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978-0134078816 Chapter 1 Appendix Chapter 1
CHAPTER 1 APPENDIX 1A.1. The slopes are as follows: line 1: 5; line 2: –5; line 3: 1; line 4: –1; line 5: slope is 1 as X goes 1A.2 There is a positive relationship between income and consumption. 1A.3. […]
978-0134078816 Chapter 1 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 1 The Scope and Method of Economics 1.1 Why Study Economics? 1) Which of the following is not listed in the book as a reason to study economics? A) to learn a way […]
978-0134078816 Chapter 1 Part 2
11 37) That which we forgo, or give up, when we make a choice or a decision is known as A) equity. B) causation. C) correlation. D) opportunity cost. Answer: D Diff: 1 Topic: Why Study Economics? Skill: Definition Learning […]
978-0134078816 Chapter 1 Part 3
21 4) Positive economics is an approach to economics that A) seeks to understand behavior and the operation of systems while making judgments about their usefulness to society. B) analyzes outcomes of economic behavior, evaluates them as good or bad, […]
978-0134078816 Chapter 1 Part 4
31 39) An efficient market is characterized by the fact that A) output is steady or growing and there is low inflation. B) profit opportunities are eliminated almost instantaneously. C) there are no opportunity costs. D) wealth is distributed fairly. […]
978-0134078816 Chapter 1 Part 5
41 73) Economic stability refers to the condition of steady growth in national output, with ________ inflation and ________ employment of resources. A) negative; low B) low; full C) high; full D) no; no Answer: B Diff: 2 Topic: The […]
978-0134078816 Chapter 1 Part 6
51 Copyright © 2017 Pearson Education, Inc. 7) Refer to Figure 1.3. The slope of the line between Points D and C is A) –3. B) –0.33. C) 0.33. D) 3. Topic: Appendix: How to Read and Understand Graphs Skill: […]
978-0134078816 Chapter 1 Part 7
59 Copyright © 2017 Pearson Education, Inc. 34) If the slope of a straight line is –2. and if X (the variable on the horizontal axis) decreases by 8, then Y (the variable on the vertical axis) will A) increase […]
978-0134078816 Chapter 1 Solution Manual
Solutions to Problems CHAPTER 1 1.1 Answers will vary, but should include the notion that each activity provides benefits in the form 1.2 The average cost is $1.43 ($39.99 / 28). The marginal cost is $0. 1.3 (a) From the […]
978-0134078816 Chapter 10 Solution Manual
CHAPTER 10 1.1 The key idea here is that many things affect the supply and demand for labor. Productivity could 1.2 Worker s Total Pounds of Macadamia Nuts Per Week MP MRP 0 0 — — 1 1,200 1,20 0 […]
978-0134078816 Chapter 11 Solution Manual
CHAPTER 11 1.1 All are capital except (d), (f), and (i). Capital refers to those goods produced by the economic 1.2 (a) Disagree. Capital is a stock measure and refers to those goods produced by the economic system that are […]
978-0134078816 Chapter 12 Solution Manual
S D0 D1 Price of corn P1 P0 D0 D1 S Quanty of farmland Figure 2 Q P0 P1 CHAPTER 12 1.1 If oil prices were to rise at the same time as the subsidy was given to ethanol production, […]
978-0134078816 Chapter 13 Solution Manual
CHAPTER 13 1.1 This does not necessarily constitute a monopoly. Even though Vincent has the only 7-Eleven in 2.1 (a) Disagree. A monopolist chooses quantity so that sets MC = MR, but then charges a price higher than MR. This is because […]
978-0134078816 Chapter 14 Solution Manual
CHAPTER 14 1.1 (a), (c), and (d) are probably oligopolies dominated by a few firms: (b) and (e) are not oligopolies 1.2 The most obvious reason that brand-name pharmaceutical manufacturers would want to enter into such agreements is to limit […]
978-0134078816 Chapter 15 Solution Manual
CHAPTER 15 1.1 Mariano’s Hacienda Ranch is monopolistically competitive. The restaurant industry contains a 2.1 Bands are an example of monopolistic competition. Firms are small and have some but not much market power. Better bands are more expensive than lesser-known […]
978-0134078816 Chapter 16 Solution Manual
CHAPTER 16 1.1 The statement is correct. Figure 16.3 on page 336 in the text shows that when the penalty is equal 1.2 The carbon tax will increase the marginal cost of electricity providers, and will result in the supply […]
