Chapter 1.1-1.5, Chapter 3.1-3.4, 7.1-7.5, Chapter 11.1-11.7 Econ 105 Cypress College

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Scarcity implies that every society and every individual face​ trade-offs because scarcity means that. (1.2)

human wants are greater than what available resources can produce

​"Looked at from the standpoint of incremental revenue​ (huge) minus these incremental expenses​ (modest), the Postal Service could very easily have come to the conclusion​ that, even at​ $2 a​ package, the Amazon contract was likely to be highly​ profitable." ​Sources: Eli​ Rosenberg, "Trump Said Amazon Cost The the USPS​ 'Billions.' But the Post Office Has a Different​ Explanation." Washington Post​, May​ 11, 2018. What does the writer mean by​ "incremental revenue" and​ "incremental cost"? Why would he focus on incremental revenue and incremental cost rather than on total revenue and total​ cost? ​"Incremental" means the same thing as

"marginal." If the marginal revenue exceeds the marginal​ cost, the​ USPS's profit will increase. If the marginal cost exceeds the marginal​ revenue, the​ USPS's profit will decrease.

Refer to the table below. What is the marginal cost of producing the 200th​ pizza?

$3.25

In​ 2019, the Alliance of American Football​ (AAF), a professional football​ league, went out of business. The AAF played its games in the​ spring, while the National Football League​ (NFL) plays its games in the fall. In discussing the failure of the​ AAF, a columnist for the San Antonio​ Express-News asks the​ question, "Can any upstart football league take on the NFL​ monopoly, and​ win?" The NFL has 32 teams located in cities around the United States. ​Source: Michael​ Taylor, "The NFL Monopoly Rolls ​On,"expressnews.com​, April​ 3, 2019. In what sense can the NFL be considered a​ monopoly? The NFL can be considered a monopoly because

. few football fans have found the games offered by new leagues to be close substitutes to those offered by the NFL.

​Sally's marginal revenue from lowering the price of tomatoes from $3.00 to $1.75 is Lowering the price from $3.00 to $1.75 results in an output effect of XX and Price Effect is

0.5 175,000 -125,000

Match the terms below on the left with the definitions to their right. Do this by inserting into each​ term's response box the number associated with its correct definition. 1. Health insurance 2. Fee-for-service 3. Single-payer health care system 4. Socialized medicine

1. A A contract under which a buyer makes payments in exchange for the​ provider's agreeing to pay some or all of the​ buyer's medical bills. 2. A type of health insurance plan under which doctors and hospitals receive a payment for each service they provide. 3. A health care system where one​ entity, usually the​ government, provides national health insurance to all residents. 4. A health care system in which the government owns most hospitals and employs most doctors.

When economists speak of a shortage​, they mean a situation in which

All of the Above the market price is below the equilibrium price. the quantity demanded exceeds quantity supplied. some consumers are unable to make a purchase at

Match the countries below on the left with the health care system descriptions to their right. Do this by inserting into each​ country's response box the number associated with the description of its health care system. 1. Canada 2. Japan 3. the United Kingdom 4. the United States

1. Has a ​single-payer health care system where the government provides national health insurance to all residents. 2.Has a system of universal health insurance under which every resident is required to either enroll in a​ non-profit health insurance society or in a government health insurance program. 3. The government owns most hospitals and employs most​ doctors, so the health care system is referred to as socialized medicine. 4. Most people have private health insurance through​ employers, with the government also providing insurance to the​ poor, aged, and military veterans.

Match the terms below on the left with the definitions to their right. Do this by inserting into each​ term's response box the number associated with its correct definition. 1. Moral Hazard 2. Principal-Agent Problem 3. Adverse selection 4. Asymmetric information

1. Refers to actions people take after they have entered into a transaction that make the other party to the transaction worse off. 2. Results from agents pursuing their own interests rather than the interests of the principals who hired them. 3. Is the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. 4. Occurs when one party to an economic transaction has less information than the other party.

If Daniel sells 350 hamburgers at a price of ​$4.00​, and his average cost of producing 350 hamburgers is ​$3.50​, what is his​ profit? Part 2 Profit = ​$

175

Stephen runs a pet salon. He is currently grooming 120 dogs per week. If instead of grooming 120 ​dogs, he grooms 121 ​dogs, he will add ​$65.54 to his costs and ​$68.38 to his revenues. What will be the effect on his profits of grooming 121 dogs instead of 120 ​dogs?

2.84

The table below shows the quantity of workers and total output for a local pizza restaurant. Answer the following questions based on this​ table: Quantity of Workers Total Output 0 0 1 3 2 — 3 17 4 22 5 26 6 24 a. When the owner hires 4​ workers, the average product of labor is 5.55.5 pizzas. ​(Enter your response rounded to two decimal​ places.) Part 2 b. The marginal product of the fifth worker is 44 pizzas. ​(Enter your response as a whole​ number.) Part 3 c. If the marginal product of the second worker is​ 6, then the total number of pizzas produced when 2 workers are hired is 99 pizzas. ​(Enter your response as a whole​ number.) Part 4 d. Assuming the marginal product of the second worker is​ 6, the law of diminishing marginal returns set in with the

5.5 4 9 fourth worker

Suppose Angelica opens a small store near​ campus, selling beef brisket sandwiches. Use the graph to the​ right, which shows the demand and cost for​ Angelica's beef brisket​ sandwiches, to answer the questions that follow.

55 4.5 (P-ATC)XQ= (4.5-5.5)X55=-55 Exit industry

The Apply the Concept feature explains that there are both positive and normative aspects to the debate over whether the federal government should enact tariffs on imports from China. What economic statistics would be most useful in evaluating the positive elements in this​ debate? Assuming that these statistics are available or could be​ gathered, are they likely to resolve the normative issues in this​ debate? Which of the following economic statistics would be useful in evaluating the positive elements in this​ debate?

All of the Above

Many universities and corporations offer a health wellness program that helps their employees improve or maintain their health and get paid​ (a relatively small​ amount) for doing so. The programs​ vary, but typically consist of employees completing a health​ assessment, receiving a healthy living​ program, and monitoring their monthly health activities. Part 2 Corporations and universities are willing to pay employees to take care of themselves because a healthier workforce

A and B only. A. translates into lower​ costs, in part by reducing​ illness-related absenteeism and premature retirements. B. performs more​ efficiently, thereby improving overall productivity in the workplace.

Identify whether each of the following statements describes a change in supply or a change in the quantity supplied. To take advantage of high prices for snow shovels during a very snowy​ winter, Alexander​ Shovels, Inc., decides to increase output.

A change in quality supply

In the six months following Hurricane​ Katrina, production of oil in the Gulf of Mexico declined by 25 percent

A change in supply

The success of​ Apple's iPod leads more firms to begin producing digital music players.

A change in supply

Indicate which of the following would cause a movement from point A to C. ​(Check all that​ apply.)

A decrease in worker productivity. in the prices of substitutes in production.

A columnist in the Wall Street Journal offers the following opinion of​ Starbucks: "Starbucks is in some ways the victim of its​ success, having attracted increasingly aggressive competitors into what is now a fairly crowded​ market." ​Source: James​ Freeman, "Tragedy of the Starbucks​ Commons," Wall Street Journal​, January​ 19, 2019. Do all firms that are currently earning an economic profit eventually become​ "victims of their own​ success"? Which of the following statements is​ true?

A firm can only hope to earn a profit in the long run if it is able to continually find new ways to differentiate its product.

Which of the following statements about a hypothesis is​ correct?

A hypothesis is a statement that could in principle turn out to be incorrect

What do economists mean by market​ equilibrium?

A market outcome where quantity supplied is equal to quantity demanded.

Indicate which of the following could cause a movement from point A to C. ​(Check all that​ apply.) Part 5

A rise in the number of buyers. Your answer is correct. A decline in vegetarianism.

According to an article in the Wall Street Journal in early​ 2019, "United States Steel Corp. said it plans to add 1.6 million tons of steelmaking capacity next year by resuming the construction of a new furnace in Alabama as tariffs on foreign metal raise profits on domestic​ steel." ​Source: Bob​ Tita, "U.S. Steel to Expand Under​ Tariffs," Wall Street Journal​, February​ 11, 2019. Part 2 a. How does a tariff on imported steel make a U.S. steel company more​ profitable?

A tariff on imported steel will raise the prices of those​ imports, making it likely that some U.S. consumers of steel will shift from buying imported steel to buying​ domestically-produced steel.

In which of the following ways is the market for health care in the United States different from the markets for other goods and​ services? ​(Check all that apply​.)

A. The government plays a large role in the market for health care. This is the correct answer. B. Consumers of health care typically pay less than full price.

What is the difference between the average cost of production​ (ATC) and marginal cost of production​ (MC)? Part 2 (11.4)

ATC = TCQ​; MC =ΔTCΔQ.

Current trends in U.S. health care​ spending, if not​ altered, will cause the growth of federal government spending in the United States to

Accelerate

An article in the Wall Street Journal refers to​ "the basic principle of insurance—pooling risk in order to minimize liability from unforeseen​ dangers." ​Source: Amanda​ Foreman, "Insuring against​ Disaster," Wall Street Journal​, February​ 20, 2019. Part 2 The problem of XXX is that it undermines the ability of insurance to provide the benefit of sharing risk.

Adverse Selection

The​ "lemons problem" refers to the observation that the presence of asymmetric information in the used car market leads to the problem of XXX causing the cars offered for sale to be predominantly XXX in quality

Adverse Selection/poor

While teaching the concepts of asymmetric​ information, a professor asked his students for examples of adverse selection or moral hazard in marriage. Which of the following examples most accurately describes adverse selection and moral hazard in​ marriage?

Adverse selection because the​ husband's secret alcoholism comes out after the wedding. Moral hazard because a spouse lets their appearance go after marriage.

According to the​ figure, health care is a normal good for

All countries

What do economists mean when they use the Latin expression ceteris paribus​? (3.1)

All else equal.

Which of the following statements is​ true?

All individuals face a scarcity of time and need to make choices how to allocate it.

What is the actual cost and also the opportunity cost of distributing the tickets this​ way?

All of the Above

An externality Part 2

All of the Above refers to a benefit or cost of an economic activity that affects someone who is not directly associated with it. interferes with the economic efficiency of a market equilibrium. may require government intervention.

Which of the following would cause a shift in the demand curve... from point A to point​ B?

All of the Above An increase in the price of a substitute good. B. An increase in income​ (normal good). C. A decrease in income​ (inferior good).

Which of the following is one of the difficulties in making​ cross-country comparisons in health care​ outcomes? (7.3)

All of the Above Countries do not always collect health care related data in the same way. Countries may have different lifestyle choices that affect health care outcomes apart from the effectiveness of the​ countries' health care system. Countries do not deliver health care services in the same way.

Which of the following is a provision of the Affordable Care​ Act?

All of the Above Each state will have an Affordable Insurance Exchange. Insurance companies are required to participate in a​ high-risk pool that will insure individuals with​ pre-existing medical conditions. Every firm with more than 200 employees is required to offer health insurance to its employees.

According to a Congressional Budget Office​ forecast, less than half of future increases in spending on Medicare and Medicaid as a percentage of GDP will be due to the aging of the population. Which of the following factors explain most of the​ increase?

All of the Above Excessive​ paperwork, duplication, and waste. Low rates of productivity in the health care sector. The introduction of higher cost drugs and medical equipment. Malpractice​ lawsuits, including the costs of unnecessary tests and procedures.

In​ 2019, an article on forbes.com discussed one of the new Reserve Roastery coffeehouses that Starbucks has​ introduced: A​ "23,000-square-foot three-story​ emporium, where specialty​ coffee, pizza and pastries to be served​ in-house had all been roasted or baked on site and a cocktail bar on the top floor served​ coffee-infused alcohol." The article described the new coffeehouses as​ Starbucks's attempt to meet competition from Blue Bottle Coffee and other upscale coffeehouses. The new Reserve Roastery coffeehouses are larger and more costly to operate than are conventional Starbucks coffeehouses.​ We've seen that Blue Bottle Coffee and other third wave coffee houses also have higher costs than conventional second wave coffeehouses. ​Source: Andria​ Cheng, "How Starbucks Plans to Roast Its Coffeehouse​ Competition," forbes.com, January​ 25, 2019. Are the strategies used by​ Starbucks, Bl

All of the Above Firms hope that they can earn​ short-run profits by periodically introducing new products or new ways of selling their existing products. B. As long as a firm can stay a step ahead of​ competitors, it can continue to earn an economic​ profit, even though those profits would eventually disappear if it were to stop innovating. C. A firm​ can't earn an economic profit in the long run using strategies that can be easily copied.

Some objections raised by economists to​ Fogel's analysis of the drivers behind increases in spending on health care cite its

All of the Above lack of attention to​ short-run financing considerations. ​de-emphasis of cost​ factors, particularly those related to technological change. failure to adequately assess the role of distorted price signals for buyers of health care

increases in a country's income can improve health by

All of the Above Improving sanitary conditions accelerating medical research improving food distribution

Which of the following statements is true about the health of people in the United States during the past 150​ years?

All of the Above Life expectancy has more than doubled. Infant mortality has decreased. The average person has become taller.

Why would supporters of​ market-based reforms to health care propose to make the tax treatment of​ employer-provided health insurance the same as the tax treatment of​ individually-purchased health​ insurance?

All of the Above This change would result in a reduction in​ employers' spending on health insurance policies for employees. This change would result in a reduction in health insurance premiums. This change would result in an increase in​ employees' out-of-pocket spending on health care.

