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Question: An article in the Wall Street Journal


An article in the Wall Street Journal on the use of driverless trucks at Rio Tinto’s Australian mines observes, “The new equipment cut many driving jobs… . But the reductions will be partly offset by new types of work. The company now needs more network technicians … a hybrid of electrical and mechanical engineering that hardly existed five years ago.” Is it likely that total employment at Rio Tinto’s mines will have increased or decreased as a result of its use of robots? Are the average wages Rio Tinto pays likely to be higher or lower? Are the wages of the truck drivers who were replaced by robots likely to end up higher or lower in their new jobs? Briefly explain your answers.

Source: Timothy Aeppel, “What Clever Robots Mean for Jobs,” Wall Street Journal, February 24, 2015.


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> Is it possible for technological change to be negative? If so, give an example.

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> Suppose you see a 2013 Volkswagen Jetta GLS Turbo Sedan advertised in the campus newspaper for $9,000. If you knew the car was reliable, you would be willing to pay $10,000 for it. If you knew the car was unreliable, you would be willing to pay $5,000 fo

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> Joe Morgan is a sportscaster and former baseball player. After he stated that he thought the salaries of Major League Baseball players were justif ied, a baseball fan wrote the following to Rob Neyer, a sports columnist: Mr. Neyer, What are your feelings

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> In panel (b) of Figure 12.9 on page 426, Sacha Gillette reduces her output from 40,000 to 25,000 dozen eggs when the price falls to $1.75. At this price and this output level, she is operating at a loss. Why doesn’t she just continue ch

> A column in the New York Times notes that many economists “support Pigovian taxes because, in some sense, we are already paying them.” In what sense might consumers in a market be “paying” a Pigovian tax even if the government hasn’t imposed an explicit

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> Are imports and exports now a smaller or larger fraction of GDP than they were 40 years ago?

> A study analyzed a pharmaceutical firm’s costs to develop a prescription drug and receive government approval. An article in the Wall Street Journal describing the study noted that included in the firm’s costs was “the return that could be gained if the

> Suppose an assistant professor of economics is earning a salary of $75,000 per year. One day she quits her job, sells $100,000 worth of bonds that had been earning 3 percent per year, and uses the funds to open a bookstore. At the end of the year, she sh

> Discuss the shape of the long-run supply curve in a perfectly competitive market. Suppose that a perfectly competitive market is initially at long-run equilibrium and then there is a permanent decrease in the demand for the product. Draw a graph showing

> Would a firm earning zero economic profit continue to produce, even in the long run?

> According to an article in the Wall Street Journal, in May 2015, Moody’s Investors Service cut its rating on McDonald’s bonds from A3 to A2. a. What is Moody’s top bond rating? Under what circumstances Moody’s would, or the other bond rating agencies, be

> Suppose that Henry Ford had continued to experience economies of scale, no matter how large an automobile factory he built. Discuss what the implications of this would have been for the automobile industry.

> When are firms likely to enter an industry? When are they likely to exit an industry?

> According to an article in the Wall Street Journal, in 2007 the insurance company AXA Equitable signed a long-term lease on 2 million square feet of office space in a skyscraper on Sixth Avenue in Manhattan in New York City. In 2013, AXA decided that it

> Suppose you decide to open a copy store. You rent store space (signing a one-year lease to do so), and you take out a loan at a local bank and use the money to purchase 10 copiers. Six months later, a large chain opens a copy store two blocks away from y

> According to an article in the New York Times, interest payments on bank loans make up more than half the costs of a typical solar panel manufacturer. The owner of a firm that imports solar panels made this observation about solar panel manufacturers: “S

> The following graph shows the market for apples. Assume that the government has imposed a price floor of $10 per crate. a. How many crates of apples will be sold to consumers after the price floor has been imposed? b. Will there be a shortage or a surp

> How do health insurance companies deal with asymmetric information problems?

