The Micro Economy Today 14th Edition

Chapter 1: Economics: The Core Issues Solutions Manual Learning Objectives for Chapter 1 After reading this chapter, you should know LO 01-01. How scarcity creates opportunity costs. LO 01-02. What the production-possibilities curve represents. LO 01-03. The three core economic questions that every society must answer. LO 01-04. How market and government approaches to economic problems differ. Questions

Chapter 10: Monopoly Solutions Manual Learning Objectives for Chapter 10 After reading this chapter, you should know LO 10-01. How a monopolist sets price and output. LO 10-02. How monopoly and competitive outcomes differ. LO 10-03. The pros and cons of monopoly. Questions for Discussio 1. The objective in the game of Monopoly is to get all the

Chapter 11: Oligopoly 1. How many bookstores are on or near your campus? If there were more bookstores, how would the price of new and used books be affected? (LO 11-01) Answer: More bookstores would most likely mean more competition and lower prices for books, both new and used, sold by

Chapter 12: Monopolistic Competition Solutions Manual Questions for Discussion 1. What is the source of Starbucks confidence in the News on page 266? (LO 12-01) Answer: Starbucks dominant market position gives it unique pricing flexibility. According to the article, every week the company succeeds in persuading nearly 40 million people to buy pricey drinks. Starbucks

Chapter 13: Natural Monopolies: (De)Regulation? Solutions Manual Learning Objectives for Chapter 13 After reading this chapter, you should know LO 13-01. The characteristics of natural monopoly. LO 13-02. The regulatory dilemmas posed by natural monopoly. LO 13-03. The costs associated with regulation. LO 13-04. How deregulation has fared in specific industries. Questions for Discussion 1. Given the inevitable limit

Chapter 14: Environmental Protection Solutions Manual Learning Objectives for Chapter 14 After reading this chapter, you should know LO 14-01. How markets encourage pollution. LO 14-02. Alternative strategies for reducing pollution. LO 14-03. Why zero pollution may not be desirable. Questions for Discussion 1. What are the economic costs of the externalities caused by air toxins (News, p.

Chapter 15: The Farm Problem Solutions Manual Learning Objectives for Chapter 1 After reading this chapter, you should know LO 15-01. What makes the farm business different from others. LO 15-02. Some mechanisms used to prop up farm prices and incomes. LO 15-03. How subsidies affect farm prices, output, and incomes. Questions for Discussio 1. Would the U.S.

Chapter 16: The Labor Market Solutions Manual Learning Objectives for Chapter 16 After reading this chapter, you should know LO 16-01. What factors shape labor supply and demand. LO 16-02. How market wage rates are established. LO 16-03. How wage floors alter labor market outcomes. Questions for Discussion 1. Why are you doing this homework? What are you

Chapter 17: Labor Unions Solutions Manual Learning Objectives for Chapter 17 After reading this chapter, you should know LO 17-01. How unions secure higher wages. LO 17-02. The factors that affect collective bargaining outcomes. LO 17-03. How unions affect nonunion wages. Questions for Discussion 1. Collective bargaining sessions often start with unreasonable demands and categorical rejections. Why do

Chapter 18: Financial Markets Solutions Manual Learning Objectives for Chapter 18 After reading this chapter, you should know LO 18-01. How present discounted values are computed. LO 18-02. The difference between stocks and bonds. LO 18-03. Key financial parameters for stocks and bonds. LO 18-04. How risks and rewards are reflected in current values. Questions for Discussion 1. If

Chapter 19: Taxes: Equity versus Efficiency Solutions Manual Learning Objectives for Chapter 19 After reading this chapter, you should know LO 19-01. How the U.S. tax system is structured. LO 19-02. What makes taxes more or less progressive. LO 19-03. The nature of the equity-efficiency trade-off. Questions for Discussion 1. What goods or services do you and your

Chapter 2: The U.S. Economy: A Global View Solutions Manual Learning Objectives for Chapter 2 After reading this chapter, you should know LO 02-01. The relative size of the U.S. economy. LO 02-02. How the U.S. output mix has changed over time. LO 02-03. How the U.S. is able to produce so much output. LO 02-04. How

