The Energizer Bunny that “keeps going and going” has been a very successful ad campaign for batteries. Explain the relationship between this slogan and the firm’s price elasticity of demand and total revenue.
> Why do marginal costs of production rise?
> Is the "best" quantity of workers to hire where the marginal productivity of the last worker employed is the greatest (which implies an output level in which the marginal cost of producing additional units is the cheapest)?
> Many people search out and purchase "bargains" at garage and yard sales. What are some implicit costs associated with this type of shopping?
> Some companies advertise: "We deal in high volume and pass our savings on to you in the form of lower prices." How could this be?
> Will each of the following changes in price cause total revenue to increase, decrease, or remain unchanged? a. Price falls, and demand is elastic. b. Price rises, and demand is elastic. c. Price falls, and demand is unitary elastic. d. Price rises, and d
> How can the extent to which economies or diseconomies of scale are experienced help us to predict the size and number of real-world firms in an industry?
> If a firm wished to minimize its cost of production then what output level should it produce?
> Why does the marginal cost curve intersect the average variable and average total cost curves at their respective minimum points?
> In each of the following situations, indicate who bears the biggest burden of a tax imposed on sellers, consumers or sellers? a. Given supply, demand is quite inelastic? b. Given supply, demand is quite elastic?
> If a firm wants to maximize its revenues then what price should it charge?
> If a firm wishes to increase its revenues and the product it is selling has an inelastic demand, then should the firm increase or decrease its price?
> Why are convenience stores able to charge higher prices than grocery stores for some items?
> What is the advantage of using the midpoints formula as opposed to the total revenue test in determining the degree of price elasticity?
> If good X has a price elasticity of demand equal to 2 and good Y has a coefficient equal to 2.5 which has a more elastic demand?
> If good X has a price elasticity of demand equal to 2 and the price increases by 10 percent then by what percent will the quantity demanded change?
> Consider the following demand schedule: What is the price elasticity of demand between; a. P 5 $25 and P 5 $20? b. P 5 $20 and P 5 $15? c. P 5 $15 and P 5 $10? d. P 5 $10 and P 5 $5? Quantity demanded Elasticity coefficient Price $25 20 20 40 15 60
> What are some additional examples of public goods and services?
> How would an economist answer the question: "What is the appropriate level of government involvement?"
> How does government attempt to correct for an inequitable distribution of income?
> How does government attempt to correct for a lack of competition?
> Why has government been involved in setting prices---price controls?
> Why has the price of most computers and other electronic product been falling over the past several years while the demand for these products has been rising at the same time?
> If demand and supply both increase, but demand increases more than supply increases, then what happens to the equilibrium price and quantity?
> If the price of televisions has increased over the last year and people are buying more televisions, is this an exception to the law of demand, or has there been a change in demand or supply which could account for this?
> Macroeconomic instability can also be viewed as a "market failure." This is because the market system (capitalism) is permissive of the problems of unemployment, inflation and slow rates of economic growth associated with macroeconomic instability. How h
> Is there a "free-rider" problem associated with public goods and services? How does government address this free-rider problem?
> Suppose the price elasticity of demand for farm products is inelastic. If the federal government wants to follow a policy of increasing income for farmers, what type of programs will the government enact?
> Why money isn’t considered capital in economics?
> If the government banned the sale and purchase of a good or service (for example, cigarettes, or abortion services), then what impact would this have on the market for this item.
> What are the necessary ingredients for a nation to experience greater rates of economic growth, higher average standards of living, and a greater ability to compete in the global economy? That is, what could the U.S. do to achieve all this?
> Under what conditions would a nation be able to currently produce more of both consumer and capital products?
> What is the profit-maximizing quantity of output for a firm to produce?
> What is the cost of a new car?
> What is the opportunity cost of attending college?
> How does government affect the answer to the "For Whom" fundamental economic question?
> How does government affect the answer to the "How" fundamental economic question?
> How does government affect the answer to the "What" fundamental economic question?
> What are some problems associated with economic growth?
> Opponents of increasing the tax on gasoline argue that the big oil companies just pass the tax along to the consumers. Do you agree or disagree? Explain your answer.
> What is the relationship between tuition and student enrollment at a university. How would this relationship be graphed?
> What is the relationship between a student's grade point average and the number of hours spent studying per week. How would this relationship be graphed?
> What is the relationship between the annual sale of umbrellas and the annual amount of rainfall received in inches? How would this relationship be graphed?
