ISBN 13: 978-1305280618

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. ANSWER: d POINTS: 1 DIFFICULTY: Easy

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights Reserved.

2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2016 Cengage Learning. All Rights

Chapter 22/International Trade and Comparative Advantage CHAPTER 22 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE TEST YOURSELF 1. The following table describes the number of yards of cloth and barrels of wine that can be produced with a weeks worth of labor in England and Portugal. Assume that no other inputs are needed. In England In Portugal Cloth

Chapter 22/International Trade and Comparative Advantage CHAPTER 22 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE This chapter introduces students to the principles of international trade. It outlines the Ricardian doctrine of comparative advantage, showing that trade is to the advantage of both partners, even if one is more efficient in the production of all goods. It also

Chapter 21/Is U.S. Economic Leadership Threatened? CHAPTER 21 IS U.S. ECONOMIC LEADERSHIP THREATENED? TEST YOURSELF 1. In what ways is the United States still an economic leader in the world? In what ways has it fallen behind other nations? The United States still leads the world in productivity but is slipping when compared to the growth

Chapter 21/Is U.S. Economic Leadership Threatened? CHAPTER 21 IS U.S. ECONOMIC LEADERSHIP THREATENED? Chapter 21 recognizes that is some respects, the United States has fallen significantly behind other nations. It analyzes key economic factors, like innovation, education, health care, and the budget deficit, identifying important areas in which the United States is still strong and

Chapter 20/Poverty, Inequality, and Discrimination CHAPTER 20 POVERTY, INEQUALITY, AND DISCRIMINATION TEST QUESTIONS 1. Define the poverty rate. Does it rise or fall during recessions? The poverty rate is the percentage of families whose annual income falls below thepoverty line. The rate increases during recessions. The poverty rate is the percentage of families whose annual income

Chapter 20/Poverty, Inequality, and Discrimination CHAPTER 20 POVERTY, INEQUALITY, AND DISCRIMINATION Chapter 20 begins with a survey of the basic facts of poverty and income distribution in the United States. It then turns to explanations of differences in incomes and policy measures to change the distribution of income. Throughout, the chapter emphasizes the trade-off betweenequality

Chapter 19/Labor and Entrepreneurship: The Human Inputs CHAPTER 19 LABOR AND ENTREPRENEURSHIP: THE HUMAN INPUTS TEST YOURSELF 1. The following table shows the number of pizzas that can be produced by a large pizza parlor employing various numbers of pizza chefs. Number of Chefs Number of Pizzas per Day 1 40 2 64 3 82 4 92 5 100 6 92 a. Find

Chapter 19/Labor and Entrepreneurship: The Human Inputs CHAPTER 19 LABOR AND ENTREPRENEURSHIP: THE HUMAN INPUTS Chapter 19 is an introduction to the principal issues in modern labor economics. It is divided into two main sections: the markets for labor and the entrepreneur. CHAPTER OUTLINE PART I: THE MARKETS FOR LABOR PUZZLE RESOLVED: WHY ARE ENTREPRENEURIAL EARNINGS SURPRISINGLY

Chapter 18/Pricing the Factors of Production CHAPTER 18 PRICING THE FACTORS OF PRODUCTION TEST YOURSELF 1. Which of the following inputs do you think include relatively large economic rents in their earnings? a. Nuts and bolts b. Petroleum c. A champion racehorse Use supply-demand analysis to explain your answer. (a) Nuts and bolts: no economic rent. Many manufacturers easily

Chapter 18/Pricing the Factors of Production CHAPTER 18 PRICING THE FACTORS OF PRODUCTION The discussion of income distribution begins with this chapter. The chapter first outlines the general theory of factor pricing, that is to say, supply and demand, with demand determined by marginal productivity. It then turns to the particular considerations relevant to three

Chapter 17/Taxation and Resource Allocation CHAPTER 17 TAXATION AND RESOURCE ALLOCATION TEST YOURSELF 1. Using the following hypothetical income-tax table, compute the marginal and average tax rates. Is the tax progressive, proportional, or regressive? Income Income Tax $20,000 $2,000 30,000 2,700 40,000 3,200 50,000 3,500 The tax is regressive, since the average tax rate falls as income rises: Tax Rate Income Tax

PROBLEMS 1. The gasoline excise tax is an example of a benefit tax: people who use the highways pay for their upkeep through the tax. In what ways does the gasoline tax meet or fail to meet the criteria of horizontal and vertical equity? Can you think of a way of improving the horizontal

Chapter 17/Taxation and Resource Allocation CHAPTER 17 TAXATION AND RESOURCE ALLOCATION Chapter 17 begins by describing the U.S. tax structure, and then analyzes it in terms of equity, efficiency, excess burden, and incidence. It deals with several current controversies in taxation, including the debate over repealing the Bush tax cuts. CHAPTER OUTLINE THE LEVEL AND TYPES OF