978-0134078816 Chapter 17 Solution Manual
CHAPTER 17 1.1 303 Copyright © 2017 Pearson Education, Inc. Solutions to Problems 304 1.2 The new salary has to give you a utility level over 340 to make you switch. If p is the probability that the company succeeds, […]
978-0134078816 Chapter 18 Solution Manual
CHAPTER 18 1.1 Items (d) and (e) represent income from wages and salaries. 2.1 The Gini coefficient for right-handed people exceeds that for left-handed people. The Gini coefficient for 1995 exceeds that for 2015. A higher Gini coefficient is one […]
978-0134078816 Chapter 19 Solution Manual
CHAPTER 19 1.1 [Tax rate (Total income – Non-taxable income) / Total income] x 100 = Average tax rate (a) [0.20 (35,000 – 35,000) / 35,000] x 100 = 0 (b) [0.20 (50,000 – 35,000) / 50,000] x 100 = […]
978-0134078816 Chapter 2 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice 2.1 Scarcity, Choice, and Opportunity Cost 1) The process by which resources are transformed into useful forms is A) capitalization. B) consumption. C) production. D) allocation. […]
978-0134078816 Chapter 2 Part 2
11 Copyright © 2017 Pearson Education, Inc. 37) Refer to Figure 2.2. If Microland’s economy is at Point A, it could produce more consumer goods A) without sacrificing any capital goods. B) by sacrificing some capital goods. C) only with […]
978-0134078816 Chapter 2 Part 3
21 69) Refer to Figure 2.4. The economy moves from Point E to Point B. This could be explained by A) an increase in unemployment. B) a reduction in unemployment. C) a change in society’s preferences for hybrid cars versus […]
978-0134078816 Chapter 2 Part 4
31 101) Related to the Economics in Practice on page 25: Which one of the following occurs when an individual enters the paid work force? A) The opportunity cost of time for housework increases, because time spent on housework could […]
978-0134078816 Chapter 2 Part 5
41 139) Assume a society can produce either olives or grapes. If the marginal rate of transformation of bushels of olives into bushels of grapes is 0.2, then the opportunity cost of grapes is A) the 5 bushels of olives […]
978-0134078816 Chapter 2 Part 6
50 4) Which of the following is an element of a command economy? A) The market decides distribution. B) The means of production are privately owned. C) Production decisions are centralized. D) The market decides what will be produced. Answer: […]
978-0134078816 Chapter 2 Solution Manual
CHAPTER 2 1.1 Answers will vary, but should include: (a) the value of alternative uses of time (studying for final exams, other forms of leisure) (b) the value of alternative uses of time (other forms of leisure or exercise) (d) […]
978-0134078816 Chapter 20 Solution Manual
CHAPTER 20 1.1 The data in the following table is from 2014. As the data shows, the United States ran a trade deficit with all five countries in 2014. Country Exports (millions of U.S. dollars) Imports (millions of U.S. dollars) […]
978-0134078816 Chapter 21 Solution Manual
CHAPTER 21 1.1 Answers will vary, but most students will most likely agree with this assessment. This seems to 1.2 The information gathered by students will vary, but the following information gives some basic reasons for the discrepancies. The high […]
978-0134078816 Chapter 22 Solution Manual
CHAPTER 22 1.1 (a) There may be many factors that would cause the incidence of heart disease to be more (b) More women live in senior assisted living facilities because, on average, they tend to outlive men. It is not […]
978-0134078816 Chapter 3 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 3 Demand, Supply, and Market Equilibrium 3.1 Firms and Households: The Basic Decision–Making Units 1) Michael Dell was the first individual who sold computers by mail order. The company founded by Dell is […]
978-0134078816 Chapter 3 Part 10
87 105) Refer to Scenario 3.3. If at the same time of the mustard recall, consumer income also decreased. Then, ceteris paribus, in the market for mustard this would have caused A) both the equilibrium price and quantity to decrease. […]
978-0134078816 Chapter 3 Part 2