> Why do leaders of less developed countries often run very large deficits and print entirely too much money creating excessive inflation, even though they are aware of the consequences of their policies? How might these inflationary policies damage these
> What are two major institutions which are taken for granted in developed countries but are lacking in the less developed countries of the world?
> It is often said the less developed countries are characterized by a "dual economy." What do these people mean by a "dual economy?"
> What is the difference between growth and development?
> To what extent do you think the study of developing nations and the economic recommendations for these countries is analogous to regional economic development within depressed areas of developed nations? What about poor individuals?
> The "Four Tigers of the Pacific Rim" offer an example of developmental success. What seems to be the key elements necessary for developing countries to offer their citizens higher standards of living?
> Why is economic growth and development a goal of virtually all nations?
> All modern industrial states in the world have a socialized medical system, except South Africa and the United States. Why do you think that is? Should the United States adopt a socialized medical system? Why, or why not?
> It has been suggested that different nation's conception of what constitutes an equitable, fair or just distribution of income is what primarily differentiates the degree to which government is involved in their economies. Do you agree or disagree? Why?
> We know that all real-world economies are mixed. However, is it always true that capitalist-dominated nations, as opposed to socialist-dominated nations, enjoy a higher average standard of living?
> What are some examples of "socialism" in the United States economy?
> How did Karl Marx argue that capitalism would "sow the seeds of its own destruction"? What has helped keep Marx's predictions from coming true?
> What are some of the problems associated with capitalism which the American people have called upon government to address? What are some examples of ways in which government has attempted to alleviate each of these problems?
> What are the benefits and the costs to a nation of higher trade barriers? Which are greater: the benefits or the costs?
> Suppose the U.S. government increases trade barriers on Japanese cars coming into the United States. a. What impact would this have on the American car market? What about the impact on American automotive workers? (Hint: think in terms of demand and sup
> Which type of trade barrier is most advantageous from the government's perspective?
> What impact will an appreciation of the dollar have on the relative price of foreign goods to Americans, and the relative price of American-made products to foreigners? What will likely happen to America's trade deficit?
> Explain the impact of external costs and external benefits on resource allocation.
> What will likely happen to a nation's balance of payments if its GDP and income levels increase?
> How could an increase in a nation's fiscal deficit increase its trade deficit?
> What is the Keynesian approach to inflation?
> The discussion of low-investment country Alpha versus high investment country Beta explained that sacrificing production of consumer goods for an increase in capital goods output can result in economic growth and a higher standard of living. Stated diffe
> Frederick W. Smith is a classic entrepreneurial success story. Young Fred went to Yale University, had a good new idea, secured venture capital, worked like crazy, and made a fortune, and the Smithsonian Institution rendered its ultimate accolade. It sna
> Minimum wages exist in more than 100 countries. In 1938, Congress enacted the federal Fair Labor Standards Act, commonly known as the “minimum-wage law.” Today, a minimum wage worker who works full-time still earns a d
> The most famous footrace ever held occurred in the pages of a book and is a fictional tale involving two animals. As the story unfolds, a rabbit gets off to a fast start, but he does not keep up this pace, and instead takes a nap, halting his progress. A
> Gold is always a fascinating story. The Wonderful Wizard of Oz was first published in 1900, and this children’s tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gol
> Growing bananas for European markets was a multibillion dollar bright spot for Latin America’s struggling economies. In fact, about half of this region’s banana exports traditionally were sold to Europe. Then, in 1993,
> Monetarists and Keynesians still debate the causes of the Great Depression. Monetarists Milton Friedman and Anna Schwartz, in their book A Monetary History of the United States, argued that the Great Depression was caused by the decline in the money supp
> Consider this statement: “Government involvement in markets is inherently inefficient.” Do you agree or disagree? Explain.
