE 4.14 A Supply Curve for Which Price Elasticity Declines as Quantity Rises. For
Which of the following factors would affect a buyer’s reservation price for a given good or service: social influence, the price of the good, or the cost of producing the item?
If bottles sell for 35 cents each, how many bottles should the company described in Table 6.2 produce each day?Data from Table 6.2 TABLE 6.2 Fixed, Variable, and Total Costs of Bottle Production
For the bottle maker whose cost curves are shown in Figure 6.6, find the profit-maximizing output level if bottles sell for $0.20 each. How much profit will this firm earn? What is the lowest price
What is the socially optimal amount of recycling of glass containers?
Should Pudge Buffet stay in the farming business?
Does owning one’s own land make a difference?
What happens in a city with “too many” hair stylists and “too few” aerobics instructors?
How much economic rent will a talented chef get?
How do cost-saving innovations affect economic profit in the short run? In the long run?
How much waste does a price ceiling on heating oil cause?
By how much do subsidies reduce total economic surplus in the market for bread?
Blackadder and Baldrick are rational, self-interested criminals imprisoned in separate cells in a dark medieval dungeon. They face the prisoner’s dilemma displayed in the matrix.Assume that
Suppose the equilibrium wage for unskilled workers in New Jersey is $7 per hour. How will the wages and employment of unskilled workers in New Jersey change if the state legislature raises the
You would again save $10 by buying the game downtown rather than at the campus store, but your cost of making the trip is now $12, not $9. By how much would your economic surplus be smaller if you
Which is more valuable: saving $100 on a $2,000 plane ticket to Tokyo or saving $90 on a $200 plane ticket to Chicago?
Refer to given information in Example 1.3, but this time your frequent-flyer coupon expires in a week, so your only chance to use it will be for the Fort Lauderdale trip.Should you use your
If the marginal benefit of each launch had been not $6 billion but $9 billion, how many shuttles should NASA have launched?
Should a basketball team’s best player take all the team’s shots?A professional basketball team has a new assistant coach. The assistant notices that one player scores on a higher percentage of
In 500 words or less, use cost-benefit analysis to explain some pattern of events or behavior you have observed in your own environment.
Should you walk downtown to save $10 on a $25 computer game?
Should you walk downtown to save $10 on a $2,020 laptop computer?
How much should you eat at an all-you-can-eat restaurant?
Should NASA expand the space shuttle program from four launches per year to five?
What is the production possibilities curve for an economy in which Susan is the only worker?
How do changes in productivity affect the opportunity cost of nuts?
Samples of points on the demand and supply curves of a pizza market are provided in Table 3.1. Graph the demand and supply curves for this market and find its equilibrium price and quantity.Data from
What will happen to the equilibrium price and quantity of tennis balls if court rental fees decline?
What will happen to the equilibrium price and quantity of overnight letter delivery service as the price of Internet access falls?
How do shifts in both demand and supply affect equilibrium quantities and prices?
In Figure 3.1, what is the marginal buyer’s reservation price when the quantity of pizza sold is 10,000 slices per day? For the same demand curve, what will be the quantity of pizza demanded at a
In Figure 3.2 , what is the marginal cost of a slice of pizza when the quantity of pizza sold is 10,000 slices per day? For the same supply curve, what will be the quantity of pizza supplied at a
In the rental housing market whose demand and supply curves are shown below, what will be the effect of a law that prevents rents from rising above $1,200 per month? Controlled rent = 1,200 Supply
How will a decline in airfares affect intercity bus fares and the price of hotel rooms in resort communities?
How will a large pay increase for federal employees affect the rents for apartments located far away from Washington Metro stations?