Chapter 16/Externalities, the Environment, and Natural Resources CHAPTER 16 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES TEST YOURSELF 1. Production of Commodity X creates 10 pounds of emissions for every unit of X produced. The demand and supply curves for X are described by the following table: Price Quantity Demanded Quantity Supplied $10 80 100 9 85 95 8 90

Chapter 16/Externalities, the Environment, and Natural Resources PROBLEMS 1. Muddy Manufacturing finds it convenient to discharge some of its waste into nearby Crystal River, upstream from the town of Midville. Authorities in Midville estimate that each pound of waste costs the town $5.50 in terms of purification at the water plant, damage to fisheries, pollution

Chapter 16/Externalities, the Environment, and Natural Resources CHAPTER 16 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES The principal theme of Chapter 16 is that some simple economic principles can help us to understand the relationship between economic activity on the one hand and the preservation ofthe environment and natural resources on the other. understand the relationship

Chapter 15/The Shortcomings of Free Markets CHAPTER 15 THE SHORTCOMINGS OF FREE MARKETS TEST YOURSELF 1. What is the opportunity cost to society of a 100-mile truck trip? Why may the price of the gasoline used by the truck not adequately represent that opportunity cost? The opportunity cost to society of a trip by a

Chapter 15/The Shortcomings of Free Markets CHAPTER 15 THE SHORTCOMINGS OF FREE MARKETS Chapter 15 deals in a comprehensive way with a series of market failures. It is the complement to Chapter 14, which extolled the virtues of free markets; this chapter concentrates solely on their faults. CHAPTER OUTLINE WHAT DOES THE MARKET DO POORLY? 1. Market economies

Chapter 14/The Case for Free Markets: The Price System CHAPTER 14 THE CASE FOR FREE MARKETS: THE PRICE SYSTEM TEST YOURSELF 1. What possible social advantages of price increases arise in the following cases? a. Charging higher prices for electrical power on very hot days when many people use air conditioners b. Raising water prices in

Chapter 14/The Case for Free Markets: The Price System CHAPTER 14 THE CASE FOR FREE MARKETS: THE PRICE SYSTEM Chapter 14 shows how the market system can solve the enormously complex coordination problems of an economy, and do so efficiently. The uncontrolled market system need not lead to economic efficiency under all circumstances, but it

Chapter 13/Limiting Market Power: Regulation and Antitrust CHAPTER 13 LIMITING MARKET POWER: REGULATION AND ANTITRUST DISCUSSION QUESTIONS 1. Why is an electric company in a city often considered to be a natural monopoly? What would happen if two competing electric companies were established? How about telephone companies? How can changes in technology affect your answer? Electric companies and

Chapter 13/Limiting Market Power: Regulation and Antitrust CHAPTER 13 LIMITING MARKET POWER: REGULATION AND ANTITRUST Part 1 of Chapter 13 deals with the regulation of firm and the other principal tool the government has to confront the problem of excessive market power, antitrust policy. Part 2 of Chapter 13 begins the microeconomics section on government

Chapter 12/Between Competition and Monopoly CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY TEST YOURSELF 1. Using game theory, set up a payoff matrix similar to one that Volkswagens management might employ in analyzing the problem presented in Discussion Question 5. The payoff matrix for Ford might be Table 1: TABLE 1 Volkswagon FordCut PriceNew ProductIt is, of course,

PROBLEMS 1. In the beach city of Santa Barbara, California, there are seven bathing suit stores, each with the same schedule of costs and each facing an identical demand curve. Swim N Style is a typical store: Suits sold (per hour) Price Total Cost 1 $68 $70 2 66 80 3 64 85 4 62 90 5 60 100 6 58

Chapter 12/Between Competition and Monopoly CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY This chapter deals with monopolistic competition and oligopoly, the market forms that lie between the two polar cases of perfect competition and monopoly. It is here that the great majority of firms are found. Special emphasis is given to game theoretic techniques and analysis. CHAPTER

Chapter 11/Monopoly CHAPTER 11 MONOPOLY TEST YOURSELF 1. Which of the following industries are pure monopolies? a. The only supplier of heating fuel in an isolated town b. The only supplier of IBM notebook computers in town c. The only supplier of digital cameras Explain your answers. (a) Pure monopolist. There is no good substitute for heat (bulky sweaters

Chapter 11/Monopoly CHAPTER 11 MONOPOLY Chapter 11 presents the basic structure of a monopoly. Like perfect competition, monopoly is a polar case, of which real-world examples are difficult to find. It needs to be studied because it is a stepping stone toward the understanding of market types that are more common and becauseexploitation of monopoly

Chapter 10/The Firm and the Industry under Perfect Competition CHAPTER 10 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION TEST YOURSELF 1.Under what circumstances might you expect the demand curve of the firm to be a. Vertical? b. Horizontal? c. Negatively sloping? d. Positively sloping? (a) A demand curve might be vertical for a good that is absolutely necessary to