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Question: Barney subscribes to the NFL Sunday Ticket,


Barney subscribes to the NFL Sunday Ticket, a program package offered by DirecTV that allows Barney to watch every regular season NFL game played on Sundays. The subscription price for the Sunday Ticket is in addition to the fee paid for Barney’s DirecTV package. Barney invites two friends who work with him to watch football on Sundays at his home. Is Barney a free rider because he can watch any football game broadcast on Sundays, including those games not shown on his local television stations? Are Barney’s friends free riders?


> What is protectionism? Who benefits and who loses from protectionist policies? What are the main arguments people use to justify protectionism?

> According to a study by the U.S. Centers for Disease Control and Prevention, the price elasticity of demand for cigarettes is 20.25. Americans purchase about 360 billion cigarettes each year. a. If the federal tax on cigarettes were increased enough to c

> What is globalization? Why are some people opposed to globalization?

> The demand for agricultural products is inelastic, and the income elasticity of demand for agricultural products is low. How do these facts help explain the decline of the family farm in the United States?

> UPS has reorganized the routes its drivers take to deliver packages to homes. According to an article in the Wall Street Journal, “The company can save $50 million a year by reducing by one mile the average aggregated daily travel of its drivers.” a. Bri

> What are the asymmetric information problems in the market for health insurance?

> What events led to the General Agreement on Tariffs and Trade (GATT)? Why did the WTO eventually replace the GATT?

> The following graphs show the supply and demand curves for two markets. One of the markets is for Tesla automobiles, and the other is for a cancer-fighting drug, without which lung cancer patients will die. Briefly explain which graph most likely represe

> Which of the following graphs best represents what happens in the market for hotel rooms at a ski resort during the winter? Briefly explain. From the graph that you picked, what would be the result during the winter if hotel rates stayed at their summer

> Comic book fans eagerly compete to buy copies of Amazing Fantasy No. 15, which contains the f irst appearance of the superhero Spider-Man. At the same time the publisher printed copies of the comic for the U.S. market, with the price printed on the cover

> Proposals have been made to increase government regulation of firms providing childcare services by, for instance, setting education requirements for childcare workers. Suppose that these regulations increase the quality of childcare and cause the demand

> An article in the New York Times about J.C. Penney’s pricing strategy under former CEO Ron Johnson observes, “Penney had pulled up the anchor, only to see many of its customers sail away.” a. In behavioral economics, what is an “anchor”? b. In what sense

> The following four graphs represent four market scenarios, each of which would cause either a movement along the supply curve for Pepsi or a shift of the supply curve. Match each scenario with the appropriate graph. a. A decrease in the supply of Coke

> Does the strength of each of the five competitive forces remain constant over time? Briefly explain.

> The Economist offered the following two options for subscribing: 1. $56 per year for an online-only subscription 2. $125 per year for print plus online access subscription A large majority of subscribers chose option 1. But the magazine would have prefer

> For several years, the United States imposed a tariff on tire imports. According to an analysis by economists Gary Clyde Hufbauer and Sean Lowry of the Petersen Institute, of the additional $1.1 billion consumers spent on tires as a result of the tariff

> Does the law of diminishing marginal utility hold true in every situation? Is it possible to think of goods for which consuming additional units, at least initially, will result in increasing marginal utility?

> A student was asked to draw a demand and supply graph to illustrate the effect on the market for smart watches of a fall in the price of displays used in smart watches, holding everything else constant. She drew the following graph and explained it as fo

> The price of organic apples falls, and apple growers find that their revenue increases. Is the demand for organic apples elastic or inelastic?

> According to an article in the New York Times, the Web site Stickk offers a service where you give them money that they will donate to charity if you fail to go to the gym as often as you promise to. (You can even have the money donated to an anti-charit

> During the same period that robots and other new technologies have been affecting the labor market, there has been an increase in imports to the United States of manufactured goods—including shoes, clothing, and automobiles—from countries in which worker

> An economic analysis of a proposal to impose a quota on steel imports into the United States indicated that the quota would save 3,700 jobs in the steel industry but cost about 35,000 jobs in other U.S. industries. Why would a quota on steel imports caus

> We saw in the chapter opener that the T. Cain Grocery offers its employees a health care plan with a high deductible of $4,500 per year. What effect do high-deductible plans have on how often employees visit doctors or otherwise use health care services?

> A student writes the following: “Increased production leads to a lower price, which in turn increases demand.” Do you agree with his reasoning? Briefly explain.