In attempting to compare health care outcomes across​ countries, a problem encountered is

All of the Above a lack of data consistency. distinguishing health care effectiveness from lifestyle choices. getting an accurate measurement of health care delivery. properly assessing consumer preferences.

The situation described here​ (of healthy people not subsidizing sick people through the purchase of​ insurance) is a problem for a system of health insurance since it

All of the Above accentuates the adverse selection problem for insurers. may impose big losses on insurers. makes insurance premiums excessively high.

Which of the following is one of the major reasons for the improvement in U.S. health in the last two​ centuries?

All of the Above advances in medical equipment and prescription drugs better sanitation improvements in the distribution of food

Health insurance companies deal with asymmetric information problems by Part 2

All of the Above agreeing to pay only a percentage of any claim conducting their own medical examinations limiting the coverage of​ pre-existing conditions.

By shifting the costs of Medicare to​ beneficiaries, the growth of Medicare spending may be restrained since

All of the Above beneficiaries will be more prudent when it comes to choosing which health care services to acquire. consumers will demand fewer health care services than they would if a third party pays most of the bill. health care consumers will become more knowledable about the effectiveness and value of health care services.

According to an article in the Wall Street Journal​, ​"United [Airlines] rolled out a new app to its flight attendants earlier this year with so much information about​ people, the airline has been reluctant to turn on all the functionality. The tool can show flight attendants information on each frequent​ flier's five previous flights....But United is worried some customers might consider that​ stalking." ​Source: Scott​ McCartney, "What the Airline Knows about the Guy in Seat​ 14C," Wall Street Journal​, June​ 20, 2018. Is the app an example of positive technological​ change? Negative technological​ change? Does the answer depend on how costumers react to​ United's use of the​ app?

All of the Above are True If the app allows flight attendants to access information about customers more efficiently and makes them more productive in helping passengers the app is a positive technological change. If the app allows flight attendants to know whether a passenger needs a special diet or help getting on and off the​ plane, the app is a positive technological change. If customers dislike the app enough that they switch to another airline or get into lengthy arguments with flight​ attendants, the app is a negative technological change.

Government policymakers use economic principles to make​ decisions, such as (1.5)

All of the above

Would people in the United States helped by the steel tariffs necessarily support the​ tariffs? Would people who were hurt by the tariffs necessarily oppose the​ tariffs? Which of the following statements is​ true?

All of the above.

An article in the Economist magazine argues that the real problem with health insurance is as​ follows: The healthy people who decide not to buy insurance out of rational​ self-interest, and who turn out to be right. By not buying​ insurance, those​ (largely young) healthy people will be failing to subsidize the people insurance is meant​ for: the ones who end up getting sick. ​Source: "To Boldly Go Where He Had Already Been​ Before," Economist​, May​ 13, 2011. Part 2 Why is it rational for healthy people not to buy health​ insurance?

All of the above. They anticipate having small or negligible medical bills. They perceive little risk of becoming sick. They anticipate little benefit from purchasing health insurance.

The government can block the entry to a market through

All off the Above granting a patent. granting a copyright. granting a public franchise.

When does allocative efficiency​ occur?

Allocative efficiency occurs when production is in accordance with consumer preferences.

Which of the following statements about an economic variable is​ correct?

An economic variable is something measurable that can have different values

How are implicit costs different from explicit​ costs?

An explicit cost is a cost that involves spending​ money, while an implicit cost is a nonmonetary cost.

Suppose that the table shows the quantity supplied of UGG boots at five different prices in 2020 and in 2021. Part 2 Refer to the table and note the change in the supply of UGG boots from 2020 to 2021. Which of the following could explain the change in supply observed in​ 2021? ​(Check all that​ apply.)

An increase in the expected future price. decrease in worker productivity.

Which of the following illustrates the law of​ supply?

An increase in price causes an increase in the quantity​ supplied, and a decrease in price causes a decrease in the quantity supplied.

Which of the following statements is​ correct?

An innovation is the practical application of an invention.

Give two examples of products sold in perfectly competitive markets and two examples of products sold in monopolistically competitive markets. Part 5

Apples and oranges are sold in perfectly competitive markets and Starbucks coffee and Gap clothing are sold in monopolistically competitive markets.

All public franchises are not natural​ monopolies, and all natural monopolies are not public franchises.

Are Not Are Not

Briefly discuss what might account for this result and why it differs from the answer you gave to part​ (a). ​(​Hint: Why was the finding of increased sales of physical books particularly strong for less popular​ books?)

As more books become available as free​ downloads, readers of these books recommend them to other​ readers, causing an increase in the demand for both the print and the digital versions of the​ book, particularly among readers who prefer to read a physical book.

Indicate which of the following statements represent positive analysis and which represent normative analysis.

A​ 50-cent-per-pack tax on cigarettes will reduce smoking by teenagers by 12 percent. This represents positive analysis. Part 3 b. The federal government should spend more on AIDS research. This represents normative analysis. Part 4 c. Rising paper prices will increase textbook prices. This represents positive analysis. Part 5 d. The price of coffee at Starbucks is too high. This represents normative analysis.

Which area represents the deadweight loss resulting from consumers not paying the full price of medical​ services?

B

​"Bandit barriers are a great deterrent.​ We've talked to guys who rob​ banks, and as soon as they see a bandit​ barrier, they go find another​ bank." ​Sources: U.S. Department of​ Justice, Federal Bureau of​ Investigation, "Bank Crime Statistics ​2017"​; and Richard​ Cowen, "FBI: Banks Are to Blame for Rise in​ Robberies," NorthJersey.com​, March​ 10, 2009. Despite this​ finding, many banks have been reluctant to install these barriers.​ Wouldn't banks have a strong incentive to install bandit barriers to deter​ robberies? Why,​ then, do so many banks not do​ so? Part 2

Banks have no economic incentive to install the barriers.

Why are models based on​ assumptions?

Because models have to be simplified to be useful.

Suppose that your local police department recovers 100 tickets to a big NASCAR race in a drug raid. It decides to distribute these to residents and announces that tickets will be given away at 10 A.M. Monday morning at City Hall. Suppose that your college decides to give away​ 1,000 tickets to the football game against your​ school's biggest rival. The athletic department elects to distribute the tickets by giving them away to the first​ 1,000 students who show up at the​ department's office at 10 a.m. the following Monday. Part 2 a. The groups of people that are most likely to get the tickets will be those for whom the expected marginal

Benefits

Given the following​ statement: ​"Providing health care is obviously a public good. If one person becomes ill and​ doesn't receive​ treatment, that person may infect many other people. If many people become​ ill, then the output of the economy will be negatively affected.​ Therefore, providing health care is a public good that should be supplied by the​ government." Health​ care, as a​ good, is best described​ by:

Both A and B Health care should be supplied by the government because it generates positive externalities. Health care should not be supplied by the government because the private market preserves incentives to improve health care with innovation and medical technology.

In the​ figure, consider the marginal revenue of the eighth unit sold. When the firm cuts the price from $6.00 to $5.60 to sell the eighth ​unit, the area in the graph denoting the output effect is given by In​ dollars, this effect is

C $5.6 B 2.8 2.8

Which of the following countries operates under a​ single-payer health insurance​ system?

Canada

From the list​ below, select the variable that will cause the demand curve to​ shift:

Consumer income

In which of the following ways is the market for health care in the United States similar to the markets for other goods and​ services? ​(Check all that apply​.) (7.1 The Improving Health of People in the United States)

Consumers of health care make the decisions about how much they wish to consume. Health care sellers are primarily private firms.

In a market​ system, how does society decide what goods and services will be​ produced?

Consumers, firms, and the government determine what goods and services will be produced by the choices they make.

of going to the​ department's office on Monday morning are greater than the expected marginal

Costs

Any attempt to determine whether or not this is a good system must focus on its

Costs and Benefits

How did De Beers attempt to convince consumers that used diamonds were not good substitutes for new​ diamonds?

De Beers developed the slogan​ "a diamond is​ forever" to increase sentimental value.

If teachers put too little weight in the grading scale on a certain part of the​ course, like readings outside the​ textbook, students might respond by XXX that part of the course.

De-emphasizing

When an employer offers a wellness program to its​ employees, the health insurance premiums the employer pays on behalf of the employees are likely to

Decrease

How does the entry of new coffeehouses affect the profits of existing​ coffeehouses?

Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.

Devra​ Gartenstein, a restaurant​ owner, made the following observation about preparing​ food: "Cooks become increasingly less productive as a kitchen becomes increasingly​ crowded." ​Source: Devra​ Gartenstein, "Law of Diminishing Marginal Returns in Restaurant​ Operations," smallbusiness.chron.com. What do economists call the problem she is​ describing? What are its implications for the marginal product of labor for​ cooks

Diminishing marginal​ returns, where additional cooks produce less additional output.

Briefly explain whether you agree with the following​ statement: ​"The reluctance of healthy young adults to buy medical insurance creates a moral hazard problem for insurance​ companies."

Disagree. Moral hazard becomes a problem after one purchases insurance. In this​ case, the reluctance of​ young, healthy adults to purchase insurance in the first place leads to an adverse selection problem.

Which of the following refers to the​ principal-agent problem in the market for health​ care?

Doctors pursuing their own interests rather than the interests of their patients.

According to an article on​ barrons.com, earnings increased for Starbucks in early 2019 partly because of lower costs due to​ "streamlined operations." ​Source: David​ Marino-Nachison, "Starbucks Stock Is​ Up, but So Are​ Expectations, Analyst​ Says," barrons.com, April​ 8, 2019. Explain the effect of this cost decline on the price of a Starbucks​ cappuccino, on the quantity of cappuccinos a representative Starbucks coffeehouse​ sells, and on the profit of this Starbucks coffeehouse. Assume that the demand for Starbucks cappuccinos is unchanged. When Starbucks streamlines its​ operations, its MC curve shifts downward and its ATC curve shifts downward. The lower cost causes Starbucks to increase the quantity of cappuccinos that it sells and to decrease the price of cappuccinos.​ Starbucks's profit increases.

Downward Downward lower increase decrease increase

Explain the effect of installing Just Walk Out technology in a convenience store that had previously used a conventional checkout process with cash registers and cashiers. Assume that the technology causes a decline in both the fixed cost and the marginal cost of selling a quart of milk. Assume for simplicity that quarts of milk are the only product the store sells. When a convenience store installs Just Walk Out​ technology, its MC curve shifts ▼ upwarddownward and its ATC curve shifts ▼ downwardupward. The ▼ lowerhigher cost causes the store to ▼ decreaseincrease the quantity of milk that it sells and to ▼ decreaseincrease the price of milk. The​ store's profit ▼ decreasesincreases.

Downward downward lower increases decreases increases

Is Jill Johnson correct when she says the​ following: ​"I am currently producing​ 20,000 pizzas per month at a total cost of ​$30,000. If I produce​ 20,001 pizzas, my total cost will rise to ​$30,001. ​Therefore, my marginal cost of producing pizzas must be​ increasing."

E. Though​ Jill's average total cost of production is​ decreasing, her marginal cost of producing pizzas could be increasing or decreasing.

Consider the following​ statement: ​ "The problem with economics is that it assumes that consumers and firms always make the correct decisions. But we know that everyone makes​ mistakes." What is the most correct response to this​ statement?

Economics assumes that consumers and firms are​ rational, not that they always make the right decisions.

Which of the following statements about economics as a social science is​ correct?

Economics studies the actions of individuals.

"We find evidence that Economics LOADING... is a good choice of major for those aspiring to become a CEO​ [chief executive​ officer]. When adjusting for size of the pool of​ graduates, those with undergraduate degrees in Economics are shown to have had a greater likelihood of becoming an​ S&P 500 CEO than any other​ major." A list of famous economics majors published by Marietta College includes business leaders Warren​ Buffet, Donald​ Trump, Ted​ Turner, and Sam​ Walton, as well as former presidents George H.W.​ Bush, Gerald​ Ford, and Ronald Reagan. ​Sources: Patricia M. Flynn and Michael A.​ Quinn, "Economics: A Good Choice of Major for Future​ CEOs," Social Science Research Network​, November​ 28, 2006; and Famous Economics Majors​, Marietta​ College, Marietta​ Ohio, May​ 15, 2012. Why might studying economics be particularly good preparation for being the top manager of a

Economics teaches us how to look at the tradeoffs involved in every decision.

Which of the following statements is​ correct? (1.6 A Preview of Important Economic Terms)

Economists use the terms​ firm, company, and business interchangeably.

When a positive technological change​ occurs,

Either A or B more output can be produced from the same inputs. the same output can be produced with fewer inputs.

The graph depicts the demand​ (and marginal​ revenue) for a monopolistically competitive​ firm's perfume along with the average total cost and marginal cost of producing perfume in the short run. Part 2 As the market for perfume moves toward a​ long-run equilibrium, firms will ▼ enterexit the industry.

Exit Right Less

The widespread acceptance that bacteria causes diseases helped lead to a public health movement in the late nineteenth and early twentieth centuries. This movement eventually brought​ sewers, clean drinking​ water, and garbage removal to all U.S. cities. The public health movement in the United States in the late nineteenth and early twentieth centuries was like a technological advance to the​ country's production​ possibilities, since both expanded the​ economy's productive​ capacity, the former by increasing the​ nation's effective workforce.

Expanded Effective workforce

An increase in the price of cappuccino will increase the quantity of cappuccinos demanded.

False

Economists assume that the only reason people take the actions they do is in response to economic incentives

False

In a competitive​ market, firms can dictate what the equilibrium price of a good or a service will be.

False

Briefly explain whether you agree that when a firm stops​ innovating, it is likely to die

Firms can successfully compete only by introducing new goods and services or better ways of producing existing goods and services.

