Microeconomics: Principles & Policy
14th Edition
ISBN: 9781337794992
Author: William J. Baumol, Alan S. Blinder, John L. Solow
Publisher: Cengage Learning
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Classify the following goods as normal or inferior and provide a justification. (It might be easiest to create a table in Microsoft Excel and put the phrase in one column while the answer goes in the next column.)
used cars (as opposed to new cars)
home remodeling (versus doing nothing)
vacation planning services (versus doing the planning oneself)
new clothes (as opposed to used clothes)
canned vegetables (as opposed to fresh vegetables)
Consider a two-city (A and B) regional economy where each city operates on the negatively sloped portion of its utility curve. In the initial equilibrium, the two cities are identical. Then air pollution (lead emissions) in city B decreases the brain power and productivity of workers in the city by 20 percent. Illustrate the effects of lead emissions on the regional equilibrium, indicating the direction of changes in city size (the number of workers) and regional utility.
You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions:
Control Variable
(Z)
Total Benefits
B(Z)
Total Cost
C(Z)
Net Benefits
N(Z)
Marginal Benefit
MB(Z)
Marginal Cost
MC(Z)
Marginal Net Benefit
MNB(Z)
0
0
0
1
200
10
2
380
30
3
540
60
4
680
100
5
800
150
6
900
210
7
980
280
8
1040
360
9
1080
450
10
1100
550
A. Graph the total cost and total benefit curves.B. On another graph, plot the points for the marginal cost, marginal benefit, and marginal net benefit.C. Show how the two…
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- You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions: Control Variable (Z) Total Benefits B(Z) Total Cost C(Z) Net Benefits N(Z) Marginal Benefit MB(Z) Marginal Cost MC(Z) Marginal Net Benefit MNB(Z) 0 0 0 1 200 10 2 380 30 3 540 60 4 680 100 5 800 150 6 900 210 7 980 280 8 1040 360 9 1080 450 10 1100 550 a. How many units (Z) maximize net benefits?b. What is the relationship between marginal benefits and marginal costs at the level of Z you determined above?c. Graph the total…arrow_forwardThe scenarios each illustrate the principle of economics. Match each scenarios with the principle that best fits it You are currently in a labeling module. Turn off browse mode or quick nav, Tab to items, Space or Enter to pick up, Tab to move, Space or Enter to drop. On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store and buying a flat-screen TV at another store and buying one means he will lose the ability to purchase the other.An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. It compares how much adding another worker will improve the product with the additional cost.To entice students to keep themselves up to date with economic current events, an instructor offers extra credit to students for participating in an online discussion forum, and this sparks a lively debate about environmental policy.…arrow_forwardThe dung beetle gets utility from consuming mud balls which are made out of mud and dung. Both inputs are measured in grams and perfectly divisible. Its utility from balls which contain m grams of mud and d grams of dung is u(m, d) = md. For reasons to do with the structural integrity of the balls, however, it cannot combine the two ingredients in very different quantities. The ratio of mud and dung it uses must fall between 1 : 2 and 2 : 1. Excess amounts of either ingredient are discarded at no cost to the dung beetle. (a) How much utility does the beetle get from the following bundles of mud and dung, (m, d)? i. (2,16). ii. (4,8). iii. (4,16). iv. (6,16/3). (b) Draw an indifference curve between mud and dung that represent the preferences of the dung beetle and gives the beetle a utility level of 32.arrow_forward
- Which statement best explains how total utility affects production? A company should produce enough so that the revenue from the extra units exceeds the extra costs to produce them. A company should make just enough of a product so that the consumer is left wanting more. A company should stop producing when marginal returns begin to increase. A company should make as much of a product as possible in order to dominate the market.arrow_forwardWhich of the following statements is TRUE? A budget constraint illustrates increasing opportunity cost, while a production possibility frontier illustrates constant opportunity cost A budget constraint shows the limits on an individual’s consumption, while a production possibility frontier shows the limits on an economy’s production. A budget constraint shows the limits on an individual’s consumption, while a production possibility frontier shows the limits on a business’ consumption or expenses. A budget constraint is a straight line, while a production possibility frontier has a constant slopearrow_forwardBecause one’s productivity in the workplace is likely to be affected by one’s health, investment in health could increase earnings to the extent that one might spend money on health care without reducing his or her consumption of other goods. True or Falsearrow_forward
- Two alternative programs to save 50 more lives per year entail providing more cardiac intensive care facilities and redesigning dangerous highway interchanges. The price of a new cardiac intensive care unit is $500,000, and the price of redesigning and renovating a highway interchange is $1 million. One combination of the two programs that can save 500 lives is five cardiac units and three highway exit renovations. a.) Is the mix involving five cardiac units and three highway exit renovations cost-effective? b.) Assuming that the marginal products of both programs decline, what needs to be done to achieve the cost-effective mix of programs?arrow_forwardWhich of the following statements is most true? You will purchase 2 slices of pizza because the Marginal Cost of the third slice exceeds the Marginal Benefit. You will purchase 2 slices of pizza because the Marginal Cost of the third slice exceeds the Marginal Benefit. You will purchase 3 slices of pizza because the Marginal Cost of the fourth slice exceeds the Marginal Cost. You will purchase 3 slices of pizza because the Marginal Cost of the fourth slice exceeds the Marginal Cost. You will purchase 2 slices of pizza because the Marginal Benefit of the third slice exceeds the Marginal Cost. You will purchase 2 slices of pizza because the Marginal Benefit of the third slice exceeds the Marginal Cost. You will purchase 1 slice of pizza because the Marginal Benefit of the second slice exceeds the Marginal Costarrow_forwardBecause one’s productivity in the workplace is likely to be affected by one’s health, investment in health could increase earnings to the extent that one might spend money on health care without reducing his or her consumption of other goods.arrow_forward
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