Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 34, Problem 23RQ
Does international trade, taken as a whole, increase the total number of jobs, decrease the total number of jobs, or leave the total number of jobs about the same?
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Atlas Games is considering selling a new educational board game that is designed to introduce teenagers (ages 13 to 18) to the complexities of taxes, corporate takeovers, and market manipulation. The company must decide quickly whether to proceed with selling this game. Production of this game will require an investment of $6 million to complete the game's design, marketing, and setup for production, and an additional production cost of $8 per game.
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Consider that two major airlines, Delta Air Lines and American Airlines, operate on a competitive route from New
York to Los Angeles. Both airlines offer similar services, have comparable cost structures, and regularly interact in
the market where they can choose to set either high fares (cooperative pricing) or low fares (competitive pricing).
Each airline's profit for this route depends on the pricing strategy chosen by both airlines as described by the
following payoff matrix:
Strategy
High Fare
American Airlines
High Fare
($ million)
Low Fare
($ million)
(10, 10)
(2,40)
Delta Air Lines
($ million)
Low Fare
($ million)
(40, 2)
(8,8)
Now consider that the airlines compete repeatedly and they both use a trigger strategy to maintain high fares over
time. Specifically, with this strategy,each airline agrees to set high fares as long as the other airline does the
same. However, if any airline undercuts by setting a low fare, the other responds by setting low fares indefinitely
as…
Consider that two major airlines, Delta Air Lines and American Airlines, operate on a competitive route from New
York to Los Angeles. Both airlines offer similar services, have comparable cost structures, and regularly interact in
the market where they can choose to set either high fares (cooperative pricing) or low fares (competitive pricing).
Each airline's profit for this route depends on the pricing strategy chosen by both airlines as described by the
following payoff matrix:
Strategy
High Fare
American Airlines
High Fare
($ million)
Low Fare
($ million)
(10, 10)
Delta Air Lines
($ million)
Low Fare
($ million)
(2,40)
(40, 2)
(8,8)
Now consider that the airlines compete repeatedly and they both use a trigger strategy to maintain high fares over
time. Specifically, with this strategy,each airline agrees to set high fares as long as the other airline does the
same. However, if any airline undercuts by setting a low fare, the other responds by setting low fares indefinitely
as…
Chapter 34 Solutions
Principles of Economics 2e
Ch. 34 - Explain how a tariff reduction causes an Increase...Ch. 34 - Explain how a subsidy on agricultural goods like...Ch. 34 - Explain how trade barriers save jobs in protected...Ch. 34 - Explain how trade barriers raise wages in...Ch. 34 - How does international trade affect working...Ch. 34 - Do the jobs for workers in low-income countries...Ch. 34 - How do trade barriers affect the average Income...Ch. 34 - How does the cost of saving jobs in protected...Ch. 34 - Explain how predatory pricing could be a...Ch. 34 - Why do low-income countries like Brazil, Egypt, or...
Ch. 34 - Explain the logic behind the race to the bottom...Ch. 34 - What are the conditions under which a country may...Ch. 34 - Why is the national security argument not...Ch. 34 - Assume a perfectly competitive market and the...Ch. 34 - What is the difference between a free trade...Ch. 34 - Why would countries promote protectionist laws,...Ch. 34 - What might account for the dramatic increase in...Ch. 34 - How does competition, whether domestic or foreign,...Ch. 34 - What are the gains from competition?Ch. 34 - Who does protectionism protect? From what does it...Ch. 34 - Name and define three policy tools for enacting...Ch. 34 - How does protectionism affect the price of the...Ch. 34 - Does international trade, taken as a whole,...Ch. 34 - Is international trade likely to have roughly the...Ch. 34 - How is international trade, taken as a whole,...Ch. 34 - Is international trade likely to have about the...Ch. 34 - What are main reasons for protecting infant...Ch. 34 - What is dumping? Why does prohibiting it often...Ch. 34 - What is the race to the bottom scenario?Ch. 34 - Do the rules of international trade require that...Ch. 34 - What is the national interest argument for...Ch. 34 - Name several of the international treaties where...Ch. 34 - What is the general trend of trade barriers over...Ch. 34 - If opening up to free trade would benefit a...Ch. 34 - Who gains and who loses from trade?Ch. 34 - Why is trade a good thing if some people lose?Ch. 34 - What are some ways that governments can help...Ch. 34 - Show graphically that for any tariff, there is an...Ch. 34 - From the Work It Out Effects of Trade Barriers,...Ch. 34 - If trade barriers hurt the average worker in an...Ch. 34 - Why do you think labor standards and working...Ch. 34 - How would direct subsidies to key industries be...Ch. 34 - How can governments identify good candidates for...Ch. 34 - Microeconomic theory argues that it is...Ch. 34 - How do you think Americans would feel if other...Ch. 34 - Is it legitimate to impose higher safety standards...Ch. 34 - Why might the unsafe consumer products argument be...Ch. 34 - Why might a tax on domestic consumption of...Ch. 34 - Why do you think that the GAIT rounds and, more...Ch. 34 - An economic union requires giving up some...Ch. 34 - What are some examples of innovative products that...Ch. 34 - In principle, the benefits of international trade...Ch. 34 - Economists sometimes say that protectionism is the...Ch. 34 - Trade has income distribution effects. For...Ch. 34 - Assume two countries, Thailand (T) and Japan (J),...Ch. 34 - You have just been put in charge of trade policy...Ch. 34 - The country of Pepperland exports steel to the...
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- Not use ai pleasearrow_forwardIf player 2 charges $12 per widget, what price would player 1 charge in response? Player 2 $10 $12 Player 1 $10 $40,000 π₁ = $80,000 #₂ = $40,000 π₂ = $20,000 $12 π, $20,000 π₁ = $60,000 = $80,000 π₂ = $60,000 $10 $12 Cannot be determined.arrow_forwardnot use ai pleasearrow_forward
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