Why would firms drilling in the Permian Basin continue producing natural gas if they receive a zero or negative price for​ it?

Firms continue to produce natural gas because it is a byproduct of producing​ oil, so long as oil is profitable enough to cover the price of disposing of the natural​ gas, the firms will continue to produce it.

In a market​ system, what determines how goods and services will be​ produced?

Firms determine how goods and services will be produced.

Why would the columnist argue that the act was more likely to hurt than help​ low-income families?

Firms that might otherwise have hired a​ low-wage worker may now be reluctant to do so because the firms could be liable for paying the tax.

An opinion columnist in the Washington Post argues that the Stop Bad Employers by Zeroing Out Subsidies Act is​ "virtually guaranteed to hurt the very​ low-income working families its sponsors want to​ help." ​Source: Catherine​ Rampell, "Tax Bezos. Help Workers. But Not Like​ This." Washington Post​, September​ 6, 2018. Part 2 a. What was the main provision of this​ act?

Firms whose employees received assistance from government​ benefits, including Medicaid and the Supplemental Nutrition Assistance Program​ (SNAP), would be required to pay a tax equal to cost of the assistance.

Which would be better news for firms selling traditional canned​ tuna: Fact ​(i​) is more important in explaining their declining sales than fact ​(ii​), or the​ reverse?

Firms would prefer fact ​(ii​) more than fact ​(i​) because it is easier for the traditional canned tuna producers to change their marketing strategy and also offer their tuna in pouches and trendy flavors than it is to change the minds of millennial and generation Z consumers about the desirability of eating tuna.

A book providing advice to entrepreneurs describes some business costs as being​ "the amount of money that will go out even if none at all comes​ in." ​Source: Tom​ Hodgkinson, Business for​ Bohemians: Live​ Well, Make Money​, New​ York: The Overlook​ Press, 2018, p. 40. a. The author isdescribing a​ business's fixed cost. Part 2 b. Which of the following is an example of this type of​ cost?

Fixed Rent for a store or Wearhouse

For Jill​ Johnson's pizza​ restaurant, explain whether each of the following is a fixed or variable cost. Part 2 The payment she makes on her fire insurance policy is a The payment she makes to buy pizza dough is a variable cost. Part 4 The wages she pays her workers is a variable cost. Part 5 The lease payment she makes to her landlord who owns the building where her store is located is a fixed cost. Part 6 The​ $300-per-month payment she makes to her local newspaper for running her weekly advertisements is a fixed cost.

Fixed Variable Variable fixed fixed

Centrally planned economies allocate resources based on decisions by

Government

while market economies answer these questions through decisions made by

Households and Firms

by a tariff on imported steel.

Hurt

Using the broader definition of​ monopoly, in which of the following cases could we argue that Microsoft has a monopoly in computer operating​ systems?

If​ Apple's computer operating system and the Linux operating system were not considered close substitutes for Windows.

Which of the following is a correct statement about a mixed​ economy?

In a mixed​ economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

As an​ economist, how can you hope that your analysis of the demand for butter is accurate if you neglect thousands and thousands of other​ variables?

In the model of demand and​ supply, we focus only on the variables that experience has shown are the most important in determining the demand for a​ product: income, price of substitutes and​ complements, taste for the​ good, population, and the expected future price.

What is the difference between the short run and the long​ run? (11.2)

In the short​ run, at least one of a​ firm's inputs is​ fixed, while in the long​ run, a firm is able to vary all its inputs and adopt new technology

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of​ recessions?

Macroeconomics

Which of the following are examples of a firm experiencing positive technological​ change? Part 2 a. A firm is able to cut each​ worker's wage rate by 10 percent and still produce the same level of output. This XXX an example of positive technological change. A training program makes a​ firm's workers more productive. Part 5 This XXX an example of positive technological change. An exercise program makes a​ firm's workers more healthy and productive. Part 7 This is an example of positive technological change. Part 8 d. A firm cuts its workforce and is able to maintain its initial level of output. Part 9 This is an example of positive technological change. Part 10 e. A firm rearranges the layout of its factory and finds that by using its initial set of​ inputs, it can produce exactly as much as before. Part 11 This is not an example of positive technological change.

Is Not IS Is IS IS Not

From 1979 to​ 2015, China had a policy that allowed couples to have only one child.​ (Since 2016, couples have been allowed to have two​ children.) The​ one-child policy caused a change in the demographics of China. Between 1980 and​ 2017, the share of the population aged 14 and under decreased from 36 percent to 18 percent.​ And, as parents attempted to ensure that the lone child was a​ son, the number of male children relative to female children increased. ​Sources: World​ Bank, World Development Indicators​, February​ 2019; and Steven Lee​ Myers, Jin​ Wu, and Claire​ Fu, "China's Looming​ Crisis: A Shrinking​ Population," New York Times​, January​ 21, 2019. Part 2 How has the​ one-child policy changed the relative demand for goods and services in​ China?

It has undoubtedly shifted away from goods and services appealing to youthful​ buyers, particularly youthful female buyers.

Is it possible for technological change to be​ negative? If​ so, give an example.

It is possible for technological change to be negative. An example is when a hurricane damages a firm's facilities.

Under the Social Security retirement​ system, the federal government collects a tax on most​ people's wage income and makes payments to retired workers above a certain age who are covered by the system.​ (The age to receive full Social Security retirement benefits varies with the year the worker was​ born.) Part 2 What attributes of the Social Security retirement system make it a program of social​ insurance? ​(Mark all that​ apply.)

It provides a means of spreading the risk of bad outcomes. It is a transfer program.

​JAB, a German company that now owns both​ Peet's and​ Intelligentsia, has been focusing on sales of​ cold-brewed coffee, which it sells in supermarkets and convenience stores. According to an article in the Wall Street Journal​, ​"Making and distributing​ cold-brewed coffee, in​ particular, is challenging and expensive because it requires a lot of coffee beans to extract the​ flavor." ​Source: Zeke Turner and Julie​ Jargon, "The Secretive Company That Pours​ America's Coffee," Wall Street Journal​, March​ 7, 2018. If​ cold-brew coffee is more costly for JAB to produce than is conventional ground coffee or hot coffee sold in coffeehouses​ (JAB sells those types of coffee as​ well), why would JAB focus on​ it?

JAB is following a strategy of differentiating its product from those offered by competing firms

Suppose Jill Johnson operates her pizza restaurant in a building she owns in the center of the city. Similar buildings in the neighborhood rent for​ $4,000 per month. Jill is considering selling her building and renting space in the suburbs for​ $3,000 per month. Jill decides not to make the move. She​ reasons, "I would like to have a restaurant in the​ suburbs, but I pay no rent for my restaurant​ now, and I​ don't want to see my costs rise by​ $3,000 per​ month." Part 2 What do you think of​ Jill's reasoning? Part 3

Jill is incorrectly ignoring the opportunity cost of using the building she owns.

Is Jill Johnson correct when she says the​ following: ​"I am currently producing​ 10,000 pizzas per month at a total cost of ​$50,000. If I produce​ 10,001 pizzas, my total cost will rise to ​$50,050. ​Therefore, my marginal cost of producing pizzas must be​ increasing."

Jill's average total cost of production is​ increasing, so her marginal cost of producing pizzas must be increasing.

In its​ advertising, the mattress company Sealy has claimed that​ "after years of simulated​ use, we maintained support 4 times better than other leading​ brands." ​Source: www.sealy.com. If Sealy succeeds in convincing consumers that its claim is​ correct, its demand curve would become

Less Elastic

What potential problems do opponents of​ "Medicare for​ all" foresee in abolishing private health​ insurance?

Less medical innovation because the lower prices that the government imposes on pharmaceutical products and manufacturers of medical devices will reduce their incentive to bring new products to market.

After the Sears department store chain emerged from​ bankruptcy, its CEO Edward Lampert was quoted as​ saying: "Our goal is to continue to shrink the size of our​ stores." ​Source: Suzanne​ Kapner, "Edward​ Lampert's Plan for​ Sears: Smaller​ Stores, Less​ Apparel," Wall Street Journal​, February​ 13, 2019. Is​ Lampert's remark referring to​ Sears's economic short run or its economic long​ run? Briefly explain.

Long​ run, because changing the size of stores takes a significant amount of time.

These decisions would restrain the growth of Medicare spending by denying payments for technologies with XXX ​benefit-to-cost ratios.

Low

Annie​ Lowery, a business​ reporter, wrote the book Give People​ Money: How a Universal Basic Income Would End​ Poverty, Revolutionize​ Work, and Remake the World​, which advocates that the federal government adopt a universal basic income​ (UBI) under which every person in the country would receive a monthly check of​ $500 to​ $1,000. She argues that​ "in a society as rich as ours...everyone deserves a guarantee of financial​ security." ​Source: Annie​ Lowery, "Trump Should Just Give People​ Money," New York Times​, July​ 7, 2018. Is Lowery correct that it is the role of the federal government to guarantee that people have financial​ security?

Lowery is making a normative judgment regarding the policy. Normative analysis concerns what one person believes ought to be. You can agree or disagree with her opinion depending on your own views of the issue. There is no way to demonstrate that​ Lowery's opinion is correct.

The effect of higher income taxes on the total amount of consumer spending. This is a

Macroeconomics

The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a

Macroeconomics

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a XXX issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a issue.

Macroeconomics Microeconomics

Which of the following statements about microeconomics and macroeconomics is​ correct?

Macroeconomics is the study of the economy as a whole.

Which of the following is not a step that economists use in developing a useful economic​ model?

Make a value judgement about the merits of the hypothesis.

Which of the following is not among its major​ provisions?

Makes all health care professionals employees of the federal government.

The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a

Microeconomics

The reasons for low rates of profit in the airline industry. This is a

Microeconomics

Which of the following areas of economics studies issues such as ways to reduce teenage​ smoking?

Microeconomics

A primary difference between macroeconomics and microeconomics is (1.4 Micro and Macro)

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

Which of the following statements about microeconomics and macroeconomics is​ correct?

Microeconomics involves the study of how households and firms make choices.

Which of the following terms refers to the problem in which one person with no deductible on his or her health insurance policy tends to engage in a less healthy lifestyle than another person with a high insurance​ deductible?

Moral Hazard

Compared to the increases in health care spending per person in other​ high-income countries, the increases in health care spending per person in the United States have grown

More Rapidly

Which of the following accurately describe changes over time in the health of the average person in the United States ​(Check all that​ apply.)

Mortality rates have decreased. Your answer is correct. Life expectancy at birth has increased. Your answer is correct. The likelihood of death in the first months of life has fallen. This is the correct answer. Obesity has increased.

The incentive of employees to improve or maintain their health once they obtain health insurance may be XXX impacted.

Negatively

Does it apply in the long​ run?

No

Dr.​ Strangelove's theory is that the price of mushrooms is determined by the activity of subatomic particles that exist in another universe parallel to ours. When the subatomic particles are emitted in​ profusion, the price of mushrooms is high. When subatomic particle emissions are​ low, the price of mushrooms also is low. Is it possible to test this​ theory?

No

If​ McDonald's raises the price it charges for Quarter Pounders above the prices charged by other​ fast-food restaurants,​ won't it lose all its​ customers?

No

Is it possible for marginal revenue for a firm operating in a perfectly competitive industry to be​ negative?

No

Is the amount of time that separates the short run from the long run the same for every​ firm?

No

Productive efficiency occurs when a good or service​ (such as the distribution of​ tickets) is produced at the lowest possible cost. Is this an efficient way to distribute the​ tickets?

No

Would a firm selling in a monopolistically competitive market ever produce where marginal revenue is​ negative? Part 3

No because marginal cost cannot be negative.

An article in the Wall Street Journal discussing the smartphone market notes that industry analysts make the following​ observation: Apple's​ "biggest advantage has been its role as the only seller of devices featuring its iOS operating system. The iOS monopoly means users who switch to a rival device would have to learn a new system and potentially give up some stored​ information, analysts​ say." ​Source: Tripp​ Mickle, "Diverging​ Fortunes: High Prices Propel​ Apple, Sink​ Samsung," Wall Street Journal​, August​ 1, 2018. Does Apple have a monopoly on​ smartphones?

No, Apple is not the only producer of smartphones in the​ market, so it does not have a monopoly on smartphones.

Is zero economic profit inevitable in the long run for a monopolistically competitive​ firm?

No, a firm could try to continue making a profit in the long run by reducing production costs and improving its products

According to an article on​ crainsnewyork.com, in​ 2018, the Metropolitan Museum of Art​ (the Met) in New York City had record attendance of 7.36​ million, an increase of 5 percent over the previous year. During​ 2018, the Met had also increased the price of attendance. ​Source: Miriam Kreinin​ Sinclair, "Met Museum​ Attendance, Revenue up a Year After Imposing​ Fee," crainsnewyork.com, January​ 4, 2019. a. Can we conclude from this information that the demand curve for visiting the Met is upward​ sloping?

No, it is much more likely that during 2018 there was an increase in demand for visits to the Met.

A student looks at the data in the table to the right and draws this​ conclusion: ​"The marginal product of labor is increasing for the first 3 workers​ hired, and then it declines for the next 3 workers. I guess each of the first 3 workers must have been hard workers. Then Jill must have had to settle for increasingly poor​ workers." Part 2 Do you agree with the​ student's analysis? Briefly explain.

No. Marginal product initially increases due to specialization and then decreases due to the law of diminishing returns

If the​ firm's marginal costs are​ $5 at every level of​ output, what shape will the​ firm's average total cost​ have? Part 5 The​ firm's average total cost curve will be

horizontal

Suppose a firm has no fixed​ costs, so all of its costs are​ variable, even in the short run. Part 2 If the​ firm's marginal costs are continually increasing​ (that is, marginal cost is increasing from the first unit of output​ produced), will the​ firm's average total cost curve have a U​ shape?