11 11) If the demand for coffee decreases as income decreases, coffee is a(n) A) normal good. B) inferior good. C) substitute good. D) complementary good. Answer: A Diff: 2 Topic: Demand in Product / Output Markets Skill: Conceptual AACSB: […]
978-0134078816 Chapter 3 Part 3
21 39) Refer to Figure 3.7. An increase in quantity demanded is represented by the movement A) from D2 to D1. B) from D2 to D3. C) along D2 from Point B to point A. D) along D2 from Point […]
978-0134078816 Chapter 3 Part 4
31 68) As Tabitha consumes more ice cream sundaes within a given period of time, it is likely that each additional sundae consumed will A) bring her successively more satisfaction. B) bring her successively less satisfaction. C) increase her quantity […]
978-0134078816 Chapter 3 Part 5
41 10) Refer to Figure 3.10. An increase in the wage rate of pizza makers will cause a movement from Point B on supply curve S2 to A) Point A on supply curve S2. B) Point C on supply curve […]
978-0134078816 Chapter 3 Part 6
51 37) The price of circuit boards used in the manufacturing of LCD televisions has fallen. This will lead to ________ LCD televisions. A) an increase in the supply of B) a decrease in the supply of C) an increase […]
978-0134078816 Chapter 3 Part 7
61 27) Refer to Table 3.2. In this market there will be an excess demand of 1,000 cheeseburgers at a price of A) $5. B) $6. C) $8. D) $9. Answer: A Diff: 2 Topic: Market Equilibrium Skill: Analytical AACSB: […]
978-0134078816 Chapter 3 Part 8
71 57) Refer to Figure 3.16. When the economy moves from Point E to Point B, there has been A) an increase in supply and an increase in quantity demanded. B) an increase in both supply and demand. C) a […]
978-0134078816 Chapter 3 Part 9
81 85) Related to the Economics in Practice on page 66: One explanation for the increase in the price of the Baltimore newspaper is the increase in the cost of newsprint. This would cause the ________ of Baltimore newspapers to […]
978-0134078816 Chapter 3 Solution Manual
V CHAPTER 3 1.1 Answers will vary, but may include examples such as: Bill Gates and Paul Allen with Microsoft; 2.1 (a) Anderson (household) is supplying his labor in an input market, and the county courthouse (firm) is demanding his […]
978-0134078816 Chapter 4 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 4 Demand and Supply Applications 4.1 The Price System: Rationing and Allocating Resources 1) In the short run, it is necessary to nonprice ration a good whenever ________ exists. A) excess demand B) […]
978-0134078816 Chapter 4 Part 2
11 Refer to the information provided in Figure 4.3 below to answer the question(s) that follow. Figure 4.3 33) Refer to Figure 4.3. An example of an effective price ceiling would be government setting the price of pencils at A) […]
978-0134078816 Chapter 4 Part 3
21 68) If the market price of green tea is $20.00 per pound and the government will not allow green tea growers to charge more than $25.00 per pound of green tea, which of the following will happen? A) Demand […]
978-0134078816 Chapter 4 Part 4
31 5) Refer to Figure 4.4. Assume that initially there is free trade. If the United States then imposes a $25 tax per barrel of imported oil, the tax revenue generated will equal A) $25 million per day. B) $50 […]
978-0134078816 Chapter 4 Part 5
40 7) Refer to Figure 4.6. If price is P1, consumer surplus is area A) A. B) A + B + E. C) G. D) B + C + E + F + G. Answer: B Diff: 2 Topic: Supply […]
978-0134078816 Chapter 4 Solution Manual
CHAPTER 4 1.1 (a) (b) (c) 1.2 Disagree. Every demand curve hits the quantity axis because of diminishing marginal utility—at a price of zero, there is a limit to how much one can or wants to consume. The argument that […]
978-0134078816 Chapter 5 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 5 Elasticity 5.1 Price Elasticity of Demand Refer to the information provided in Figure 5.1 below to answer the question(s) that follow. Figure 5.1 1) Refer to Figure 5.1. The demand for tickets […]
978-0134078816 Chapter 5 Part 2
11 Copyright © 2017 Pearson Education, Inc. 3) Refer to Figure 5.2. If the price of a hamburger increases from $2 to $4, the price elasticity of demand equals ________. Use the midpoint formula. A) –0.33 B) –2.0 C) –3.0 […]
978-0134078816 Chapter 5 Part 3