> The story of the worst collapse of the housing market and the most serious financial crisis since the Great Depression is filled with villains and no action hero to sweep down from the sky and save the day. It is an Alice in Wonderland story with plent
> The Federal Open Market Committee (FOMC), which is the Fed’s most powerful monetary policy-making group, and meets eight times a year at the Federal Reserve in Washington, D.C. Often it seems that the whole world is watching for the res
> The case of Lincoln Savings and Loan is a classic example of what went wrong during one of the worst financial crises in U.S. history prior to the banking crisis and Great Recession of 2007–2009. In 1984, the Securities and Exchange Com
> The Federal Reserve is perhaps the most independent government agency in the United States. Periodically, there is a resurgence of interest in curtailing its independence. Should the Fed be independent of partisan politics, or would we be better off with
> On the tiny South Pacific island of Yap, life is easy, but the currency is hard as a rock. For nearly 2,000 years, the Yapese has used large stone wheels to pay for major purchases, such as land, canoes, and permission to marry. The people of Yap have be
> Perhaps the national debt and federal budget deficits are really not so large and threatening. For example, it can be argued that we should use real rather than nominal values to report the national debt—similar to using real GDP to report economic growt
> As unprecedented deficit figures flowed during the Great Recession, it is hard to believe that for four years the federal budget was in surplus. After a one-year small budget surplus in 1969, it took 29 contentious years to eliminate federal budget defic
> Two controversial fundamental tax reform ideas are often hot news topics. One proposal is the flat tax discussed earlier in this chapter, and the other is a national sales tax. The flat tax would grant a personal exemption of say, $36,000, for a typical
> Supply-side economics became popular during the presidential campaign of 1980. This fiscal policy prescription gained prominence after supply-side economist Arthur Laffer, using his pen to draw on a paper napkin, explained what has come to be known as th
> In The General Theory of E mployment, Interest, and Money, Keynes wrote: The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by li
> What are the advantages and disadvantages of the price system?
> The inflation rate for health care in the United States has consistently exceeded the overall rate of inflation over the last half century. According to the Bureau of Labor Statistics, in 2016, the costs of health care increased by 4 percent, while the o
> The following articles are two historical examples of hyperinflation: The first is a Wall Street Journal article from 1985 that describes hyperinflation in La Paz, Bolivia; the second article is from the San Francisco Chronicle article that reported on
> In the late 1980s, many farmers who were tired of milking cows, roping steers, and slopping hogs decided to try their hand at a new animal. Anyone feeding this animal, however, could require a gun for protection. Prior to the late 1970s, alligators were
> There is a global market in human organs in spite of attempts to prevent these transactions. For example, China banned organ sales in 2006, and India did the same in 1994. Conversely, in Iran regulated kidney sales for profit are legal and currently ther
> Radio was in existence for 38 years before 50 million people tuned in. Television took 13 years to reach that benchmark. Sixteen years after the first PC kit was introduced, 50 million people were using one. When available to the public, the Internet cro
> The unemployment rate does not measure the full impact of unemployment on individuals. Prolonged unemployment not only means lost wages, but it also impairs health and social relationships. The United States fought its most monstrous battle against unemp
> Technological advances continue to enhance our productivity, enabling us to enjoy a greater quantity, quality, and variety of products that significantly elevate our standard of living as a nation. Every day we witness incredible new technologies in comp
> Women working full-time earn on average about 20 percent less than men. Discrimination in wages and employment on the basis of sex was made illegal in 1963 by the Equal Pay Act (EPA), which outlawed pay discrimination between men and women doing substant
> Suppose March Madness included your basketball team making it all the way to the Final Four and you were going to be there. Before leaving, you checked the official website and noticed a Coke ad giving a prize to the person who submitted the best video c
> Cartels flourished in Germany and other European countries in the first half of the twentieth century. Many had international memberships. After World War II, European countries passed laws against such restrictive trade practices. The following are some
> Use a graph to show the impact on the price of Japanese cars sold in the United States if the United States imposes import quotas and other trade restrictions that decrease the supply of Japanese cars. Now draw another graph to show how the change in the
> A key characteristic of the market structures discussed in this chapter is that they use advertising to promote product differentiation, which is a form of non-price competition. The television commercial is considered the most effective method of mass-m
> Yellow taxicabs in New York City, which are today one of the most famous icons of the city, engender a love and hate relationship. The upside is that you can stick your arm in the air to hail a cab that will take you to your destination. The downside is
> Oil was discovered in western Pennsylvania by Colonel Edwin L. Drake in 1859, and after the Civil War, oil wells sprang up across the landscape. Because oil was plentiful, there was cutthroat competition, and the result was low prices and profits. At thi
> Interesting examples of monopolies can be found in other countries. Let’s begin with a historical example. In the sixteenth through eighteenth centuries, monarchs granted monopoly rights to a variety of businesses. For example, in 1600,
> Pick the best price that you want to pay for a product. Is zero reserved only for those who believe in Santa Claus? Recall the famous saying by economist Milton Friedman that “there’s no such thing as a free lunch.” Well, today more a
> Tobacco use is one of the chief preventable causes of death in the world. Since 1964, health warnings have been mandated in the United States on tobacco advertising, including billboards and printed advertising. In 1971, television advertising was prohib
> In their book Free to Choose, published in 1980, economists Milton Friedman and his wife Rose Friedman proposed a voucher plan for schools. The objective of their proposal was to retain government financing, but give parents greater freedom to choose the