No. The average total cost curve will be continually increasing.

Do you agree that health insurance is meant for people who end up getting​ sick?

No. While it obviously directly benefits those who do become​ sick, it indirectly benefits all since everyone faces some risk of sickness. There is a​ "psychic" benefit to knowing that one is​ "covered" if sickness should befall them.

A technology website estimated that the cost of materials and components in​ Apple's iPhone XS Max was​ $453. Apple was selling this phone for​ $1,249. ​Source: Daniel Yang and Stacy​ Wegner, "Apple iPhone XS Max​ Teardown," techinsights.com, October​ 3, 2018. Can we conclude from this information that Apple was making a profit of about​ $796 on each of these​ iPhones?

No; to calculate economic​ profit, all implicit and explicit costs relating to the production of the iPhone must be subtracted from the total revenue earned from selling the​ phones, so Apple made less than​ $796 on each iPhone.

Because public goods must be both nonrival and nonexcludable ​, health care does not qualify as a public good under the usual definition.

Nonrival nonexcludable does not

According to the​ textbook, the data on the relationship between health care spending per person and income per person shows that health care

Normal Good

What type of economic analysis is concerned with the way things ought to​ be?

Normative Analysis

Which of the following statements about normative analysis is​ correct?

Normative analysis is concerned with what ought to be.

Today, which of the following countries has a centrally planned​ economy?

North Korea

The overall mortality rate in the United States decreased by more than 25 percent between 1981 and 2015. Which of the following is not a cause of this​ decline? Part 2 The decline in the mortality rate is due to all of the following except a decline in deaths due to Part 3

Obesity

he main sources of health insurance in the United States include all of the following except

household​ co-operatives, or​ co-ops.

A task force established by the Trump administration to evaluate the USPS recommended that Congress consider making the USPS a private​ firm, although the Postal Rate Commission might keep the authority to regulate the prices the new firm would charge. The administration noted that the​ "USPS is caught between a mandate to operate like a business but with the expenses and the political oversight of a public​ agency." ​Source: Jennifer​ Smith, "Trump's Fix for Postal​ Service: Privatize​ It," New York Times​, June​ 22, 2018; and Task Force on the United States Postal​ System, "United States Postal​ Service: A Sustainable Path​ Forward," December 2018. a. Suppose that Congress allowed the USPS to retain its monopoly on deliveries to residential mailboxes but also allowed it to operate as a private business without needing to have its prices approved by the Postal Rate Commission and without havi

Only A and C are correct. eliminate some services that under the universal service obligation it is obligated to provide. raise the rates of some services if it were allowed to do so.

A monopolistically competitive firm​ doesn't produce where P​ = MC like a perfectly competitive firm because Part 2

P exceeds MR for a monopolistically competitive​ firm, and​ it's MR that must equal MC for profit maximization

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​ graph, D1 represents the demand for medical services if consumers paid the full price of medical​ services; D2 represents the demand for medical services when consumers pay only a fraction of the true cost of medical​ services; and S represents the supply of medical services. Use the graph to answer the following questions. Part 2 The equilibrium market price received by doctors and other suppliers of medical services is

P2

What is the price paid by consumers of medical​ services?

P3

An article in the Economist notes that the National Health Service​ (NHS) in the United Kingdom​ "is free at the point of​ delivery." ​Source: "The Three Myths of the​ NHS," Economist​, June​ 18, 2018. What does​ "free at the point of​ delivery" mean?

Patients pay virtually nothing when they receive health care services.

The same article suggested that the views of the average person in the United Kingdom​ "have made it impossible even to think about boosting NHS revenue by charging patients a nominal sum for visiting the​ doctor." Which of the following statements would be true if the NHS were allowed to charge patients for​ doctor's visits, as happens in most other​ countries, including the United​ States?

Patients would have more incentive to avoid making appointments for​ conditions, such as​ colds, where medical treatment is ineffective

Which of the following are examples of activities that generate externalities in the market for health​ care? ​(Check all that​ apply.)

People receiving vaccinations against infectious diseases. Individuals engaging in injurious or reckless lifestyle choices.

According to a personal technology column in the Wall Street Journal​, as smartphones have increased in​ size, several​ firms, including​ PopSockets, have begun making grips that make it less likely that you will drop your​ phone: "There are two​ parts: an adhesive base that sticks to my​ phone, and the​ accordion-style top that expands so I can wrap my fingers around​ it, then pops back down when​ I?m done." ​Source: David​ Pierce, "A​ $10 Accessory Proves Smartphones Are Too​ Big," Wall Street Journal​, February​ 17, 2019. a. Are PopSockets and similar products substitutes for or complements to​ smartphones?

Phone grips and smartphones are complements because people who buy a smartphone may also buy a phone grip to help reduce the likelihood of dropping the phone.

Which of the following statements about positive analysis is​ correct?

Positive analysis is concerned with what is.

​Segment.com, based in San​ Francisco, develops and sells software that allows companies to gather data on customers and manage the​ companies' social media presence. Segment reorganized its office as part of its​ "anti-distraction campaign." According to an article in the Wall Street​ Journal, the company cut back on its internal text messaging service and moved​ "some of its communication back to email to reduce the number of notifications employees were​ receiving." ​Source: Rachel​ Feintzeig, "How One Firm Lowered Its​ Open-Office Noise," Wall Street Journal​, November​ 15, 2016. Does this movement from a new technology—text messaging—to an older technology—email—represent positive or negative technological change at​ Segment? Briefly explain.

Positive technological​ change, because more output can be produced using the same inputs.

What is the term for the payment that a buyer agrees to make in a health insurance contract in exchange for the provider agreeing to pay some or all of the​ buyer's medical​ bills?

Premium

Who might gain and who might lose if Congress ended the​ USPS's monopoly on deliveries to residential mailboxes and made the USPS a private​ firm, entirely free from government​ regulation? In the table​ below, indicate whether each of the following groups would likely gain or lose if the USPS lost its monopoly on mail deliveries to residential mailboxes. Gain or​ Lose? Private firms allowed to access residential mailboxes ▼ Lose Impossible to know Gain Individuals who receive services provided under the universal service obligation ▼ Lose Impossible to know Gain Mail customers living in remote or rural areas ▼ Gain Lose Impossible to know The United States Postal Service ▼ Impossible to know Gain Lose Publishers of newspapers and magazines

Private= Gain Individuals= Lose Mail=Lose The US= Impossible to know Publishers=Lose

When does productive efficiency​ occur?

Productive efficiency occurs when a good or service is produced at the lowest possible cost.

A student​ remarks: ​"If firms in a monopolistically competitive industry are earning economic​ profits, new firms will enter the industry.​ Eventually, the representative firm will find its demand curve has shifted to the​ left, until it is just tangent to its average cost curve and it is earning zero profit. Because firms are earning zero profit at that​ point, some firms will leave the​ industry, and the representative firm will find its demand curve will shift to the right. In​ long-run equilibrium, price will be above average total cost by just enough so that each firm is just breaking​ even." Is the analysis correct or​ incorrect?

The analysis is incorrect. Firms will not leave the industry when earning zero economic profit. When the​ firm's demand curve is tangent to its average cost curve it is still earning zero economic profit.

The efficient quantity of medical services is

Q1 because this is the quantity if consumers paid the full price of medical services.

If the federal government paid for all medical​ care, as in the​ "Medicare for​ All" proposal, the wages you receive from your employer will likely

Rise

In​ 1916, the Ford Motor Company produced​ 500,000 Model T Fords at a price of​ $440. The company made a profit of​ $60,000,000 that year. Henry Ford told a newspaper reporter that he intended to reduce the price of the Model T to​ $360, and he expected to be able to sell​ 800,000 cars at that price. Ford​ said, ​"Less profit on each​ car, but more​ cars, more employment of​ labor, and in the end we get all the total profit we ought to​ make." Part 2 a. Did Ford expect the total revenue he received from selling Model Ts to rise or fall following the price cut?

Rise because he assumed demand was elastic.

You observe that when the price of Sketchers lace−up sneakers increases the demand for Diet Coke remains the same.

Sketchers lace−up sneakers and Diet Coke are considered to be unrelated goods.

Which of the following statements is true of health care spending in the United​ States?

Spending on health care as a percentage of GDP has increased since 1965.

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 fruits produced in the United​ States." ​Source: Quoted in Douglas A.​ Irwin, Peddling​ Protectionism: Smoot-Hawley and the Great​ Depression, Princeton,​ NJ: Princeton University​ Press, 2011, p. 22. Part 2 This producer apparently assumed apples and bananas to be

Substitutes

What is the difference between technology and technological​ change? (11.1) Part 2

Technology is the process of using inputs to make​ output, while technological change is when a firm is able to produce the same output using fewer inputs.

Which of the following is the health care reform legislation passed by Congressed and signed by President Obama in March​ 2010?

The Affordable Care Act

Harvard Business School started using case studies—descriptions of strategic problems encountered at real companies—in their courses in 1912.​ Today, Harvard Business Publishing​ (HBP) sells its case studies to about​ 4,000 colleges worldwide. HBP is the sole publisher of the Harvard Business​ School's case studies. Part 2 What criteria would you use to determine whether HBP has a monopoly on the sale of business case studies to be used in college​ courses?

The ability to ignore the actions of other​ firms, the persistence of economic​ profits, and the availability of close substitutes.

Briefly explain whether you agree or disagree with the following​ argument: Adam​ Smith's idea of the gains to firms from the division of labor makes a lot of sense when the good being manufactured is something complex like automobiles or​ computers, but it​ doesn't apply in the manufacturing of less complex goods or in other sectors of the​ economy, such as retail sales. Part 2

The argument is incorrect. Gains from division of labor will occur whenever production of a good or provision of a service has multiple tasks. Your answer is correct.

Older oil wells that produce fewer than 10 barrels of oil a day are called​ "stripper" wells. Suppose that you and a partner own a stripper well that can produce eight barrels of oil per day and you estimate that the marginal cost of producing another barrel of oil is​ $80. In making your​ calculation, you take into account the cost of​ labor, materials and other inputs that increase when you produce more oil. Your partner looks over your calculation of marginal cost and​ says: "You forgot about that bank loan we received two years ago. If we take into account the amount we pay on that​ loan, its adds​ $10 per barrel to our marginal cost of​ production." Which of the following statements is most​ true?

The bank loan should not be included in marginal cost because it cannot be avoided by not producing another barrel.

Stuart Butler of the Brookings Institution argues that​ "there is much more to achieving good health than just spending money on medical care. We could save billions of dollars repairing hip fractures for​ seniors, for​ instance, by investing a fraction of that money in such things as safer bathrooms and​ non-slip carpeting." ​Source: Stuart M.​ Butler, "There Are Good Reasons to Be Optimistic about True Health​ Reform," brookings.edu, August​ 14, 2018. Would changes of this type be observable in the health outcomes policymakers use to compare the health care systems of different​ countries? Which of the following statements is​ true?

The changes Butler proposed might increase​ well-being for the reasons he states.​ But, it seems unlikely that the changes would improve the health outcomes that policymakers typically focus on​ (curing diseases or injuries after people have already experienced​ them). Your answer is correct.

From the list​ below, select the variable that will cause the supply curve to​ shift:

The cost of raw materials

Should your graph definitely show the equilibrium price of used cars​ increasing? Should your graph definitely show the equilibrium quantity of used cars​ increasing?

The equilibrium quantity will definitely​ increase, but the change in equilibrium price depends on the relative size of the shifts of demand and supply.

Can we be certain whether the equilibrium price and quantity of medical services will​ increase?

The equilibrium quantity will increase but the equilibrium price may or may not increase.

If marginal revenue slopes​ downward, which of the following is​ true?

The firm must decrease its price to sell a larger quantity.

Which of the following statements about the idea that people are rational is​ correct?

The idea assumes that consumers and firms use all available information as they act to achieve their goals.

Refer to the graph. For a certain output range​ (or quantity of pizzas produced per​ day), marginal cost is greater than average cost. What is this output​ range? When marginal cost is less than average total​ cost, average total cost must be

The output range greater than about 525 pizzas per day Decreasing

riefly explain whether the glut in this market is likely to eventually disappear.

The rental price of offices will eventually fall until the quantity of offices supplied equals the quantity of offices​ demanded, eliminating the glut.

When the DuPont chemical company first attempted to enter the paint​ business, it was not successful. According to a company​ report, in one year it ​"lost nearly​ $500,000 in actual cash in addition to an expected return on investment of nearly​ $500,000, which made a total loss of income to the company of nearly a​ million." Why did this report include as part of the​ company's loss the amount it had expected to earn​ -- but​ didn't -- on its investment in manufacturing​ paint? ​Source: Alfred D.​ Chandler, Jr., Thomas K.​ McCraw, and Richard​ Tedlow, Management Past and​ Present,​ Cincinnati: South-Western,​ 2000, pp.​ 3-92.

The report sought to include implicit costs because DuPont could have invested its money elsewhere and earned​ $500,000

If the columnist is​ correct, why did the sponsors of the act in Congress write the act the way that they​ did?

The sponsors of the legislation may have hoped that firms would raise the wages of​ low-income workers, which would make it unnecessary for these workers to apply for government benefits

Which one is best suited to find the quantity supplied at a price of​ $4.50? (3.2)

The supply curve

The demand for pears is highest during summer and lowest during winter. Yet pear prices are normally lower in summer than in winter. What must be happening to the supply of pears​, from winter to​ summer, for the equilibrium price to​ fall?

The supply increases more than the demand increases.