Chapter 20: Transfer Payments: Welfare and Social Security Solutions Manual Learning Objectives for Chapter 20 After reading this chapter, you should know LO 20-01. The major income transfer programs. LO 20-02. How transfer programs affect labor supply and total output. LO 20-03. The trade-offs between equity and efficiency. Questions for Discussion 1. If we have to choose between

Chapter 21: International Trade Solutions Manual Questions for Discussion 1. Suppose a lawyer can type faster than any secretary. Should the lawyer do her own typing? Can you demonstrate the validity of your answer? (LO 21-01) Answer: This is a question of comparative advantage. If the lawyer can write and type 15 briefs

6. (a) What was the price difference between U.S. and Chinese solar panels in 2013? (b) How much money did U.S. consumers save as a result of this price difference if they purchased 2,000 megawatts of Chinese paneling in 2013? (c) By how much did the price of Chinese solar panels rise

Chapter 22: International Finance Solutions Manual Questions for Discussion 1. Why would a decline in the value of the dollar prompt foreign manufacturers such as BMW to build production plants in the United States? (LO 22-03) Answer: BMW can produce cars at a lower cost in the United States when the dollar

Chapter 23: Global Poverty Solutions Manual Learning Objectives for Chapter 23 After reading this chapter, you should know LO 23-01. How U.S. and global poverty are defined. LO 23-02. How many people in the world are poor. LO 23-03. What factors impede or promote poverty reduction. Questions for Discussion 1. Why should Americans care about extreme poverty

Chapter 3: Supply and Demand Solutions Manual Learning Objectives for Chapter After reading this chapter, you should know LO 03-01. The nature and determinants of market demand. LO 03-02. The nature and determinants of market supply. LO 03-03. How market prices and quantities are established. LO 03-04. What causes market prices to change. LO 03-05. How

Chapter 4: The Role of Government Solutions Manual Learning Objectives for Chapter 4 After reading this chapter, you should know LO 04-01. The nature and causes of market failure. LO 04-02. How the public sector has grown. LO 04-03. Which taxes finance state, local, and federal governments. LO 04-04. The meaning of government failure. Questions for Discussion 1. Why

Chapter 5: Consumer Choice Solutions Manual Learning Objectives for Chapter 5 After reading this chapter, you should know LO 05-01. Why demand curves are downward sloping. LO 05-02. The nature and source of consumer surplus. LO 05-03. The meaning and use of price discrimination. LO 05-04. How consumers maximize utility. Questions for Discussion 1. What does the demand

Chapter 6: Elasticity Solutions Manual Learning Objectives for Chapter 6 After reading this chapter, you should know LO 06-01. How to compute price elasticity of demand. LO 06-02. The relationships between price changes, price elasticity, and total revenue. LO 06-03. What the cross-price elasticity of demand measures. LO 06-04. What the income elasticity of demand tells us. LO

Chapter 7: The Costs of Production Solutions Manual Learning Objectives for Chapter 7 After reading this chapter, you should know LO 07-01. What the production function represents. LO 07-02. Why the law of diminishing returns applies to production processes. LO 07-03. How the various measures of cost relate to each other. LO 07-04. How economic and accounting

Chapter 8: The Competitive Firm Solutions Manual Questions for Discussion 1. What economic costs will a large corporation likely overlook when computing its profits? How about the owner of a family-run business or farm? (LO 08-01) Answer: Opportunity costs would not likely be considered when computing the profits of a large corporation. More

Chapter 9: Competitive Markets Solutions Manual Learning Objectives for Chapter 9 After reading this chapter, you should know LO 09-01. The market characteristics of perfect competition. LO 09-02. How prices are established in competitive markets. LO 09-03. Why long-run economic profits approach zero in competitive markets. LO 09-04. How society benefits from market competition. Questions for Discussion 1. Why

4. Suppose the following data describe the demand for liquid diet beverages: Price $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 Quantity 7 10 13 16 19 22 25 28 31 34 Demanded Five identical, perfectly competitive firms are producing these beverages. The cost of producing these beverages at each firm is

68. Which of the following is true about

88. Refer to Figure 1.7. Which of the following

118. Refer to Figure

106. Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X, ceteris paribus. Complete the table by calculating the required opportunity costs for brushes and combs.