> In an article in the Quarterly Journal of Economics, Ted O’Donoghue and Matthew Rabin make the following observation: “People have self-control problems caused by a tendency to pursue immediate gratification in a way that their ‘long-run selves’ do not a

> Suppose the government is considering imposing either a tariff or a quota on canned peaches. Assume that the proposed quota has the same effect on the U.S. price of canned peaches as the proposed tariff. Use the graph to answer the following questions.

> A column in the Wall Street Journal observes, “Independent websites like Edmunds.com, AutoTrader.com and Kelley Blue Book publish detailed pricing information [on automobiles] for consumers and do so for free. Consumers want such information and business

> Use the following graph of a monopoly to answer the questions. a. What quantity will the monopoly produce, and what prices will the monopoly charge? b. Suppose the government decides to regulate this monopoly and imposes a price ceiling of $18 (in othe

> Briefly explain whether you agree with the following statement: “Japan has always been much more heavily involved in international trade than are most other nations. In fact, today Japan exports a larger fraction of its GDP than Germany, Great Britain, o

> If the equilibrium price and quantity of a product were $100 and 1,000 units per month in 2015 and $150 and 800 units per month in 2016, did this product experience a larger shift in its demand curve or in its supply curve from 2015 to 2016? Briefly expl

> Andrea grew up enjoying her Italian grandmother’s home-cooked meals. Chicken and pasta with meatballs were her favorite foods. But after Andrea graduated from college, found a job, and got married, she became a vegetarian and no longer ate chicken or mea

> In the year 541, an outbreak of bubonic plague hit the Byzantine Empire. Because the plague was spread by flea-infested rats that often lived on ships, ports were hit particularly hard. In some ports, more than 40 percent of the population died. The empe

> What does it mean for a producer or consumer to internalize an externality? What would cause a producer or consumer to internalize an externality?

> Suppose that the United States currently both produces kumquats and imports them. The U.S. government then decides to restrict international trade in kumquats by imposing a quota that allows imports of only 6 million pounds of kumquats into the United St

> Suppose consumers pay less than the true cost of medical services because a third party, such as an insurance company or the government, pays most of the bill. In the following graph, D1 represents the demand for medical services if consumers paid the fu

> William Easterly in The White Man’s Burden shares the following account by New York University Professor Leonard Wantchekon of how Professor Wantchekon’s village in Benin, Africa, managed the local fishing pond when he was growing up: To open the fishing

> Historically, the production of many perishable foods, such as dairy products, was highly seasonal. As the supply of those products fluctuated, prices tended to fluctuate tremendously—typically by 25 to 50 percent or more— over the course of the year. On

> The following excerpt is from a letter sent to a financial advice columnist: “My wife and I are trying to decide how to invest a $250,000 windfall. She wants to pay off our $114,000 mortgage, but I’m not eager to do that because we refinanced only nine m

> According to an editorial in the Washington Post, “Sugar protectionism is a burden on consumers and a job-killer.” a. In what sense does the United States practice “sugar protectionism”? b. In what way is sugar protectionism a burden on consumers? In wha

> Employees in most circumstances do not pay taxes on the value of the health insurance provided by their employers. If employees were taxed on the value of the employer-provided health insurance, what would you expect to happen to the overall compensation

> How is the separation of ownership from control related to the principal–agent problem?

> Jeff and James have different opinions regarding the amount the U.S. government should spend on national defense. Jeff believes that more should be spent in order to ensure that the country’s enemies will not challenge the United States militarily. James

> A woman who owned a music store in New York City was quoted in an article in the Wall Street Journal as “bemoaning the comparative salaries of tubists and stockbrokers. ‘People should be paid in terms of what they contribute to people’s well-being.’” a.

> Use the following graph of a monopoly to answer the questions. a. What quantity will the monopoly produce, and what prices will the monopoly charge? b. Suppose the monopoly is regulated. If the regulatory agency wants to achieve economic efficiency, wh

> According to one news story, the cost of producing 4K televisions has been declining. According to a second story, many people have switched from watching programs on television sets to watching them on smart phones, tablets, or laptops. After reading th

> Do producers tend to favor price floors or price ceilings? Briefly explain.