21 33) At a price of $5, quantity demanded is 70; and at a price of $7, quantity demanded is 50. Since total revenue ________ by the price increase, demand must be ________. A) is increased; elastic B) is decreased; […]
978-0134078816 Chapter 5 Part 4
31 5) The income elasticity of demand A) measures the change in income necessary for a given change in quantity demanded. B) measures the responsiveness of income to changes in quantity demanded. C) measures the responsiveness of quantity demanded to […]
978-0134078816 Chapter 5 Part 5
41 36) If two products are substitutes, the ________ elasticity of demand is ________. A) income; positive B) income; negative C) cross–price; positive D) cross–price; negative Answer: C Diff: 1 Topic: Other Important Elasticities Skill: Definition Learning Outcome: Micro-6 37) […]
978-0134078816 Chapter 5 Part 6
48 6) Refer to Figure 5.7. The amount customers will pay per pumpkin after the imposition of the tax is A) $1.75. B) $3.00. C) $4.25. D) $7.25. Answer: D Diff: 2 Topic: Elasticity and Taxes Skill: Analytical AACSB: Analytical […]
978-0134078816 Chapter 5 Solution Manual
CHAPTER 5 1.1 The slope of the demand curve in Figure a is: (5 – 3) / (10 – 20) = 2 / −10 = −0.2. 2.1 (a) +25% (b) −10% (c) −3.8 2.2 (a) Neither. Since demand is unit […]
978-0134078816 Chapter 6 Appendix Chapter 6
CHAPTER 6 APPENDIX 1A.1 The graph to the left violates “more is better” because the indifference curve has a positive slope. 1A.2 I/Px1 = 100 and I = 100, thus Px1 = $1.00 (Point A on demand curve) I/Px2 = […]
978-0134078816 Chapter 6 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 6 Household Behavior and Consumer Choice 6.1 Household Choice in Output Markets 1) Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price […]
978-0134078816 Chapter 6 Part 2
11 33) Refer to Figure 6.2. Along budget constraint AC, the opportunity cost of one beer is A) 1/4 of a gardenburger. B) 1 gardenburger. C) 2 gardenburgers. D) changing as Mr. Lingle moves down his budget constraint. Answer: B […]
978-0134078816 Chapter 6 Part 3
21 Copyright © 2017 Pearson Education, Inc. 64) Refer to Figure 6.5. Molly’s budget constraint is BD. Molly’s income is $375, the price of a DVD is $15 and the price of a CD is $25. At point D the […]
978-0134078816 Chapter 6 Part 4
31 96) When the price of a good decreases, the budget constraint shifts out parallel to the original budget constraint. Answer: FALSE Diff: 1 Topic: Household Choices in Output Markets Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro–10 97) Assuming […]
978-0134078816 Chapter 6 Part 5
41 23) Refer to Table 6.1. Assume that a store is giving hamburgers and sodas away for free. Consumers can have as many sodas and hamburgers as they want, but the food has to be consumed one unit at a […]
978-0134078816 Chapter 6 Part 6
51 53) ________ utility is the additional satisfaction gained by consuming ________ of a good. A) Marginal; all units B) Total; one more unit C) Total; no more units D) Marginal; one more unit Answer: D Diff: 2 Topic: The […]
978-0134078816 Chapter 6 Part 7
61 89) The diamond/water paradox helps to illustrate the concept of marginal value. Answer: TRUE Diff: 1 Topic: The Basis of Choice: Utility Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro–10 90) The law of diminishing marginal utility implies that […]
978-0134078816 Chapter 6 Part 8
71 14) In the labor market, the income and substitution effects work in the same direction. Answer: FALSE Diff: 1 Topic: Household Choice in Input Markets Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro–10 6.5 Appendix: Indifference Curves 1) Harry […]
978-0134078816 Chapter 6 Part 9
78 17) Refer to Figure 6.14. If the price of an ice cream cone is $3, Jason‘s income is A) $50. B) $375. C) $450. D) indeterminate because the price of ice cream sandwiches is not given. Answer: C Diff: […]
978-0134078816 Chapter 6 Solution Manual
CHAPTER 6 1.1 (a) (d) (b) (e) (c) (f) (g) 1.3 (a, b, d) (c) Paintball is a normal good and golf is an inferior good. As income falls, golf consumption rises but paintball consumption falls. 1.2 (a,c) (b)10 lunches […]
978-0134078816 Chapter 7 Appendix Chapter 7