Chapter 01 Test Bank Key 1. Which of the following is not one of the three core economic issues that must be resolved? A. How to produce the goods and services we select. B. What to produce with unlimited resources. C. Who should get the goods and services we

87. Dynamic pricing allows a seller to A. Always charge the highest price. B. Move prices up when demand is high, and lower prices for a similar product when the demand is low. C. Keep the same price no matter what happens with demand. D. Change prices when the quantity

45. In Figure 24.2, the profit-maximizing monopolist will earn a

Chapter 10 Test Bank Key 1. If a firm can change market prices by altering its output, then it A. Has market power. B. Faces a flat demand curve. C. Is a price taker. D. Engages in marginal cost pricing. The essence of market power is the ability

Chapter 11 Test Bank Key 1. Market power is the ability of a firm to A. Advertise. B. Act as a price taker. C. Control the price and quantity supplied. D. Increase the number of substitute goods. Firms in an oligopoly have market power because they can influence

89. Refer to Table 25.2. Assume there are only four firms in the pool sweeper industry. What is the market share for Blue Lagoon? A. 20 percent. B.

70. Compared to the outcome under a marginal cost pricing strategy, a monopolistically competitive firm will produce a A. Lower output and charge a higher price. B. Greater output and charge a higher price. C. Lower output and charge a lower price. D. Greater output and charge a

90. Which firm

Chapter 12 Test Bank Key 1. Which of the following characterizes monopolistic competition? A. Many interdependent firms sell a homogeneous product. B. A few firms produce a particular type of product. C. Many firms produce a particular type of product, but each maintains some independent control over

Chapter 13 Test Bank Key 1. All of the following are necessary conditions for pure laissez faire except A. All producers must be perfectly competitive. B. Both buyers and sellers must have full information about products and prices. C. Firms do not have economies of scale. D. Some

105. In Figure 27.2, profit regulation will lead the natural monopoly to produce A.

91. The electric utility industry became a target for deregulation when A. The cost of constructing nuclear power plants declined. B. Technological advances destroyed the basis for natural monopolies in power production. C. Local utility companies began behaving like monopolies. D. The marginal costs for power plants increased considerably. Advances

87. A chemical-producing firm is located just upstream from an electric power plant. Instead of the more expensive procedure of burying its wastes, the chemical-producing firm begins dumping its waste into the stream. This causes increased variable costs for the power plant, which uses water from the stream to cool

Chapter 14 Test Bank Key 1. Which of the following is not a form of air pollution? A. Acid rain. B. Smog. C. The greenhouse effect. D. Thermal pollution. Smog, acid rain, and the greenhouse effect are all forms of air pollution. A. Acid rain. B. Smog.

Chapter 15 Test Bank Key 1. How much will farm subsidies cost taxpayers between 2002 and 2012? A. $15-$20 billion per year. B. $50-$100 billion per year. C. $500-$800 billion per year. D. $1-$2 billion per year. U.S. farm subsidies cost taxpayers $15-$20 billion per year.

76. Refer to Figure 29.3 for a cotton market with an equilibrium price of P1 and a

107. Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In Table

71. Assume that the product price is $4 per unit and that the hourly wage for workers is $12. Neither price nor wage changes with output. In

Chapter 16 Test Bank Key 1. The willingness to work a certain amount of time at a given wage rate is known as A. Labor supply. B. Labor demand. C. Derived supply. D. Derived demand. Labor supply is the willingness and ability to work specific amounts of time

Chapter 17 Test Bank Key 1. Labor supply can be defined as the A. Total number of people who are employable. B. Total number of people in paid employment. C. Willingness and ability of people to work at alternative wage rates in a given period of time, ceteris