> The Washington National Football League team paid a very high price to select Baylor quarterback Robert Griffin III in the 2012 player draft. In addition to paying Griffin a high salary, the team made a trade with the St. Louis team in which they had to

> The following graph shows the situation after the U.S. government removes a tariff on imports of canned tuna. a. Which areas show the gain in consumer surplus? b. Which area shows the loss in producer surplus? c. Which area shows the loss in government

> The late Nobel Laureate Robert Fogel of the University of Chicago argued, “Expenditures on health care are driven by demand, which is spurred by income and by advances in biotechnology that make health interventions increasingly effective.” a. If Fogel w

> Suppose the government imposes a payroll tax of $1 per hour of work and collects the tax from employers. Use a graph for the market for labor to show the effect of the payroll tax, assuming the special case of a vertical supply curve of labor. By how muc

> Years ago, an apple producer argued that the United States should enact a tariff, or a tax, on imports of bananas. His reasoning was that “the enormous imports of cheap bananas into the United States tend to curtail the domestic consumption of fresh frui

> The widespread realization in the late nineteenth century that bacteria causes diseases helped lead to a public health movement. This movement eventually brought sewers, clean drinking water, and garbage removal to all U.S. cities. What effect did the pu

> What is market failure? When is market failure likely to arise?

> Rob Neyer is a baseball writer for sbnation.com. He has described attending a Red Sox game at Fenway Park in Boston and having a seat in the sun on a hot, humid day: “Granted, I could have moved under the overhang and enjoyed today’s contest from a nice,

> The following graph shows the effect on consumer surplus, producer surplus, government tariff revenue, and economic surplus of a tariff of $1 per unit on imports of plastic combs into the United States. Use the areas denoted in the graph to answer the fo

> The text refers to health care as a normal good. Briefly explain why. In the future, is it possible that health care in the United States could become an inferior good? Briefly explain how it would be possible to tell if this change had occurred.

> Consider the natural monopoly shown in Figure 15.7 on page 520. Assume that the government regulatory agency sets the regulated price, PR, at the level of average total cost at which the demand curve intersects the ATC curve. If the firm knows that it wi

> What do economists mean by shortage? By surplus?

> Consider firms selling three goods: One firm sells a good with an income elasticity of demand less than zero, one firm sells a good with an income elasticity of demand greater than zero but less than one, and one firm sells a good with an income elastici

> Put each of the following goods or services into one of the categories shown in Figure 5.7 on page 166. That is, categorize them as private goods, public goods, quasi-public goods, or common resources. Figure 5.7: a. A television broadcast of baseball&ac

> According to a news story, Pennsylvania’s liquor tax is “paid by the seller—the restaurant or bar owner—when the seller buys liquor from state-run wine and spirit stores.” Briefly explain the effect of how liquor taxes in Pennsylvania are collected has o

> According to one observer of the lobster market: “After Labor Day, when the vacationers have gone home, the lobstermen usually have a month or more of good fishing conditions, except for the occasional hurricane.” Use a demand and supply graph to explain

> Someone who owns a townhouse wrote to a real estate advice columnist to ask whether he should sell his townhouse or wait and sell it in the future, when he hoped that prices would be higher. The columnist replied: “Ask yourself: Would you buy this townho

> Sean Astin, who played the hobbit Sam in The Lord of the Rings movies, wrote the following about an earlier film he had appeared in: “Now I was in a movie I didn’t respect, making obscene amounts of money (f ive times what a teacher makes, and teachers d

> The following comments were made by two employers regarding a proposed increase in the federal minimum wage: Dillon Edwards, founder of Parlor Coffee: “[The increase] should definitely be [to] more than [$8.75 an hour]… . It needs to be at least in doubl

> According to a news story, during the summer of 2015, gasoline prices were expected to decline by 32 percent, while “U.S. drivers are expected to consume slightly more gasoline, a 1.6 percent increase, during the summer.” Given this information, calculat

> Use the following graph of the market for basketball tickets at State University to answer the questions. a. What is the price elasticity of supply? b. Suppose the basketball team at State University goes undefeated in the first half of the season, and

> Suppose China decides to pay large subsidies to any Chinese company that exports goods or services to the United States. As a result, these companies are able to sell products in the United States at far below their cost of production. In addition, China

> Some economists and policymakers have argued that one way to control federal government spending on Medicare is to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decides that they are not worth

> The elasticities reported in this Making the Connection were calculated using price data for many brands of beer. Why might price elasticity estimates be less reliable if they use data for only one brand of beer?

> Vaccines don’t provide immunity from disease for some people. But if most people get vaccinated against a disease, such as measles, then the population achieves “herd immunity,” which means that there are so few cases of the disease that even people for

> Suppose the federal government decides to impose a sales tax of $1.00 per pizza. Briefly explain whether you agree with the following statement, made by a representative of the pizza industry: The pizza industry is very competitive. As a result, pizza s

> What are the two main categories of participants in markets? Which participants are of greatest importance in determining what goods and services are produced?

> The following table shows the market shares during the first three months of 2015 for companies in the U.S. personal computer (PC) market, which includes desk-based PCs and mobile PCs, such as mini-notebooks, but not tablet computers, such as iPads: Us

> What is the marginal productivity theory of income distribution?