What will happen to the equilibrium price and quantity in the corn tortilla chip market if both of the following events occur: (1) researchers discover that a vitamin found in corn helps protect
For the demand curves D1 and D2 shown in Figure 4.5, calculate the price elasticity of demand when P = 4. What is the price elasticity of demand on D2 when P = 1?Data from Figure 4.5 12 Price 6 st D
For the demand curve shown in Figure 4.11, draw a separate graph showing how total expenditure varies with the price of movie tickets.Data from Figure 4.11 12 10 Price ($/ticket) 0 4 2 I 0 1 2 3 4 5
What is the elasticity of supply of land within the borough limits of Manhattan?
What is the elasticity of supply of lemonade?
Which of the following industries would you classify as an oligopoly? Explain your answer. If you are not sure, what information do you need to know to decide?a. Motorcyclesb. Hotelsc. Cruise
In recent years, the Federal Trade Commission (FTC) has been concerned with patent litigation settlements between brand-name and generic manufacturers in the pharmaceutical industry. A primary focus
Which of the following markets are likely to be perfectly contestable? Explain your answers. a. Coal miningb. Insurancec. Wind Farmsd. Landscapinge. Advertising
Assume that you are in the business of providing medical insurance. You have analyzed the market carefully, and you know that at a price of $6,000 per year, you will sell 40,000 insurance policies
Between 2011 and 2018, dozens of lawsuits were brought or reinstated against U.S. firms for conspiracy to fix prices of things as diverse as pharmaceuticals, pork, airline tickets, and eggs. Choose
Explain whether you agree or disagree with the following statement. If all firms in an industry successfully engage in collusion, the resulting profit-maximizing price and output would be the same as
What is the Cournot model? How does the output decision in the Cournot model differ from the output decision in a monopoly?
T-Mobile is the thirdlargest wireless communication provider in the United States, behind Verizon and ATT, and ahead of Sprint. In an effort to differentiate themselves from their three primary
The matrix in Figure 1 shows payoffs based on the strategies chosen by two firms. If they collude and hold prices at $10, each firm will earn profits of $5 million. If A cheats on the agreement,
The payoff matrices in Figure 2 at the top of the next column show the payoffs for two games. The payoffs are given in parentheses. The values on the left refer to the payoff to A; the values on the
Suppose we have an industry with two firms producing the same product. Acme Corporation produces 19,000 units, while Zoltar Corporation produces 1,000 units. The price in the market is $20, and both
Explain whether you agree or disagree with the following statements:a. In all oligopoly models except the contestable-market model, market concentration leads to output below the efficient level,
After 17 months of negotiations, the Federal Communications Commission announced in July 2008 its approval of the merger between the world’s only satellite radio broadcasters, Sirius Satellite
How would you expect a profit-maximizing retailer to choose which shoes to stock in his or her store?
What would you expect to see happen to the placement of Green Dragon Tea if we discovered sugar was good for us?
Do you think the Oprah effect is likely to be similar to the endorsement effect of Theron or Harris?
Mariano’s Hacienda Ranch is a Mexican restaurant in Dallas. Founder Mariano Martinez is not only known for serving up great Mexican food, but also for being the inventor of the world’s first
Consider the local music scene in your area. Name some of the local live bands that play in clubs and music halls, both on and off campus. Look in your local newspaper for advertisements of upcoming
Recreational Equipment, Inc, commonly known as REI, is an outdoor recreational retail company whose product offerings include sporting goods, camping gear, and clothing. REI has over 150 retail
Write a brief essay explaining the accuracy of this statement: The Beatles were once a monopolistically competitive firm that became a monopolist.
