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Question: In what sense do employers who discriminate


In what sense do employers who discriminate pay an economic penalty? Is this penalty enough to eliminate discrimination? Briefly explain.


> Suppose that each of the following is true: (1) The laptop computer industry is perfectly competitive and that the firms that assemble laptops do not also make the displays, or screens; (2) the laptop display industry is also perfectly competitive; and

> In recent years, the United States has experienced large increases in oil production due in large part to a new technology, hydraulic fracturing (“fracking”). Fracking involves injecting a mixture of water, sand, and chemicals into rock formations at hig

> Suppose that currently the market for gluten-free spaghetti is in long-run equilibrium at a price of $3.50 per box and a quantity of 4 million boxes sold per year. If the demand for gluten-free spaghetti permanently increases, which of the following comb

> According to a news story, the Boston-based game company Proletariat launched its first mobile game, World Zombination, after having “spent nearly 18 months and $2 million to develop it.” In the first three months following the game’s release in February

> What happens in a market if the current price is above the equilibrium price? What happens if the current price is below the equilibrium price?

> A student in a principle of economics course makes the following remark: The economic model of perfectly competitive markets is fine in theory but not very realistic. It predicts that in the long run, a firm in a perfectly competitive market will earn no

> According to an article in the Wall Street Journal, rapid growth in consumer demand for natural and organic food helped make the Whole Foods supermarket chain very profitable. But according to that same story, “its accomplishment drew broad new competiti

> 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

> The following questions are about long-run equilibrium in the market for cage-free eggs. a. As described in the chapter opener, was the market for cage-free eggs in 2015 in long run equilibrium? Briefly explain. b. What would we expect to happen to the p

> 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

> Uber is a company that offers people transportation by drivers who use their own cars for this purpose. Customers pay for their rides with their smart phone apps. Uber’s prices fluctuate with the demand for the service. This “surge pricing” can result in

> What is the difference between efficiency and equity? Why do government policymakers often face a trade-off between efficiency and equity?

> For each of the following pairs of products, briefly explain which are complements, which are substitutes, and which are unrelated. a. New cars and used cars b. Houses and washing machines c. UGG boots and Apple Watches d. Apple Watches and Apple iPads

> In addition to making cars, Tesla planned to open a new factory in Nevada in 2016 to make batteries, including home storage battery packs. What is the opportunity cost to Tesla of investing in a battery factory? Source: Mike Ramsey and Anne Steele, “Tes

> To legally operate a taxi in New York City, a driver must have a medallion issued by the New York City Taxi and Limousine Commission, an agency of the city’s government. In 2015 the number of medallions was 13,605. In recent years the taxi industry in Ne

> What is meant by a country specializing in the production of a good? Is it typical for countries to be completely specialized? Briefly explain.

> Globe Life Park in Arlington is the home ball park of the Texas Rangers, a Major League Baseball team. The seating capacity of Globe Life Park is 49,170. Among the home games played by the Rangers in 2015 were these four: Can we use this information to

> Why do most economists prefer tradable emission allowances to the command-and-control approach to pollution?

> What is the main determinant of the price elasticity of supply?

> Write the formula for the price elasticity of supply. If an increase of 10 percent in the price of frozen pizzas results in a 9 percent increase in the quantity of frozen pizzas supplied, what is the price elasticity of supply for frozen pizzas? Is the s

> According to an opinion column in the New York Times, because of attempts to make it more difficult to import catfish into the United States, during 2015 many Vietnamese businesses that export catfish shifted from exporting to the United States to export

> Michael Porter argued that in many industries, “strategies converge and competition becomes a series of races down identical paths that no one can win.” Briefly explain whether firms in these industries will likely earn economic profits. Source: Michael

> At one time, Eastman Kodak was the world’s largest producer of photographic film, employing nearly 145,000 workers worldwide, including thousands at its headquarters in Rochester, New York. The firm eventually laid off most of those workers because its s

> Every year, the Gallup poll asks a sample of people in the United States whether they believe foreign trade provides “an opportunity for economic growth through increased U.S. exports,” or whether they believe foreign

> Define economic discrimination. Is the fact that one group in the population has higher earnings than other groups evidence of economic discrimination? Briefly explain.

> Suppose you are explaining the benefits of free trade and someone states, “I don’t understand all the principles of comparative advantage and gains from trade. I just know that if I buy something produced in America, I create a job for an American, and i

> Review the concept of economic efficiency from Chapter 4, pages 115–117, before answering the following question: Will there be a greater loss of economic efficiency from a price ceiling when demand is elastic or inelastic? Illustrate your answer with a

> Steven Landsburg, an economist at the University of Rochester, wrote the following in an article in the Wall Street Journal: Free trade is not only about the right of American consumers to buy at the cheapest possible price; it’s also about the right of

> What is the difference between a firm’s balance sheet and its income statement?

> The grading system plays an important role in student learning. In their book Effective Grading: A Tool for Learning and Assessment in College, Barbara Walvoord and Virginia Anderson state that “grading infuses everything that happens in the classroom.”

> The head of the United Kumquat Growers Association makes the following statement: The federal government is considering implementing a price floor in the market for kumquats. The government will not be able to buy any surplus kumquats produced at the pri

> Dumping is selling a product for a price below its cost of production. The losers from dumping are competitors of the firm that dumps (and the dumping firm itself if it is selling below its marginal cost). Consumers are the beneficiaries. The biggest pro

> Corruption has been a significant problem in Iraq. Opening and running a business in Iraq usually requires paying multiple bribes to government officials. We can think of there being a demand and supply for bribes, with the curves having the usual shapes

> What is dumping? Who benefits and who loses from dumping? What problems arise when anti-dumping laws are implemented?

> Suppose that the long-run price elasticity of demand for gasoline is 20.55. Assume that the price of gasoline is currently $3.00 per gallon, the equilibrium quantity of gasoline is 140 billion gallons per year, and the federal government decides to incre

> What is a compensating differential? Give an example.

> Briefly explain which of the five competitive forces is involved in each of these business developments. a. The effect on Samsung, maker of the Galaxy large screen smartphone, as Apple introduces the iPhone 6 with a larger screen. b. The effect on McDona

> 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

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