What is a​ monopoly? A monopoly is (15.1)

a firm that is the only seller of a good or service that does not have a close substitute.

In The Wealth of Nations​, Adam Smith discussed what has come to be known as the​ "diamond and water​ paradox": ​"Nothing is more useful than​ water: but it will purchase scarce​ anything; scarce anything can be had in exchange for it. A​ diamond, on the​ contrary, has scarce any value in​ use; but a very great quantity of other goods may frequently be had in exchange for​ it." Part 2 LOADING... Click in the icon for a reference diagram. Part 3 It is possible for the price of water to be much lower than the price of diamonds if which of the following is​ true?

The supply of water is greater than the supply of diamonds. This is the correct answer.

A market system prevents people from getting as many goods and services as they want due to which of the​ following?

Their income

Suppose you see a 2017 Honda Civic hatchback advertised in the campus newspaper for ​$7,250. If you knew the car was​ reliable, you would be willing to pay ​$10,000 for it. If you knew the car was​ unreliable, you would be willing to pay ​$4,500 for it. Part 2 You should buy the car if which of the following circumstances is​ true?

There is a​ 50-50 chance that it is a lemon.

Suppose economists develop an economic model and find that​ "it works great in​ theory, but it fails in​ practice." Which of the following should the economists do​ next?

They should revise the model in light of its failure to explain or predict real world events.

Officials at​ Washington, DC's Metro subway system have debated ways to reverse a decline in ridership.​ Currently, the​ system's costs significantly exceed its​ revenues, resulting in an operating deficit that has to be covered by contributions from the local governments the system serves. One proposal to increase ridership is to run the same number of subway trains during​ off-peak hours as the system currently does during peak hours. A member of the​ system's board of directors raised the possibility that​ "the marginal cost of running the additional service exceeds the marginal revenue of the new people​ we're getting." ​Source: Faiz​ Siddiqui, "Metro Board Members Back Away from Recommendations to Increase​ Service," Washington Post​, October​ 11, 2018. Which of the following correctly characterizes this​ member's statement about the likely results of increasing the number of trains r

The​ Metro's revenue and operating deficit will both increase.

Suppose that the quantity demanded per day for a product is 80 when the price is​ $35. The following table shows costs for a firm with a monopoly in this market. Part 2 Quantity​ (Per Day) Total Cost 40 ​$1,200 50 1,250 70 2,100 80 3,600 Part 3 Briefly explain whether this firm has a natural monopoly in this market.

This firm does not have a natural monopoly because it produces at higher average total cost than two or more firms would.

One way for a firm to become a monopoly is by controlling a key resource.

True

The marginal social benefit from vaccinations is greater than the marginal private benefit to people being vaccinated.

True

Productive efficiency means that

a good or service is produced at the lowest possible cost.

An article in the New York Times​ observes, "At the heart of the​ 'Medicare for​ all' proposals championed by Senator Bernie Sanders and many Democrats is a revolutionary​ idea: Abolish private health​ insurance." ​Source: Reed Abelson and Margot​ Sanger-Katz, "Medicare for All Would Abolish Private Insurance.​ 'There's No Precedent in American​ History,'" New York Times​, March​ 23, 2019. What potential benefits do supporters of​ "Medicare for​ all" expect from abolishing private health​ insurance?

Universal coverage because everyone will be insured.

Which of the following best describes​ scarcity?

Unlimited wants exceed the limited resources available

Why​ doesn't competition among supermarkets drive the prices of vegetables they sell down to the prices of the vegetables sold in the Chinatown​ stands?

Vendors in Chinatown have a cost advantage.

The three economic questions that every society must answer are

What goods will be​ produced, how will they be​ produced, and who will receive the​ goods?

There are many wheat farms in the United​ States, and there are also more than​ 14,000 Starbucks coffeehouses. ​Why, then, does a Starbucks coffeehouse face a​ downward-sloping demand curve when a wheat farmer faces a horizontal demand​ curve? Part 2

Wheat is a homogeneous​ good, while Starbucks is able to differentiate its coffee from other coffeehouses.

In a market​ system, how does society decide who will receive the goods and services​ produced?

Who receives the goods and services produced depends largely on how income is distributed.

If​ so, why does the U.S. Constitution give Congress the right to enact copyright​ laws?

Without copyedit​ laws, individuals may be less likely to invest in creating new​ books, films, and software.

Total revenue for 3 lessons is

XXX

Leonard​ Fleck, a philosophy professor at Michigan State​ University, has​ written, ​"When it comes to health care in​ America, we have limited resources for unlimited health care needs. We want everything contemporary medical technology can offer that will improve the length or quality of our lives as we age. But as presently healthy​ taxpayers, we want costs​ controlled." ​Source: Leonard​ Fleck, Just​ Caring: Health Care Rationing and Democratic Deliberation. New​ York: Oxford University​ Press, 2009. Part 2 Is it necessary for all economic systems to limit services such as health​ care?

Yes

According to Forbes​ magazine, in​ 2019, Jeff Bezos was the​ world's richest​ person, with wealth of​ $136 billion. ​Source: Noah​ Kirsch, "Jeff​ Bezos, World's Richest​ Person, Announces Divorce After 25 Years of​ Marriage," forbes.com, January​ 9, 2019. Part 2 Does Jeff Bezos face​ scarcity?

Yes, because even though​ billionaires' financial resources enable them to afford a much greater array of goods and services than those less​ wealthy, their financial resources are not infinite.

Can this change in opportunity cost account for the decline in college football​ attendance? Briefly explain.

Yes, because these changes increase the opportunity cost of watching football games in person.

Do restaurant owners have a solution to this problem in the long​ run? Briefly explain.

Yes, restaurant owners can vary the​ size, or​ number, of kitchens.

Suppose you were building an economic model to forecast the number of people employed in U.S. manufacturing in 2026. Should your model take into account the possibility of changes in economic policy enacted by the president and​ Congress?

Yes, the model should account for economic policy because it could affect employment in manufacturing.

Which of the following best describes the system of socialized​ medicine?

a health care system under which the government owns most of the hospitals and employs most of the physicians

An article in the Wall Street Journal discussed the sidewalk vegetable stands in New York​ City's Chinatown. About 80 of these small vegetable stands operate along a handful of streets in that neighborhood. Most supermarkets buy vegetables from large wholesalers. In​ contrast, the entrepreneurs who run the stands in Chinatown buy from smaller wholesalers located in the neighborhood. These​ wholesalers, in​ turn, buy primarily from smaller family​ farms, some located overseas. Because these wholesalers make several deliveries per​ day, the owners of the stands do not have to invest in substantial storage space and the refrigerators that supermarkets use to keep vegetables fresh. The reporter compared prices for vegetables sold by these stands with vegetables sold by her​ supermarket: "In almost every​ case, Chinatown's prices were less than half what I would pay at the supermarket. Among the​ bargain

Yes, the owners of these vegetable stands are likely earning an economic profit because they remain in business.

The article also explained that New York City experienced an increase in the number of tourists during 2018 and that during the​ year, the Met offered several exhibitions that received good reviews. Does this additional information help you answer the question in part ​(a​)?

Yes, this additional information reinforces the increase in demand for visits to the Met in part​ (a).

According to an article in the Wall Street Journal in early​ 2019, the price of oil produced in the United States had increased by 25 percent since the beginning of the year. At the same​ time, U.S. oil production was at a record high. ​Source: Dan​ Molinsky, "Oil Prices Decline as U.S. Crude Production Hits​ Record," Wall Street Journal​, February​ 21, 2019. a. Are these two facts​ alone, holding everything else​ constant, consistent with a movement along the supply curve for​ oil?

Yes. A higher price of oil causes an increase in the quantity of oil​ supplied, which we show by a movement upwards along the supply curve for oil.

Is it possible for average total cost to be decreasing over a range of output where marginal cost is​ increasing? Briefly explain.

Yes. If marginal cost is less than average total​ cost, then average total cost will be decreasing.

If you own the only hardware store in a small​ town, do you have a​ monopoly? Part 2

Yes. You would have a monopoly if your profits are not competed away in the long run.

Which of the following is the correct definition of demand​ curve?

a curve that shows the relationship between the price of a product and the quantity of the product demanded

Which of the following is the​ textbook's definition of a supply​ curve?

a curve that shows the relationship between the price of a product and the quantity of the product supplied

Imagine that the curves shown in the accompanying figure represent two demand curves for traditional wings​ (basket of​ six) at Buffalo Wild Wings. Further assume that wings are a normal good. Part 2 The movement from point A to B on D1 is caused by

a decrease in the price of baskets of traditional wings.

Suppose that the curves in the figure to the right represent two supply curves for traditional wings​ (basket of​ six) at Buffalo Wild Wings. Part 2 The movement from point A to B on S1 is caused by

a decrease in the price of baskets of traditional wings.

Which of the following events would shift the supply of smartphones to the​ right?

a decrease in the price of inputs used to produce smartphones

What is a public​ franchise? Part 2 A public franchise is Part 3

a firm designated by the government as the only legal provider of a good or service.

In recent​ years, fewer households have been relying on traditional cable television to provide entertainment. Traditional cable television is sometimes called​ "pay TV." According to an article in the Wall Street Journal​, ​"The pay-TV decline comes as many U.S. households are turning to the internet for entertainment and canceling their traditional​ subscriptions, a phenomenon called​ cordcutting." ​Source: Drew FitzGerald and Benjamin​ Mullin, "Outlook for Traditional TV Goes from Bad to​ Worse," Wall Street Journal​, November​ 19, 2018. Is the decline in the number of cable television subscriptions likely the result of a movement along the demand curve for cable television or a shift in the demand​ curve? What information would you need to be confident in your​ answer? The decline in the number of cable television subscriptions is likely the result of

a leftward shift in the demand​ curve, but you would need to have information on changes​ (if any) in the price of cable television subscriptions to be sure.

Steven​ Pearlstein, a columnist for the Washington Post​, ​observed: ​"Arthur Okun's book...Equality and​ Efficiency: The Big Tradeoff​, remains a​ classic." ​Source: Steven​ Pearlstein, "Five Myths About​ Capitalism," Washington Post​, September​ 28, 2018. Why is there a​ trade-off between equality and​ efficiency? Why might an economist write an entire book on the​ subject? There is a​ trade-off between equality and efficiency because

a more equal distribution of income reduces incentives to work and invest. An economist can write an entire book on the subject because the​ trade-off involves complicated normative and positive issues.

What are implicit​ costs? Part 2 An implicit cost is Part 3

a nonmonetary opportunity cost.

If a firm is productively and allocatively​ efficient, it earns XXX ​; if it is​ not, it XXX .

a profit suffers a loss

An article in the Wall Street Journal on the market for traditional canned tuna stated the following two​ facts: i. Firms selling traditional canned tuna are struggling to connect with millennial and generation Z​ consumers, "who favor​ fresher, less-processed​ options" in the food they eat. ii. Firms selling traditional canned tuna are facing competition from firms that offer tuna for sale in​ "pouches and kits with trendy flavors or as a healthy​ snack." ​Source: Jesse Newman and Annie​ Gasparro, "The Trouble With with​ Tuna: 'A Lot of Millennials​ Don't Even Own Can​ Openers,'" Wall Street Journal​, December​ 2, 2018. a. From this​ information, can we conclude that falling sales of traditional cans of tuna is likely the result of a movement along the demand curve for traditional cans of tuna or a shift in the demand​ curve? The falling sales of traditional cans of tuna are the result

a shift in the demand curve for tuna to the left.

A monopoly is a market structure that is characterized by

a single seller of a good or service that does not have a close substitute.

Which of the following is the correct definition of demand​ schedule?

a table that shows the relationship between the price of a product and the quantity of the product demanded

Which of the following is the​ textbook's definition of a supply​ schedule?

a table that shows the relationship between the price of a product and the quantity of the product supplied

How are economic resources allocated in a market​ economy?

by the decisions of households and firms interacting in markets

If a surplus exists in a​ market, we know that the actual price is

above the equilibrium​ price, and the quantity supplied is greater than the quantity demanded.

What is the law of diminishing​ returns? Part 2 The law of diminishing returns states that

adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variable input to decline. (11.3)

Which of the following is one of the major reasons for rapid increases in health care spending in the United​ States?

advances in medical technology and new prescription drugs that have higher costs

Which of the following terms refers to the situation in which one party to an economic transaction takes advantage of knowing more than the other party to the​ transaction?

adverse selection

Alberto Chong of Georgia State University and several colleagues conducted an experiment to test the efficiency of government postal services around the world. They mailed letters to nonexistent businesses in 159 countries and kept track of how many of the letters were returned. Was this test most relevant to evaluating the productive efficiency or the allocative efficiency of these postal​ services? ​Source: Alberto​ Chong, Rafael La​ Porta, Florencio​ Lopez-de-Silanes, and Andrei​ Shleifer, "Letter Grading Government​ Efficiency," Journal of the European Economic Association​, Vol.​ 12, No.​ 2, April​ 2014, pp.​ 277-299. Part 2 This test that Albert Chong and his colleagues carried out was most relevant for evaluating the

allocative efficiency of these postal services because the test was designed to measure how often and how quickly the letters sent were returned.

An article in the Wall Street Journal notes that the average height in the United States has increased slowly in recent​ years, while the average height in the Netherlands has been increasing more steadily. Although for many years the average person in the United States was taller than the average person in the​ Netherlands, in​ 2019, the average person in the Netherlands was 2 inches taller than the average person in the United States. Income per​ person, or per​ capita, in the United States is 50 percent higher than income per person in the Netherlands. The article​ asks, "Why​ isn't the​ U.S., with the highest disposable income per capita of any​ country, the​ world's tallest​ nation?" ​Source: Jo Craven​ McGinty, "Who's the Tallest of Them​ All? It's No Longer the​ Americans," Wall Street Journal​, March​ 22, 2019. Why might we expect a relationship between average income in a co

allows for the consumption of more—and more nutritious—food.