104. The trend in the United States toward the merger of unions is driven by the labor movement's desire to accomplish all of the following except A. Increase representation. B. Avoid low-wage workers in service industries. C. Gain financial strength. D. Enhance their political power. By merging, unions hope

91. Table 31.1 shows the number of workers a firm is willing to hire per hour at different wage rates. Complete the table by computing the total wage bill (total labor cost)

Chapter 18 Test Bank Key 1. An institution that makes savings available to investors is known as A. A financial repository. B. An independent financial association. C. A financial intermediary. D. A stock and bond intermediary. A financial intermediary is an institution (e.g., a bank or the stock

72. The price of a stock will decrease, ceteris paribus, for all of the following reasons except A. There is a surplus of the stock at the current price. B. The demand for the stock decreases. C. The supply of the stock increases. D. Consumer confidence increases. The price

56. The many loopholes present in the federal income tax system prior to the 1986 tax reform caused all of the following except A. Greater vertical inequity by making the income tax more regressive. B. Greater horizontal inequity since the loopholes were more accessible to some taxpayers than others.

116. Flat tax critics A. Believe it would make it easier for state and local governments to raise their own revenues. B. Believe it would create additional vertical and horizontal inequities. C. Point out that it would increase the government's ability to alter the mix of output. D. Point

Chapter 19 Test Bank Key 1. Personal income is A. The sum of wealth and in-kind income. B. The sum of taxes, in-kind income, and personal consumption. C. A good measure of the distribution of output. D. The income received by households before payment of personal taxes.

Chapter 02 Test Bank Key 1. Approximately how much of the world's output does the United States produce? A. 5 percent. B. 17 percent. C. 30 percent. D. 12 percent. The United States is a very significant force in the world economy. A. 5 percent. B. 17

81. One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer demand is the A. Factor mobility which is the increased ease with which resources move from one industry to another. B. Abundance of scarce resources. C. Large number of proprietorships. D.

77.

Chapter 20 Test Bank Key 1. Transfer payments are A. Payments to individuals for which no current goods or services are exchanged. B. Government tax receipts. C. Government expenditures on goods and services. D. Social Security taxes paid by employers. Transfer payments include cash benefits such as Social

103. Use the following formula to answer the indicated question: Benefit amount = Maximum award - 0.4 (Wages in excess of ceiling) Lucy is retired and earns $12,000 per year working part-time. She is entitled to a maximum Social Security retirement benefit of $14,000. Social Security regulations allow her to

98. Dumping is said to occur when A. Foreign producers sell their goods abroad at prices lower than their marginal cost of production. B. Foreign producers sell their goods abroad at prices lower than our average cost of production. C. Foreign producers sell their goods abroad at prices

Chapter 21 Test Bank Key 1. Goods and services purchased from international sources are A. Exports. B. Imports. C. Net exports. D. Net imports. An import is purchased domestically but produced abroad. A. Exports. B. Imports. C. Net exports. D. Net imports. An import is purchased domestically but produced

63. The production possibilities curves illustrated in Figure

76. Choose the letter of the diagram in Figure 36.2 that represents the shift in the foreign exchange market

112. All of the following are true regarding flexible exchange rates except A. Speculators typically push exchange rates away from the long-term equilibrium. B. The quantity of foreign exchange demanded equals the quantity supplied. C. Exchange rate movements alter relative prices and may disrupt import and export flows. D.

Chapter 22 Test Bank Key 1. The exchange rate is the A. Opportunity cost at which goods are produced domestically. B. Balance-of-trade ratio of one country to another. C. Price of one country's currency expressed in terms of another country's currency. D. Amount of currency that can

Chapter 23 Test Bank Key 1. The minimally adequate living standard for a U.S. family of four is known as the A. Global poverty standard. B. Millennium Poverty Goal. C. United Nations Poverty Goal. D. U.S. poverty threshold. In 1963 it was determined that $1,000 per year was

81. Which of the following is not an example of microfinance? A. A loan to a farmer for a goat that will give milk that the farmer can sell. B. A loan to a small restaurant owner to buy a refrigerator. C. A loan to a U.S.-owned electronics company