> An article in the Wall Street Journal discussed why the hotel workers’ union in New York City was against a proposal for more hotels to be built in Midtown Manhattan: “The union is concerned that rapid hotel development shrinks room prices and profit mar

> The demand for watermelons is highest during summer and lowest during winter. Yet watermelon prices are normally lower in summer than in winter. Use a demand and supply graph to demonstrate how this is possible. Be sure to carefully label the curves in y

> Suppose that you are a big fan of the Harry Potter books. You would love to own a copy of the very first printing of the first book, but unfortunately you can’t find it for sale for less than $5,000. You are willing to pay at most $200 for a copy but can

> How might a monopolistically competitive firm continually earn an economic profit?

> A student makes the following argument: Tariffs on imports of foreign goods into the United States will cause the foreign companies to add the amount of the tariff to the prices they charge in the United States for those goods. Instead of putting a tarif

> Improvements in technology usually result in lower costs of production or new and improved consumer goods and services. Assume that an improvement in medical technology results in an increase in life expectancy for people 65 years of age and older. How w

> Rank the following four goods from lowest income elasticity of demand to highest income elasticity of demand. Briefly explain your ranking. a. Bread b. Pepsi c. Mercedes-Benz automobiles d. Laptop computers

> Nancy Folbre, an economist at the University of Massachusetts, Amherst, argued, “We must take responsibility for governing the commons—not just the quaint old fashioned village green, but things that cannot easily be privatized—[such as] clean air.” Do y

> Use the following graph of the market for cigarettes to answer the questions. a. According to the graph, how much is the government tax on cigarettes? b. What price do producers receive after paying the tax? c. How much tax revenue does the government

> Suppose that oil prices sharply increase, while more cities pass laws banning the use of plastic bags at stores. Use a demand and supply graph to illustrate your answers to the following questions. a. Can we use this information to be certain whether the

> Why do economists use models? How are economic data used to test models?

> Two health care analysts argue that in the United States, “we have arrived at a moment where we are making little headway in defeating various kinds of diseases. Instead, our main achievements today consist of devising ways to marginally extend the lives

> Richard Thaler, an economist at the University of Chicago, is the person who first used the term endowment effect to describe placing a higher value on something already owned than would be placed on the object if not currently owned. According to an art

> When Congress was considering a bill to impose quotas on imports of textiles, shoes, and other products, the late Milton Friedman, a Nobel Prize–winning economist, made the following comment: “The consumer will be forced to spend several extra dollars to

> Look again at the section “The Department of Justice and FTC Merger Guidelines,” which begins on page 518. Evaluate the following situations. a. A market initially has 20 firms, each with a 5 percent market share. Of the firms, 4 propose to merge, leavin

> Briefly explain the relationship between property rights and the existence of externalities.

> An article on forbes.com about corporate fraud stated that “misleading accounting and disclosure practices weaken the integrity of capital markets.” The article noted that using incentive contracts for top managers can create a “‘perverse’ incentive to m

> Figure 7.7 on page 236 shows that the Congressional Budget Office forecasts that only about 10 percent of future increases in spending on Medicare as a percentage of GDP will be due to the aging of the population. What factors explain the other 90 percen

> According to an article on the Boston Globe’s Web site, during the last three months of 2014, gasoline prices dropped 33 percent at the same time as ridership on mass transit, such as subways and trains, increased by 1 percent. According to a spokesperso

> As readers of Herman Melville’s 1851 novel Moby Dick know, at one time oil made from whale blubber was an important source of energy that was widely used by households and f irms in oil lamps. Other sources of energy supplanted whale oil in the second ha

> The following graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the questions. a. Which areas in the graph represent the excess burden (deadweight loss) of the tax? b. Which areas represent the revenues collected by the

> According to an article in the Wall Street Journal, the demand for orange juice is declining in the United States “as newer entrants in the beverage aisle, including more exotic fruit juices, such as pomegranate, energy drinks and ready-to-drink coffee,

> In a competitive labor market, imposing a minimum wage should reduce the equilibrium level of employment. Will this result still hold if the labor market is a monopsony? Briefly explain.

> Marvin visits his aunt and uncle who live in Milwaukee. The Milwaukee Bucks basketball team is scheduled to play a home game against the Golden State Warriors during Marvin’s visit. An online broker has a ticket for sale in Section 212 of the arena where

> In which of the following situations are social influences on consumer decision making likely to be greater: choosing a restaurant for dinner or choosing which brand of toothpaste to buy? Briefly explain.

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