​"grading infuses everything that happens in the​ classroom." They also argue that grading​ "needs to be acknowledged and managed from the first moment that an instructor begins planning a​ class." ​Source: Barbara E. Walvoord and Virginia Johnson​ Anderson, Effective​ Grading: A Tool for Learning and Assessment in​ College, 2nd​ edition, San​ Francisco: Jossey-Bass,​ 2010, p. 1. Part 2 The grading system used by a teacher can affect the incentives of students to learn the course material by

altering the payoffs to achieving success on the various components of the course

How were De​ Beers' profits​ affected? De Beers

has remained profitable

while the latter ensures it of

ample revenues

The phrase​ "health care​ outcome" refers to

any indicator of socialetal health

Should policymakers be concerned about this height​ issue? To the extent that differences in height

are the result of poorer childhood​ nutrition, U.S. policymakers should be concerned.

The monopolistically competitive firm sells​ _________ product and faces​ _________ demand curve.

a​ differentiated; a​ downward-sloping

With a​ downward-sloping demand​ curve, marginal revenue is below price

because the firm must lower its price to sell additional units.

Employees in most circumstances do not pay taxes on the value of the health insurance provided by their employers. Part 2 If the federal government started taxing employees on the value of the​ employer-provided health​ insurance, the value of the​ employer-provided health care benefit would

become less​ valuable, and firms would need to raise wages to compensate for this lost value to keep total compensation the same.

If a shortage exists in a​ market, we know that the actual price is

below the equilibrium​ price, and the quantity demanded is greater than the quantity supplied.

Compared with those of other​ high-income countries, health care outcomes in the United States are

better on some​ indicators, inferior on others.

An article on Allbirds athletic​ shoes, which are made with merino wool​ uppers, made the following three​ points: a. The shoes​ "are a favorite of striving venture capitalists and​ celebrities." b. The shoes​ "are a staple in the offices of seemingly every technology​ startup." c. It quoted one of the founders as stating that the goal of the firm was to sell shoes​ "focused on delivering everyday​ comfort." ​Source: Rob​ Copeland, "Trendy Sneaker Startup Allbirds Laces Up​ $1.4 Billion​ Valuation," Wall Street Journal​, October​ 11, 2018. If you were working for Allbirds and a manager asked you to forecast the future demand for its​ shoes, why might​ (a) and​ (b) concern​ you? Why might you be happy to hear the co founder make the statement quoted in​ (c)? As a forecaster working for​ Allbirds, you should be concerned about point​ (a) and​ (b) because

both limit the size of the market. On the other​ hand, increased everyday comfort brought from the shoes may increase the demand for the​ shoe, causing an increase in sales.

There are about 400 wineries in​ California's Napa Valley. Suppose the owner of one of the wineries—​Jerry's Wine Emporium—raises the price of his wine by​ $5.00 per bottle. Part 2 If the industry is perfectly​ competitive, the reaction of consumers would be to

buy wine from another winery.

In the market for health​ insurance, asymmetric information problems arise because Part 2

buyers of health insurance policies always know more about the state of their health than do the insurance companies.

According to an article in the Wall Street Journal​, both the quantity of organic milk sold and the price per half gallon have been falling. ​Source: Heather Haddon and Benjamin​ Parkin, "Dairies Are Awash in Organic Milk as Consumers Jump to​ Alternatives," Wall Street Journal​, January​ 2, 2018. Briefly explain whether the scenario can account for this outcome. The demand for organic milk has been decreasing, while the supply of organic milk has been increasing. This scenario

can account for the price and quantity of organic milk both falling if the decrease in demand is large enough relative to the increase in supply.

According to an article in the Wall Street Journal​, between 1998 and​ 2018, the number of non stop​ coast-to-coast flights in the United States more than doubled at the same time that the price of a ticket declined. ​Source: Scott​ McCartney, "The Rare Case Where Airlines and Passengers Both​ Win," Wall Street Journal​, March​ 28, 2018. Briefly explain whether the scenario can account for this outcome. The demand for​ coast-to-coast flights and the supply of flights both increased during this period. This scenario

can account for the quantity of​ coast-to-coast flights increasing at the same time that the price was decreasing if the increase in supply is large enough relative to the increase in demand.

This scenario

can't account for the outcome of the price and the quantity of organic milk both falling because an increase in demand and supply will both push the quantity of organic milk higher.

This scenario

can't account for the quantity of​ coast-to-coast flights increasing at the same time that the price was decreasing because an increase in demand and a decrease in supply will both push the price higher.

Economists refer to the necessity of holding all variables other than price constant in constructing a demand curve as the

ceteris paribus condition.

Why does a local​ McDonald's face a​ downward-sloping demand curve for its Quarter​ Pounder? Part 2 In monopolistically competitive​ markets, Part 3

changing the price affects the quantity sold because firms sell differentiated products.

Why​ wouldn't another entrepreneur have already opened a bookstore in the Bronx before Santos​ did? It is likely that another entrepreneur did not already open a bookstore in the Bronx due to

competition from online booksellers and bookstores in other New York City boroughs.

The goal of the Google Books project is to produce a digital version of every book ever written. An academic paper by Abhishek Nagaraj of University of​ California, Berkeley and Imke Reimers of Northeastern University analyzed the effect of Google Books on the market for​ print, or​ physical, books. They concluded that for their sample of​ books, "Digitization...increased sales of physical editions by about​ 35%, especially for less popular​ works." ​Source: Abhishek Nagaraj and Imke​ Reimers, "Digitization and the Demand for Physical​ Works: Evidence from the Google Books​ Project," February​ 21, 2019. Does this paper indicate that digital books and print books are substitutes or​ complements? The findings of Nagaraj and Reimer show that digital and print copies of books are

complements because the decrease in the price of digital books to zero is causing an increase in the quantity demanded for print copies of the same book.

​"When there is a shortage of a good

consumers compete against one another by bidding the price upward.

From the figure we can conclude that

consumers of health care have been directly paying for only a small fraction of the true cost of providing health care.

Suppose that the market for athletic shoes is initially in equilibrium at point A. Further suppose the demand for athletic shoes increases rapidly during​ 2020. At the same​ time, six more firms begin producing athletic shoes. A student remarks​ that, because of these​ events, we​ can't know for certain whether the price of athletic shoes will rise or fall. Part 2 The​ student's remarks​ (that, because of these​ events, we​ can't know for certain whether the price of athletic shoes will rise or​ fall) is

correct. When there is an increase in supply and an increase in​ demand, the new equilibrium quantity increases but whether the equilibrium price increases or decreases is unknown.

Which of the following is most likely to a variable cost for a business​ firm?

cost of shipping products

If the industry is monopolistically​ competitive, the reaction of consumers

could be to remain loyal to​ Jerry's and pay the higher price.

What is​ "natural" about a natural​ monopoly? Part 2 A natural monopoly

develops automatically due to economies of scale.

Some economists and policymakers have argued that one way to control federal government spending on Medicare would be to have a board of experts decide whether new medical technologies are worth their higher costs. If the board decided that they are not worth the​ costs, Medicare would not pay for them. Other economists and policymakers argue that the costs to beneficiaries should more closely reflect the costs of providing medical services. This result might be attained by raising​ premiums, deductibles, and​ co-payments, or by​ "means testing," which would limit the Medicare benefits​ high-income individuals receive. Political columnist David Brooks has summarized these two ways to restrain the growth of spending on​ Medicare: ​"From the​ top, a body of experts can be empowered to make rationing decisions....​ Alternatively, at the​ bottom, costs can be shifted to beneficiaries with premium supp

distribution of scarce resources

Hospitals and doctors sometimes perform tests that may not be of any value to patients because

health care providers are paid for each service they render.

A natural monopoly occurs when

economies of scale are large enough so that one firm can supply the entire market at a lower average total cost than can two or more firms.

The new equilibrium quantity will be

either point C or point D.

Which of the following is the way in which the largest number of people obtain health insurance in the United​ States?

employer-provided insurance plans

In the​ diagram, point A provides the​ _____, point B the​ _____, and point C the​ _____.

equilibrium​ price; market​ equilibrium; equilibrium quantity

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Allocative efficiency means that

every good or service is produced up to the point where marginal benefit is equal to marginal cost.

Spending on health care has been growing faster than the economy as a whole for at least the past several decades. What has caused this​ trend? Part 2 Health care as a proportion of GDP has been increasing because

expensive medical equipment has been invented.

Which of the following are sometimes called accounting​ costs?

explicit costs

What do economists mean by the word​ "marginal"?

extra or additional

By​ "premium supports" Brooks alludes to some form of XXX to beneficiaries as they cope with the burden of higher costs.

financial assistance

What are the most important differences between perfectly competitive markets and monopolistically competitive​ markets? Part 2 Unlike in perfectly competitive​ markets, in monopolistically competitive​ markets,(13.1)

firms face​ downward-sloping demand​ curves, and the products competitors sell are differentiated.

Airlines are likely to have particularly ▼ high fixed costs relative to their variable costs compared with an Old Navy clothing store or a Panera Bread restaurant.

high

Any cost that remains unchanged as output changes represents a firm's

fixed

According to an article in the Wall Street Journal​, Parsley Energy has been very active in drilling oil wells in the Permian Basin of Texas and New Mexico. In​ 2019, the company decided to cut back spending on exploring for new oil deposits. ​Source: Clifford​ Krauss, "How a​ 'Monster' Texas Oil Field Made the U.S. a Star in the World​ Market," Wall Street Journal​, February​ 3, 2019. Briefly explain how​ Parsley's decision will affect the​ firm's marginal cost of producing oil. Since costs incurred from exploring for new oil fields are part of Parsley​ Energy's

fixed​ costs, if they cut back on oil​ exploration, their marginal cost of producing oil​ won't change.

In the United​ States, to receive a medical​ license, a doctor must complete a residency program at a hospital. Hospitals are not free to expand their residency programs in a particular medical specialty without approval from a Residency Review Committee​ (RRC), which is made up of physicians in that specialty. A hospital that does not abide by the rulings of the RRC runs the risk of losing its accreditation from the Accreditation Council for Graduate Medical Education​ (ACGME). The ACGME and the RRCs argue that this system makes it possible to ensure that residency programs do not expand to the point where they are not providing residents with​ high-quality training. ​Sources: Brian​ Palmer, "We Need More​ Doctors, Stat!" Slate​, June​ 27, 2011; Sean​ Nicholson, "Barriers to Entering Medical​ Specialties," Wharton School​, September 2003. Part 2 This system may help protect consumers by ens

future doctors receive​ high-quality training.

a percentage of​ GDP, health care spending in the United States has been

growing rapidly

In terms of comparisons in health care outcomes across​ countries, the​ economist's observation

has relevance because health care outcomes are affected by many different factors and can be difficult to measure.

Consider an organization dedicated to helping​ low-income people. The members of the organization are discussing alternative methods of aiding the​ poor, when a proponent of one particular method​ asserts: ​"If even one poor person is helped with this​ method, then all our time and money would have been worth​ it." If you were a member of the​ organization, what reply best represents clear economic​ thinking? This attitude

ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

What is a production​ function? A​ firm's production function is best described as Part 2

illustrating the relationship between inputs and the maximum amounts of output that the firm can produce with these inputs.

The law of diminishing returns applies

in the short run

Late in the​ semester, a friend tells​ you, ​"I was going to drop my psychology course so I could concentrate on my other​ courses, but I had already put so much time into the course I decided not to drop​ it." Is your​ friend's reasoning correct or​ incorrect? Part 2 Your​ friend's reasoning is

incorrect

en and Jerry are managers at the​ company, and they have this​ discussion: Ben​: We should produce​ 4,000 lamps per month because that will minimize our average costs. Jerry​: But​ shouldn't we maximize profits rather than minimize​ costs? To maximize​ profits, don't we need to take demand into​ account? Ben​: ​Don't worry. By minimizing average​ costs, we will be maximizing profits. Demand will determine how high the price we can charge will​ be, but it​ won't affect our​ profit-maximizing quantity. Part 4 Evaluate the discussion between the two managers. Part 5 ​Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is Part 6

incorrect because profits are instead maximized at the quantity where marginal cost equals marginal​ revenue, which may be different since marginal revenue depends on consumer demand.

improvements in technology usually result in lower costs of production or new and improved consumer goods and services. Part 2 Assume that an improvement in medical technology results in an increase in life expectancy for people 65 years of age and older. This technological advance is likely to

increase expenditures on health care because aging people require increasing levels of health care.

It's possible to buy many books either as​ print, or​ physical, books or as digital books. a. If the price of digital books​ rises, what would you expect to happen to the demand for print​ books? If many book readers consider print books and digital books to be​ substitutes, then an increase in the price of digital books will

increase the demand for print​ books, shifting the demand curve for print books to the right.

As part of his 2016 federal budget​ proposals, President Obama recommended significant changes to the federal student loan programs. Given your answer to the previous​ question, do you think President Obama was likely to have recommended changes that would​ increase, or changes that would​ decrease, the payments that borrowers would have to​ make? President Obama was likely to have recommended changes that would

increase the payments that borrowers would have to make so that the government would be paid back sooner.

