Question: What are the asymmetric information problems in

> 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

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

> 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 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

> 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

> 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.