In a market in which there is vertical differentiation, we always see price differences among the products. In markets with horizontal differentiation, sometimes the products differ but prices are
As cities go, Las Vegas is about as “over-the-top” as is imaginable. Where else in the world can you find a 350-foot tall glass pyramid, a half-scale replica of the Eiffel Tower, a firespewing
The table shows the relationship for a hypothetical firm between its advertising expenditures and the quantity of its output that it expects it can sell at a fixed price of $12 per unit.a. In
Conduct an online search for “iPhone repair San Diego” You will find about 10 million entries. Now try “iPhone screen repair San Diego.” You will find more than 6 million entries. Try to
If you have traveled to other countries, you may have firsthand knowledge about McDonald’s menu items that are available only in foreign markets, but McDonald’s menus also contain regional
The Economics in Practice discusses the increase in sales of books that have been endorsed by Oprah Winfrey’s book club. While Oprah receives no payment for her book club endorsements, many
Every weekend more than 500 different vendors set up at the local farmers’ market, selling a variety of items from homemade prepared foods to fresh produce. Yolanda rents a booth each weekend at
The following diagram shows the structure of cost and demand facing a monopolistically competitive firm in the short run.a. Identify the following on the graph and calculate each
Explain the relationship between price and marginal revenue for a perfectly competitive firm and for a monopolistically competitive firm. Why is the relationship different for these markets?
For each of the following, state whether you agree or disagree. Explain your answer.a. Monopolistically competitive firms generate economic profits because they are protected by barriers to
Why do you think adjustment to the Dust Bowl was so slow?
Why would a private company voluntarily adopt internal carbon “taxes?”
What do you think would have happened to pass through if the largest of the electricity providers had been heavily invested in solar power, which does not produce carbon?
If government imposes penalties (taxes) that exceed the actual value of the damages done by the pollution on the firms in a polluting industry, the result is an inefficient and unfair imposition of
The kingdom of Freedonia is divided into two countries: East Babalu and West Babalu. In an effort to reduce carbon dioxide emissions, the kingdom has enacted a carbon tax on all electricity
Many people are concerned with the problem of urban sprawl. As the development of new housing tracts and suburban shopping malls continues over time, metropolitan areas have become more congested and
A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial
Microsoft and Disney are just two of a growing number of organizations using internal carbon taxes in an attempt to reduce carbon emissions, and the carbon prices being used to set the internal taxes
The following diagram represents the profit-maximizing price and output for a firm in a perfectly competitive industry with no externalities. Use this diagram to explain what will happen if the
Velma, a book editor for a local publishing company, and Daphne, an opera singer in a local opera company, share a townhouse in Miami. Velma enjoys reading and editing books at home, and Daphne
It has been argued that the following are examples of “mixed goods.” They are essentially private but partly public. For each example, describe the private and public components and discuss
Explain why you agree or disagree with each of the following statements:a. The government should be involved in providing health care for all citizens because health care is a “public
Society is made up of two individuals, Bert and Ernie, whose demands for public good A are given in Figure 1. Assuming that the public good can be produced at a constant marginal cost of $7, what is
Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods—once produced, information can be shared at virtually no cost. A
The recent economic growth resulting from government policies of newly industrializing nations such as India and China has increased environmental strains on global air and water systems. The
The overuse of a common resource is often referred to as the tragedy of the commons, and traffic congestion has been described as a modern example of this problem. Explain how traffic congestion
Economists have found that many young single people do not buy healthcare insurance. Why not?
If emergency rooms decided to only serve people with health insurance, regardless of their condition, what would you expect that to do to the problem of adverse selection in the health insurance
If a box of raisins claims it contains at least 100 raisins, do you think it is likely that there are 200?
What do you think stimulated the demand for this new iPhone app?
The following table shows the relationship between utility and income for three individuals. Show each relationship graphically and explain whether each person is risk-averse, risk-neutral, or
Your current salary is a fixed sum of $115,600 per year. You have an offer for another job. The salary there is a flat $75,000 plus a chance to earn $350,000 if the company does well. Assume that
At the beginning of 2018 I bought a fire insurance policy for my vacation home in Aspen; at the end of the year, my vacation home had not burned down. Was my purchase a mistake? Explain.
Video poker is a popular form of gambling in casinos, second only to slot machines. Some video poker games offer a “doubleup” feature, where players receiving a paying hand are offered the chance
Explain how imperfect information problems such as adverse selection and moral hazard might affect the following markets or situations:a. The market for wireless internet connectivity at large

Showing 1 - 100 of 545