> You have six hours to study for two exams tomorrow. The following table shows the relationship between hours of study and test scores: a. Use the rule for determining optimal purchases to decide how many hours you should study each subject. Treat each

> New Balance manufactures shoes in the United States, so you might expect that the firm would benefit from a tariff on shoes. Yet New Balance did not actively oppose the Obama administration’s attempts to eliminate the shoe tariff imposed on countries tha

> An article discussing the reasons that the Connecticut state legislature passed a general incorporation law observes that prior to the passage of the law, investors were afraid that large businesses “were not a safe bet for their money.” Briefly explain

> Writing on the Baseball Prospectus Web site, Dan Fox argued: “What a player is really worth depends a great deal on the teams that are interested in signing him.” Do you agree? Shouldn’t a baseball player with a particular level of ability be worth the s

> How can we measure the opportunity cost of leisure? What are the substitution effect and the income effect resulting from a wage change? Why is the supply curve of labor usually upward sloping?

> You own a hot dog stand that you set up outside the student union every day at lunchtime. Currently, you are selling hot dogs for a price of $3 each, and you sell 30 hot dogs a day. You are considering cutting the price to $2. The graph on the next page

> Yellowstone National Park is in bear country. The National Park Service, at its Yellowstone Web site, states the following about camping and hiking in bear country: Do not leave packs containing food unattended, even for a few minutes. Allowing a bear to

> 7-Eleven, Inc., operates more than 20,000 convenience stores worldwide. Edward Moneypenny, 7-Eleven’s chief f inancial off icer, was asked to name the biggest risk the company faced. He replied, “I would say that the biggest risk that 7-Eleven faces, lik

> Consider the information given in the table on four consumers in the market for orange juice. a. If the price of a bottle of orange juice is $0.75, what is the total consumer surplus received by these consumers? Illustrate your answer with a graph. b.

> An article in the Wall Street Journal titled “Auto Sales Zoom, Helped by Low Prices at the Pump” includes a graphic showing increasing car and truck sales in one panel and decreasing gasoline prices in the other panel. Does the graphic assume that autos

> An economist remarks that “the cost of consuming a book is the combination of the retail price and the opportunity cost of the time spent reading.” Isn’t the cost of consuming a book just the price you pay to buy the book? Why include the cost of the tim

> What do economists mean by scarcity? Can you think of anything that is not scarce according to the economic definition?

> The federal government subsidizes some loans to college students. Typically, the more students who participate in these programs and the more they borrow, the higher the cost to the federal government. In 2011, President Barack Obama convinced Congress t

> A sportswriter writing about the Cleveland Indians baseball team made the following observation: “If the Indians suddenly slashed all tickets to $10, would their attendance actually increase? Not all that much and revenue would drop dramatically.” What i

> If consumers should allocate their income so that the last dollar spent on every product gives them the same amount of additional utility, how should they decide the amount of their income to save?

> Is the fraction of U.S. workers in labor unions larger or smaller than in other countries?

> Why might a smaller country, such as the Netherlands, be more likely to import and export larger fractions of its GDP than would a larger country, such as China or the United States?

> Suppose that shortly after graduating from college, you decide to start your own business. Will you be likely to organize the business as a sole proprietorship, a partnership, or a corporation? Explain your reasoning.

> Between 1830 and 1890, the height of the average adult male in the United States declined by about 2 inches at the same time that average incomes more than tripled. Did the standard of living in the United States increase during this period? What insight

> Suppose that the following table gives data on the price of rye and the number of bushels of rye sold in 2015 and 2016: a. Calculate the change in the quantity of rye demanded divided by the change in the price of rye. Measure the quantity of rye in bu

> A neighbor’s barking dog can be both a positive externality and a negative externality. Under what circumstances would a dog’s bark be a positive externality? Under what circumstances would a dog’s bark be a negative externality?

> According to an article in the Wall Street Journal: In early January last year, after a disappointing Christmas season and amid worries about competition from discount retailers, Zale Corp. decided to shake things up: The selfproclaimed jeweler to Middle

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