CHAPTER 7 APPENDIX 1A.1 MPL / PL = 10 / 4 = 2.5 <MPK / PK = 6 / 2 = 3. The MP per dollar spent on capital is higher 1A.2 At A, MP MP P P L K […]
978-0134078816 Chapter 7 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 7 The Production Process: The Behavior of Profit-Maximizing Firms 7.1 The Behavior of Profit-Maximizing Firms 1) Total revenue minus total cost is equal to A) the rate of return. B) marginal revenue. C) […]
978-0134078816 Chapter 7 Part 2
11 34) The rate of return on capital that is just sufficient to keep owners and investors satisfied is called A) economic profit. B) a minimum efficient scale. C) the price–earnings ratio. D) a normal rate of return. Answer: D […]
978-0134078816 Chapter 7 Part 3
21 7) Refer to Table 7.1. If the hourly wage rate is $10 and the hourly price of capital is $25, which production technology should be selected? A) A B) B C) C D) D Answer: B Diff: 2 Topic: […]
978-0134078816 Chapter 7 Part 4
31 37) Refer to Figure 7.4. The marginal product of the fourth worker is A) 8. B) 12.5. C) 48. D) 92. Answer: A Diff: 2 Topic: The Production Process Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro–17 38) Refer […]
978-0134078816 Chapter 7 Part 5
41 69) A firm is operating such that the marginal product of labor is 10 and the marginal product of capital is 20. The firm is minimizing its costs only if A) the wage is half the rental rate. B) […]
978-0134078816 Chapter 7 Part 6
51 106) If diminishing marginal returns have already set in for Danica’s Dog Training Emporium and the marginal product of the fifth dog trainer is 18, then the marginal product of the fourth dog trainer must be A) negative. B) […]
978-0134078816 Chapter 7 Part 7
61 145) A production function shows the greatest amount that a firm will produce given the amount of labor input. Answer: TRUE Diff: 1 Topic: The Production Process Skill: Conceptual AACSB: Reflective Thinking Learning Outcome: Micro–17 146) The additional output […]
978-0134078816 Chapter 7 Part 8
71 A) $1,200. B) $1,800. C) $2,400. D) indeterminate from this information, as the price of labor is not given. Answer: B Diff: 2 Topic: Appendix: Isoquants and Isocosts Skill: Analytical AACSB: Analytical Thinking Learning Outcome: Micro–17 Refer to the […]
978-0134078816 Chapter 7 Part 9
78 49) Refer to Figure 7.10. If this firm’s cost of capital is $40 per unit and its cost of labor is $20 per unit, the isocost line represents a total cost of A) $1,000. B) $2,000. C) $3,000. D) […]
978-0134078816 Chapter 7 Solution Manual
CHAPTER 7 1.1 The Total revenue is $300,000 ($15 x 20,000). The opportunity cost of the capital is 7% of 1.2 They are not earning economic profits; they are not considering opportunity costs. The opportunity cost of capital is 8 […]
978-0134078816 Chapter 8 Part 1
1 Principles of Microeconomics, 12e (Case/Fair/Oster) Chapter 8 Short–Run Costs and Output Decisions 8.1 Costs in the Short Run 1) In the short run A) existing firms do not face limits imposed by a fixed input. B) all firms have […]
978-0134078816 Chapter 8 Part 2
11 33) Refer to Table 8.1. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, which of the following statements is true? A) The firm will use production technique […]
978-0134078816 Chapter 8 Part 3
21 68) If the marginal cost curve is below the average variable cost curve, then A) average variable costs are increasing. B) average variable costs are decreasing. C) marginal cost must be decreasing. D) average variable costs could either be […]
978-0134078816 Chapter 8 Solution Manual
CHAPTER 8 1.1 The monthly payment and the insurance do not depend on the amount that you drive. They must 1.2 At 1 million copies, AFC = $4; at 5 million copies, AFC = $0.80; and at 15 million copies, […]
978-0134078816 Chapter 9 Appendix Chapter 9
CHAPTER 9 APPENDIX 1A.1 Disagree. In the long run, expansion in an industry may cause input prices to increase. This is one 1A.2 See the story in the text and Figure 9A.2 on page 212 for an increasing-cost industry, which […]
978-0134078816 Chapter 9 Solution Manual
CHAPTER 9 1.1 (a) Disagree. A firm earning positive profits in the short run will have an incentive to 1.2 The enterprise, Megatron, is suffering a $50,000 economic loss. TR = $600,000, (P × q = $15 x 40,000), TC […]