This is

not an equitable way to distribute the tickets because some students who really want them may be unable to go and get them

In​ 2011, President Barack Obama convinced Congress to pass these changes to the federal student loan​ programs: ​(1) Payments were capped at 10 percent of a​ borrower's discretionary​ income; ​(2) any unpaid balances for people working for the government or in the​ non-profit sector were forgiven after 10​ years; and ​(3) people working in the private sector had their loans forgiven after 20 years. ​Sources: Allesandra​ Lanza, "What​ Obama's 2016 Budget Proposal Means for Student​ Borrowers," usnews.com​, February​ 11, 2015; and Josh​ Mitchell, "Student-Debt Forgiveness Plans​ Skyrocket, Raising Fears Over​ Costs, Higher​ Tuition," Wall Street Journal​, April​ 22, 2014. Part 2 As a result of these changes in the federal student loan​ program, you would predict that the total amount​ students' borrowed under these programs would have

increased because the terms of repayment have been made more generous.

Teachers often wish that students came to class prepared having read the upcoming material. A teacher could design the grading system to motivate students to come to class prepared by XXX the grade weight assigned to being prepared.

increasing

When the marginal product of labor is greater than the average product of​ labor, then the average product of labor must be

increasing

Improvements in the health of the average American caused the U.S. production possibilities frontier to shift out primarily by

increasing the​ country's effective workforce.

Which of the following is most likely to be a fixed cost for a​ farmer?

insurance premiums on property

Life expectancy in the United States declined between 1916 and 1918. This decline likely caused the U.S. production possibilities frontier to shift inward because it signified a resource base made smaller by a less effective workforce .

inward workforce

The figure illustrates market demand for a monopoly along with its average total cost​ (ATC) curve. Part 2 Is the monopoly a natural monopoly? Part 3 The firm

is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms.

while equity means that goods are distributed in a way that

is fair

The Affordable Care Act​ (ACA) (7.4)

is health care legislation passed by Congress and signed into law by President Barack Obama in 2010.

What is the law of​ demand? The law of demand is the

rule​ that, holding everything else​ constant, when the price of a good​ falls, the quantity demanded will​ increase, and when the price of a good​ rises, the quantity demanded will decrease.

Is it possible that the supply curve for oil also​ shifted? Suppose you were told that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are today. Would this fact help you answer the​ question? Given that managers at oil firms were convinced that oil prices in the future were going to be significantly lower than they are​ today,

it is likely that the supply curve for oil shifted to the right because firms will be more likely to increase the supply of oil today when prices are higher.

A monopolistically competitive firm in a​ long-run equilibrium produces where

its demand curve is tangent to its average total cost curve.

Which of the following is an example of a way in which health insurance companies have dealt with the problem of adverse​ selection?

limiting insurance coverage on​ pre-existing conditions

A business analyst gives the following advice to managers of​ firms: "If you continue to swim in a sea of​ sameness, you are going to​ drown." ​Source: Steve​ Dennis, "Macy's and JC Penney Earnings Offer Evidence of the Stall at the​ Mall; Here's How They Can Get on​ Track," forbes.com, February​ 28, 2019. Briefly explain what he means. Firms that fail to continually differentiate their products from the products of competitors will be unable to earn an economic profit in the (13.3)

long run

From an economic​ perspective,

losing the trademark on its Monopoly game would have cost Hasbro millions of dollars per year as other companies could have begun to market similar games using the same title.

Ten years from​ now, JAB's economic profit from selling​ cold-brewed coffee would be XXX It is today

lower than

The GPA you earn in a particular semester is your​ ________ GPA, and your cumulative GPA for all completed semesters is your​ ________ GPA.

marginal; average

Why was De Beers worried that people might resell their old​ diamonds? If people resell their old​ diamonds, then

market competition would​ increase, decreasing market prices.

The Food and Drug Administration​ (FDA) is part of federal​ government's Department of Health and Human Services. Among its other​ functions, the FDA evaluates the safety and effectiveness of drugs and medical devices. FDA approval had to be granted before OraSure was allowed to market its home HIV test. In a centrally planned​ economy, the government decides how resources will be allocated. In a market​ economy, the decisions of households and firms interacting in markets allocate resources. Part 2 The regulation of the production and sale of drugs and medical devices in the United States is an example of how resources are allocated in a

market economy because the drug​ development, and the resources allocated to the​ development, occurs in the market.

Efficiency means that goods are distributed in a way that

maximizes benefits to society

The success of health care systems of different countries in extending the lives of the very sick

may be measured by examining​ illness/disease mortality ratios

A firm operating in a market economy has a strong incentive to be productively efficient and allocatively efficient because the former enables it to

minimize production costs

The more cell phones in​ use, the more valuable they become to consumers. This is an example of

network externalities.

A column on bloomberg.com argues that natural gas pipelines​ "are a natural monopoly. Almost all of the costs are the fixed ones involved in building​ them; as long as​ there's spare​ capacity, the incremental expense of moving an extra cubic meter of gas down the line is​ infinitesimal." ​Source: David​ Fickling, "China's Pipeline Champion Misses an​ Opportunity," bloomberg.com​, June​ 12, 2018. Briefly explain why the cost structure of pipelines as the columnist describes it makes pipelines a natural monopoly. Be sure to define​ "natural monopoly" in your answer. A natural monopoly arises when

one firm can supply the entire market at a lower average total cost than can two or more firms.

Refer to the graph. From the origin up until point ​A, From point A up until point ​B,

output increases at an increasing rate. output increases at a decreasing rate.

Which of the following terms refers to what occurs when a person gets a vaccination against a disease and that action reduces the chances that other people will contract that​ disease?

positive externality

n an opinion column in the Washington Post​, Daniel Morgan of the University of​ Maryland's School of Medicine described the result of a study he carried out with​ colleagues: "We found that nearly 90 percent of the patients received at least one unnecessary​ [medical] test and​ that, overall, nearly​ one-third of all the tests were​ superfluous." ​Source: Daniel​ Morgan, "What the Tests​ Don't Show," Washington Post​, October​ 5, 2018. Part 2 Are there features of the U.S. health care system that might be encouraging this​ behavior? The article is referring to the

prevalence of patient health insurance in the United States that results in the​ principal-agent problem.

The difference between a change in supply and a change in the quantity supplied is that the latter is

produced by a change in the product's own price while the former is caused by a variety of variables other than the product's price.

What does McCraw mean by​ "when their innovations​ dwindle"? Innovations dwindle when a firm

produces fewer new products.

The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs is called the

production function

n article in the Los Angeles Times describes a healthy​ 23-year old woman who has decided not to buy health insurance as​ "exactly the type of person insurance plans that states and the federal government are counting on to make health reform​ work." ​Source: Anna​ Gorman, "Affordable Care​ Act's Challenge: Getting Young Adults​ Enrolled," Los Angeles Times​, June​ 2, 2013. Young healthy people must be forced to participate in health reform because they are needed to

provide a subsidy to older sicker people.

Criticisms of the ACA made by economists and policymakers who believe that the federal government should have a larger role in the health care system include all of the following except Part 2

rationing will be required under ACA unless government has total control of the system.

Two health care analysts argue that in the United​ States, ​"we have arrived at a moment where we are making little headway in defeating various kinds of diseases.​ Instead, our main achievements today consist of devising ways to marginally extend the lives of the very​ sick." ​Source: David​ Brooks, "Death and​ Budgets," New York Times​, July​ 14, 2011. Part 2 Should​ "marginally extend[ing] the lives of the very​ sick" be an important goal of a health care system​ and, if​ not, what other goals should have a higher​ priority? While this normative question has no definite correct or incorrect​ answer, it seems reasonable to expect that any health care system​ would, at a minimum and through multiple​ avenues,

reduce human suffering.

How did De​ Beers' strategy affect the demand curve for new​ diamonds? Part 6 The demand for new diamonds has

remained unchanged

Refer to the graph. Suppose initially one firm supplies 30 billion​ kilowatt-hours of electricity. If a second firm enters the market and each firm now supplies 15 billion​ kilowatt-hours of​ electricity, then the average total cost of electricity

rises from​ $0.04 to​ $0.06.

In a graph​ (not shown) of the banana market in the United​ States, the imposition of a tariff on banana imports would Part 4

shift supply​ leftward, increasing equilibrium price and decreasing equilibrium quantity.

What effect does the entry of new firms have on the demand curve of an existing firm in a monopolistically competitive​ market? The entry of new firms cause the demand curve of an existing firm in a monopolistically competitive market to

shift to the left and become more elastic.

A study analyzed the costs to a pharmaceutical firm of developing a prescription drug and receiving government approval. An article in the Wall Street Journal noted that included in the​ firm's costs was​ "the return that could be gained if the money​ [used to develop the​ drug] were invested​ elsewhere." Briefly explain whether you agree that this return should be included in the​ firm's costs. ​Source: Ed​ Silverman, "Can It Really Cost​ $2.6 Billion to Develop a​ Drug?," Wall Street Journal​, November​ 21, 2014. This return

should be included in the​ firm's costs because the opportunity cost of the​ firm's investment is one of the​ firm's implicit production costs.

obel Laureate Robert Fogel of the University of Chicago has​ argued: ​"Expenditures on healthcare are driven by​ demand, which is spurred by income and by advances in biotechnology that make health interventions increasingly​ effective." ​Source: Robert​ Fogel, "Forecasting the Cost of U.S.​ Healthcare," The American​, September​ 3, 2009. Part 2 If Fogel is​ correct, projected increases in health care spending as a percentage of GDP XXX be of concern to policymakers.

should not

In the case of health​ insurance, a lemons problem exists since those more likely to want health insurance are XXX people.

sick

Which of the following have been offered by economists to explain the rapid increase in health care spending in the United​ States? ​(Check all that apply.​)

slow rate of growth of labor productivity in health care. This is the correct answer. B. Distorted economic incentives for consumers and suppliers of health care. Your answer is correct. C. The development of advanced medical technology and new prescription drugs. This is the correct answer. D. An aging U.S. population.

A news story about the rental market for office space in big cities described the market as experiencing a​ "glut" and quoted a real estate broker as​ stating, "We are moving into greater opportunities for​ [office] tenants." ​Source: Keiko​ Morris, "Growing Glut of Office Supply to Pressure Rents Next​ Year," Wall Street Journal​, December​ 18, 2018. Part 2 a. What does the article mean by a​ "glut"? What does a glut imply about the quantity of offices demanded relative to the quantity​ supplied? A glut is another term for a surplus. When a market experiences a​ glut, the quantity supplied is greater than the quantity demanded at the current price. Part 3 b. Is the real estate​ broker's observation that the market for office space was moving in a way that would result in greater opportunities for tenants connected to the fact that there was a glut in the​ market? The glut in the market will

surplus greater than decline lower greater

Why might it be difficult for new leagues to enter the market for professional football in the United​ States? It might be difficult for new entrants to compete with the NFL because

the NFL has control over a key resource—ownership or​ long-term leases on large stadiums in major cities.

What does the​ short-run production function hold​ constant? A​ short-run production function holds constant

the amount of capital.

Natural gas pipelines are a natural monopoly because

the average total cost curve for moving natural gas through a pipeline is still falling at the point where it crosses the demand curve.

Such data can be important in evaluating the effectiveness of a​ country's health care system because

the benefit may be greater than the cost of gathering the data.

The late Nobel Laureate Gary Becker once described how an economist should analyze the demand for​ butter: An economist​ "would want to consider the price of butter and probably the level of​ income, the price of​ margarine, and the size of the population as well. But​ [the economist] would neglect thousands and thousands of other​ variables...." ​Source: Gary​ Becker, Economic Theory​, New​ Brunswick, NJ: Aldine​ Transaction, 2007, p. 5. a. What approach to analyzing demand curves is Becker​ describing?

the ceteris paribus condition

A Federal Reserve publication notes​ "Airlines have high fixed​ costs." ​Source: Scott A. Wolla and Carolyn​ Backus, "The Economics of​ Flying: How Competitive Are the Friendly​ Skies?" Federal Reserve Bank of St​ Louis, Page One Economics​, November 2018. Which of the following is likely to be one of the most important fixed costs for an​ airline?

the cost of its planes

An article in the Wall Street Journal on the recreational vehicle​ (RV) industry listed several factors that led to a larger quantity of RVs​ sold: a. Increasing confidence among households that their future incomes would rise b.​ Low-interest loans from banks to finance the purchase of an RV c. Falling gasoline prices d.​ "The 'glamping' trend that has seen a much younger generation embrace the RV​ lifestyle" ​Source: Spencer​ Jakab, "RV Stocks May Stay in the​ Wilderness," Wall Street Journal​, January​ 1, 2019. Briefly explain whether the following factor caused a movement along the demand curve for RVs or a shift in the demand curve for RVs. If you believe the demand curve​ shifted, explain whether the curve shifted to the right or to the left. The 'glamping' trend that has seen a much younger generation embrace the RV lifestyle As a result of the change in the factor​ above,

the demand curve for RVs shifted to the right.

Macroeconomics is the study of

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Eric​ Topol, a​ cardiologist, has written about the potential for using artificial intelligence​ (AI) in health care. He argues that in the​ future, many patients will have the option to receive treatment in their own​ bedrooms, where they can be monitored by AI rather than be admitted to hospitals. Doing so would reduce the costs of delivering health care​ "because the large staff of doctors and nurses...would not be necessary in the​ future." ​Source: Sumathi​ Reddy, "A​ Doctor's Prescription for More AI in​ Medicine," Wall Street Journal​, March​ 4, 2019. If the U.S. health care system makes greater use of​ AI, what are the implications for the trends shown in the maps in the Apply the Concept? Widely adopting AI in the U.S. health care sector will more likely result in

the employment of fewer workers as some tasks could be automated that are currently carried out by health care workers. If this outcome​ occurs, the trend highlighted in the maps would reverse.