An improvement in consumer confidence increases demand for goods and services. AACSB: Analytic Blooms: Apply Difficulty: 03 Hard Learning Objective: 03-04 What causes market prices to change. Topic: MARKET OUTCOMES An improvement in consumer confidence increases demand for goods and services. AACSB: Analytic Blooms: Apply Difficulty: 03 Hard Learning Objective:

104. If the actual market price were fixed at $15 per unit in Figure 3.2,

115. In The Economy Tomorrowanalysis in the text stated that thousands of people were waiting for a kidney transplant. Which of the following statements is not true? A. A price ceiling of zero is effectively a prohibition against selling organs. B. Allowing the sale of kidneys at

Chapter 03 Test Bank Key 1. Who participates in markets? A. Business firms. B. Business firms and consumers. C. Consumers and government agencies. D. All of the choices are correct. Consumers, business firms, government agencies, and foreigners participate in the marketplace. A. Business firms. B. Business firms and

73. From 2000 to 2010, the public sector share of total output A. Trended up for state and local governments and down for the federal government. B. Trended up for state and local governments and up for the federal government. C. Remained stable for state and local governments but

Chapter 04 Test Bank Key 1. The most desirable combination of output attainable with existing resources, technology, and social values is known as the A. Optimal mix of output. B. Efficient mix of output. C. Optimal mix of production. D. Efficient choice of production. The optimal mix

83. Any point on the budget constraint A. Gives the consumer the highest level of utility. B. Represent a combination of two goods that are affordable. C. Represents combinations of two goods that yield the same utility. D. Reflects the price of one good divided by the price of

58. Complete Table 19.2 below: In Table 19.2, diminishing marginal utility occurs A. With the second and fourth units only. B. With

Chapter 05 Test Bank Key 1. Sociopsychiatric explanations of consumer behavior include the A. Desire for ego and status. B. Level of income. C. Level of wealth. D. Prices of other goods. Sociologists offer explanations for our consumption behavior-not just to 'keep up with the Joneses'but to

109. For the United States to become less dependent on foreign sources of oil, A. The cross-price elasticity for alternative energy sources is negative. B. The price of alternative energy sources such as wind and solar has to rise. C. Incomes in the United States must increase. D. The

Chapter 06 Test Bank Key 1. Price elasticity of demand shows how A. To compute the slope of the demand curve. B. Responsive the quantity demanded is to a change in price. C. Responsive the quantity demanded is to a change in the price of related goods. D.

70. Refer to Figure 20.2. If

61. In Figure 21.2, at what output does this firm maximize

102. For the output levels in Table 21.4, the minimum of the average variable cost curve occurs at a production rate of A. 3 units per day. B. 2 units

Chapter 07 Test Bank Key 1. Which of the following are factors of production? A. Output in a production function. B. Productivity. C. Land, labor, capital, and entrepreneurship. D. Implicit and explicit costs. Factors of production are resources used to produce goods and services, such as land, labor,

90. A catfish farmer will shut down production when A. He is losing money. B. Price falls below AVC. C. Total revenue falls below total costs. D. The best he can do is break even. A firm should shut down only if the losses from continuing production exceed fixed

67. Refer to the data in Figure 22.1. The price of this

Chapter 08 Test Bank Key 1. Which of the following is the best explanation for why individuals own small businesses? A. Because they cannot earn a living working for corporate America. B. To provide a product consumers want. C. The expectation of profit. D. To gain experience

72. In a perfectly competitive market where firms are currently experiencing economic profits in the short-run, which of the following is least likely to occur during the long-run? A. A rightward shift in the market supply curve. B. An increase in the market quantity demanded. C. An increase in

103. Refer to Figure 23.5 for a perfectly competitive firm. Given the current market price of

Chapter 09 Test Bank Key 1. The equilibrium price in a competitive market A. Ensures that anyone who wants the good can get it. B. Equates the demand for goods with the supply of goods. C. Remains unchanged forever. D. Remains unchanged only if demand doesn't change.