Which of the following rights is given to the holder of a​ patent?

the exclusive right to a new product for a limited period

Refer to the table below. Which of the following costs are implicit​ costs?

the forgone salary and interest

What are the four most important ways a firm becomes a​ monopoly? The four main reasons a firm becomes a monopoly​ are:

the government blocks​ entry, control of a key​ resource, network​ externalities, and economies of scale

Why are the analysts quoted in the article using​ "monopoly" in this​ context? In this​ sense, the analysts mean that

the iOS operating system is a significant barrier to other firms competing with Apple in the smartphone industry.

Economists believe that an activity should be continued up to the point where

the marginal benefit from the activity is equal to the marginal cost.

If the marginal product of labor is falling​, is the marginal cost of production rising or​ falling? Briefly explain. Part 2 If the additional output from each new worker is falling​, Part 3

the marginal cost of that output is rising because the only additional cost to producing more output is the additional wages paid to hire more workers.

The late Thomas McCraw of the Harvard Business School once wrote that​ "when their innovations​ dwindle, firms begin to​ die." ​Source: Thomas K.​ McCraw, Prophet of​ Innovation: Joseph Schumpeter and Creative Destruction​, ​Cambridge, MA: Harvard University​ Press, 2007, p. 181. a. What is an​ innovation?

the practical application of an invention

If the federal government were to require that employer health care plans have deductibles that were no greater than​ $200 per​ year, the employees in these plans would be better off if

the premiums did not increase to offset the lower deductible.

The law of demand is the assertion that

the quantity demanded of a product is inversely related to its price.

A news article on production of oil and natural gas in the Permian Basin of western Texas and New Mexico noted the following two​ facts: i.​ "Shale drillers in the Permian Basin are producing vast amounts of gas as a byproduct of prospecting for​ oil." ii.​ "Gas prices in parts of the prolific region hovered near zero last month and some trades went​ negative, to as low as a negative 25 cents per million British thermal​ units...." ​Source: Rebecca​ Elliott, "In Booming​ Oilfield, Natural Gas Can Be​ Free," Wall Street Journal​, December​ 27, 2018. a. What does it mean for a price to be​ negative? A negative​ 25-cent price means that

the seller has to pay the buyer 25 cents so that the buyer agrees to receive the product.

An increase in the price of a product causes a decrease in quantity demanded because of the income and substitution effects. More​ specifically,

the substitution effect is the decrease in quantity demanded because the product is more expensive relative to other goods and the income effect is the decrease in quantity demanded owing to the decline in​ consumers' purchasing power.

When it comes to assessing how this system affects the financial interests of doctors and the well being of​ consumers, it may be that the former gain more simply because

there are far fewer of​ them, hence each stands to gain much from supply restrictions.

In an opinion column in the Washington Post​, Megan McArdle​ argued, "In​ fact, it's debatable whether the other​ countries' [health​ care] systems get better​ outcomes" than the health care system in the United States. ​Source: Megan​ McArdle, "What's Really Obstructing​ Left-Wing Dreams?" Washington Post​, May​ 7, 2018. Part 2 Why is it difficult to measure health outcomes in a way that allows us to determine which​ country's system provides the best health​ care? It is difficult to measure outcomes like these because

there is no one statistic that measures outcomes like these.

An article in the Economist on evaluating health care outcomes is subtitled​ "To Improve Health​ Care, Governments Need to Use the Right​ Data." Among the data not currently being collected in most​ countries, the article mentions​ "how soon after surgery patients get back to​ work." ​Source: ​ "Measuring Health​ Care," Economist​, February​ 1, 2014. Part 2 Governments do not currently collect such data because

they have no reason to justify the cost of doing so.

Economists assume that people are rational in the sense that

they use all available information as they take actions intended to achieve their goals.

Economists use models (1.3 Economic Models)

to answer questions and analyze issues.

If patents reduce​ competition, why does the federal government grant​ them? Part 2 The federal government grants patents Part 3

to encourage firms to spend money on research to create new products.

Economic data is used

to test models.

President Obama and his advisers have failed to correctly forecast the effects of the 2011 changes to the loan programs because they

underestimated the number of students who would take advantage of the programs.

William Germano previously served as the vice president and publishing director at the Routledge publishing company. He once gave the following description of how a publisher might deal with an unexpected increase in the cost of publishing a​ book: ​"It's often asked why the publisher​ can't simply raise the price​ [if costs​ increase]... It's likely that the editor​ [is already]... charging as much as the market will bear. ... In other​ words, you might be willing to pay​ $50.00 for a ... book on the Brooklyn​ Bridge, but if... production costs​ [increase] by 25​ percent, you might think​ $62.50 is too much to​ pay, though that would be what the publisher needs to charge. And indeed the publisher may determine that​ $50.00 is this​ book's ceiling—the most you would pay before deciding to rent a movie​ instead." ​Source: William​ Germano, Getting It​ Published: A Guide to Schol

upward Demand is perfectly elastic. less than maximum profit. This is the correct answer. lower

Any cost that changes as output changes represents a​ firm's A. fixed cost.

variable

Which costs are affected by the level of output​ produced?

variable costs

The following problem is somewhat advanced. Using​ symbols, we can write that the marginal product of labor is equal to ΔQ/ΔL. Marginal cost is equal to ΔTC/ΔQ. Because fixed costs by definition​ don't change, marginal cost is also equal to ΔVC/ΔQ. If Jill​ Johnson's only variable cost is labor​ cost, then her variable cost is just the wage times the quantity of workers​ hired, or w×L. Part 2 If the wage Jill pays is​ constant, then what is ΔVC in terms of w and​ L Use your answer above and the expressions given for the marginal product of labor and the marginal cost of output to find an expression for marginal​ cost, ΔTC/ΔQ​, in terms of the​ wage, w, and the marginal product of​ labor, ΔQ/ΔL. Part 4 Marginal cost equals Use your answer above to determine​ Jill's marginal cost of producing pizzas if the wage is ​$750 per week and the marginal product of labor is 150. The ma

wXDL w/DQ/DL $5 decreases decreases

The great baseball player Ty Cobb was known for being very thrifty. Near the end of his life he was interviewed by a reporter who was surprised to find that Cobb used​ candles, rather than​ electricity, to light his home. From Ty​ Cobb's point of​ view, was the local electric company a​ monopoly? Part 2 For​ Cobb, the local electric company

was not a monopoly because candles were a good substitute for electricity.

Explain why the marginal cost curve intersects the average total cost curve at the level of output where average total cost is at a minimum. Part 2 The marginal cost curve intersects the average total cost curve at the level of output where average total cost is at a minimum because

when the marginal cost of the last unit produced is below the​ average, it pulls the average​ down, and when the marginal cost is above the​ average, it pulls the average up.

Refer to the table below. When do diminishing returns in the production of pizzas​ start?

when the third worker is hired

Suppose that last semester your semester GPA was 1.80 and your resulting cumulative GPA was 2.55. Part 2 ​Next, suppose that this semester your semester GPA will be 2.00. Part 3 If​ so, then your cumulative GPA

will decrease because your​ "marginal" GPA will be below your cumulative GPA.

Some firms offer their employees a health care plan with high​ deductibles, sometimes as much as​ $4,500 per year. Part 2 With​ high-deductible plans, people

will hesitate to go to a doctor to avoid the cost outlay.

If the federal government were to require that employer health care plans have deductibles that were no greater than​ $200 per​ year, the employers with these plans would be

worse off because the​ premium, and their share of the​ premium, would be higher.

Should Congress and the president be concerned about the growth of Medicare​ spending?

​Yes, since most​ observers/analysts see unrestrained growth in spending as having the potential to undermine the financial health and stability of the government.

What is the difference between zero accounting profit and zero economic​ profit?

zero economic profit includes a​ firm's implicit costs but zero accounting profit does not. Zero economic profit includes a​ firm's opportunity costs but zero accounting profit does not.

EOG, a​ Texas-based producer of oil and​ gas, is called the​ "Apple of​ oil" because of the​ company's history of developing innovative methods to extract energy from shale rock. Using one of​ EOG's innovations, called​ iSteer, the company can navigate through thousands of feet of rock with a drill bit that allows for greater recovery of oil and gas than methods the company previously used. ​Source: Erin​ Ailworth, "Fracking​ 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap​ Oil," Wall Street Journal​, March​ 30, 2017. Briefly explain why economists would consider​ EOG's use of iSteer an example of technological change.

​EOG's use of iSteer enables it to recover more oil and gas with a certain quantity of inputs.

Charles Darrow claimed to have invented and played a game that closely resembles​ Hasbro's Monopoly​ game, decades before​ Hasbro's Monopoly game was introduced. In the legal debate about the right to use the name Monopoly for a​ game, whether or not Professor Anspach is correct matters because

​Hasbro's loss of the trademark on its Monopoly game would have allowed other companies to market similar games using the same title.

Assuming that these statistics are available or could be​ gathered, are they likely to resolve the normative issues in this​ debate?

​No, because normative issues involve value judgments that incorporate an​ individual's full range of​ experiences, beliefs, and emotions.

Is health care actually free to residents of the United​ Kingdom? Briefly explain.

​No, health care is not free because residents of the United Kingdom pay for it through their income taxes.

In​ 2019, Noëlle Santos opened The Lit. Bar bookstore in the Bronx borough of New York City. Her bookstore is the only one located in the​ Bronx, which has a population of about 1.5 million. ​Source: Ginia​ Bellafante, "A​ Bookstore, Finally, Comes to the ​Bronx,"New York Times​, April​ 25, 2019. Should the only bookstore in the​ Bronx, or any other​ city, be considered a​ monopoly?

​No, in the narrow definition of the​ term, The Lit. Bar bookstore would be considered a monopoly only if it had no close substitutes

Can we use this information to be certain whether the equilibrium quantity of coconut oil increased or​ decreased?

​No, the change in the equilibrium quantity depends on the relative shifts of demand and supply. If demand shifts more than​ supply, the equilibrium quantity decreases.

Suppose that competition for software engineers results in Segment.com having to pay them higher salaries. Would the fact that the firm will now face an increased cost of providing its services be an example of negative technological​ change? Briefly explain.

​No, this would not represent technological change because the same output can be produced using the same inputs.

A column by Greg David in ​Crain's New York Business discussed the effect of rising costs on prices charged by New York City restaurants. David argued that higher costs would result in higher prices​ and, "at some​ point, higher prices should reduce​ demand." ​Source: Greg​ David, "New York Area Restaurants Are Hiking​ Prices," crainsnewyork.com, May​ 2, 2018. Is he correct that if the price of a product​ increases, the demand for the product is​ reduced?

​No: an increase in the price of a product will cause a decrease in the quantity demanded of that​ product, not a decrease in demand.

Sally looks at her college transcript and says to​ you, ​"How is this​ possible? My grade point average​ (GPA) for this​ semester's courses is higher than my GPA for last​ semester's courses, but my cumulative GPA still went down from last semester to this​ semester." Part 2 Explain to Sally how this is possible.

​Sally's GPA for this semester is lower than her cumulative GPA.

An article in the New York Times​ observed, "American doctors often rail against the​ country's medical malpractice​ system, which they say forces them to order unnecessary tests and procedures to protect themselves if a patient sues​ them." ​Source: Margot​ Sanger-Katz, "A Fear of Lawsuits Really Does Seem to Result in Extra Medical​ Tests," New York Times​, July​ 23, 2018. Part 2 Is there another economic explanation—apart from fear of lawsuits—for why doctors may end up ordering unnecessary tests and other medical​ procedures?

​Yes, since doctors themselves largely conduct the tests and perform the​ procedures, they benefit by enhancing the revenue of their practices.

According to a news​ article, "The health benefits of coconut oil have been challenged by the American Heart Association and other organizations in recent years and that has hurt​ demand." The article also noted that more plantations growing coconuts had​ "sprung up in the​ [Philippines] and​ elsewhere." ​Source: Lucy​ Craymer, "Trouble in​ Paradise: Coconut Oil Prices Are Slipping and​ Sliding," Wall Street Journal​, January​ 6, 2019. a. Can we use this information to be certain whether the equilibrium price of coconut oil increased or​ decreased?

​Yes, the equilibrium price unambiguously decreased.

With a​ downward-sloping demand​ curve, average revenue is equal to price Part 2

​actually, average revenue is always equal to​ price, whether demand is downward sloping or not.

College football​ attendance, especially student​ attendance, has been on the decline. In​ 2017, home attendance at major college football games declined for the seventh consecutive year and was the lowest since 2000. The opportunity cost of engaging in an activity is the value of the best alternative that must be given up in order to engage in that activity. ​Source: Dennis​ Dodd, "College Football Heads in Wrong Direction with Largest Attendance Drop in 34​ Years," cbssports.com, February​ 13, 2018. Your opportunity cost of attending a game compared with the opportunity cost facing a college student 17 years ago is

​higher, because more games are televised today.

15.2Where Do Monopolies Come From? Question 6, End of Chapter 2.6 3 correct Points: 0 of 1 Close Question content area Part 1 A column in the Washington Post argues that​ "network externalities turn market forces on their​ head." Consider two new products—product A and product B—neither of which receives patent protection. Assume that there are no network externalities when consumers use product​ A, whereas there are very large network externalities when consumers use product B. ​Source: Daniel W.​ Drezner, "The Best Work on Political Economy in​ 2018," Washington Post​, December​ 31, 2018. Briefly explain how market forces will determine the level of competition in equilibrium in industry A and in industry B. We would expect​ that, in​ equilibrium, the market for product A will be​ _______ competitive than the market for product B. This is because​ __________.

​more; the very large network externalities in market B will make it difficult for new firms to enter the market