Economics习题答案 (Seventh Editionby, Michael Parkin)
C H A P T E R 1
1.The opportunity cost of the extra 10 points is the movie forgone when you stayed home to study.
3.The opportunity cost of going to school is $9,600 of goods and services.
The opportunity cost of going to school this summer is the highest-valued activity that you will give up so that you can go to summer school. In going to summer school,you will forgo all the goods and services that you could have bought with the income from your summer job ($6,000) plus the expenditure on tuition ($2,000), text-books ($200), and living expenses ($1,400).
5.No, parking at this mall is not free. Yes, you did impose a cost on Harry.
Finding a parking space takes about 30 minutes, so you incur an opportunity cost when you park your car. The opportunity cost is the highest-valued activity that you forgo by spending 30 minutes parking your car. If you would have spent those 30 minutes studying, then the opportunity cost of parking at this mall is 30 minutes of studying.
The cost that you imposed on Harry is the additional 30minutes that Harry will have to spend searching for a parking space.
A P P E N D I X T O C H A P T E R 1
1a.T o make a time-series graph, plot the year on the x -axis
and the inflation rate on the y -axis. The graph will be a line joining all the points.
1b.(i) 1991 (ii) 1998 (iii) 1995, 1996, 1999, 2000 (iv) 1992,
1994, 1997, 1998, 2001 (v) 2000 (vi) 1992
1c.Inflation has had a fairly flat trend through these years.
The line is close to horizontal.
3.T o make a scatter diagram, plot the inflation rate on the x -axis and the interest rate on the y -axis. The graph will be a set of dots. The pattern made by the dots tells us that as the inflation rate increases, the interest rate usually increases.5a.T o make a graph that shows the relationship between x
and y , plot x on the x -axis and y on the y -axis. The rela-
tionship is positive because x and y move in the same direction: As x increases, y increases.
5b.
The slope increases as x increases. Slope is equal to the change in y divided by the change in x as we move along the curve. When x increases from1 to 2 (a change of 1), y increases from 1 to 4 (a change of 3), so the slope is 3. But when x increases from 4 to 5 (a change of 1), y increases from 16 to 25 (a change of 9), so the slope is 9.
5c.
The taller the building, the bigger is the cost of building it. The higher the unemployment rate, the higher is the crime rate. The longer the flight, the larger is the amount of fuel used.
7.
The slope equals 8.
The slope of the curve at the point where x is 4 is equal to the slope of the tangent to the curve at that point. Plot the points of the relationship and then draw a nice smooth curve through those points. Now draw the tangent line at the point where x is 4 and y is 16. Now calculate the slope of this tangent line. T o do this, you must find another point on the tangent. The tangent line will cut the x -axis at 2, so another point is x equals 2 and y equals 0. Slope equals rise/run. The rise is 16 and the run is 2, so the slope is 8.9.
The slope is 7.
The slope of the relationship across the arc when x
increases from 3 to 4 is equal to the slope of the straight line joining the points on the curve at x equals 3 and x equals 4. In the graph, draw this straight line. When x increases from 3 to 4, y increases from 9 to 16. Slope
equals rise/run. The rise is 7 (16 minus 9) and the run is 1(4 minus 3), so the slope across the arc is 7.11.
The slope is ?5/4.
The curve is a straight line, so its slope is the same at all points on the curve. Slope equals the change in the vari-able on the y -axis divided by the change in the variable on the x -axis. T o calculate the slope, you must select two points on the line. One point is at 10 on the y -axis and 0on the x -axis, and another is at 8 on the x -axis and 0 on the y -axis. The change in y from 10 to 0 is associated with the change in x from 0 to 8. Therefore the slope of the curve equals ?10/8, which equals ?5/4.
13a.
The slope at point a is ?2, and the slope at point b is ?0.75.
T o calculate the slope at a point on a curved line, draw the tangent to the line at the point. Then find a second point on the tangent and calculate the slope of the tangent.The tangent at point a cuts the y -axis at 10. The slope of the tangent equals the change in y divided by the change in x . The change in y equals 4 (10 minus 6) and the
change in x equals ?2 (0 minus 2). The slope at point a is 4/?2, which equals ?2.
Similarly, the slope at point b is ?0.75. The tangent at point b cuts the x -axis at 8. The change in y equals 1.5,and the change in x equals ?2. The slope at point b is ?0.75.
13b.
The slope across the arc AB is ?1.125.
The slope across an arc AB equals the change in y , which is
1
S o l u t i o n s t o O d d -n u m b e r e d P r o b l e m s
PARKIN
ECONOMICS
4.5 (6.0 minus 1.5) divided by the change in x, which
equals ?4 (2 minus 6). The slope across the arc AB equals
4.5/?4, which is ?1.12
5.
15a.The relationship is a set of curves, one for each different temperature.
T o draw a graph of the relationship between the price and
the number of rides, keep the temperature at 50°F and
plot the data in that column against the price. The curve
that you draw is the relationship between price and num-
ber of rides when the temperature is 50°F. Now repeat the
exercise but keep the temperature at 70°F. Then repeat the
exercise but keep the temperature at 90°F.
15b.The relationship is a set of curves, one for each different price.
T o draw a graph of the relationship between the tempera-
ture and the number of rides, keep the price at $5.00 a
ride and plot the data in that row against the temperature.
The curve shows the relationship between temperature
and the number of rides when the price is $5.00 a ride.
Now repeat the exercise but keep the price at $10.00 a
ride. Repeat the exercise again and keep the price at
$15.00 a ride and then at $20.00 a ride.
15c.The relationship is a set of curves, one for each different number of rides.
T o draw a graph of the relationship between the tempera-
ture and price, keep the number of rides at 32 and plot
the data along the diagonal in the table. The curve is the
relationship between temperature and price at which 32
rides are taken. Now repeat the exercise and keep the
number of rides at 27. Repeat the exercise again and keep
the number of rides at 18 and then at 40.
C H A P T E R2
1a.Wendell’s opportunity cost of an hour of tennis is 2.5 per-centage points.
When Wendell increases the time he plays tennis from 4
hours to 6 hours, his grade in economics falls from 75 per-
cent to 70 percent. His opportunity cost of 2 hours of ten-
nis is 5 percentage points. So his opportunity cost of 1
hour of tennis is 2.5 percentage points.
1b.Wendell’s opportunity cost of an hour of tennis is 5 per-centage points.
When Wendell increases the time he plays tennis from 6
hours to 8 hours, his grade in economics falls from 70 per-
cent to 60 percent. His opportunity cost of 2 hours of ten-
nis is 10 percentage points. So his opportunity cost of 1
hour of tennis is 5 percentage points.
3.Wendell’s opportunity cost of playing tennis increases as
he spends more time on tennis.
When Wendell increases the time he plays tennis from 4
hours to 6 hours, his opportunity cost is 5 percentage
points. But when he increases the time he plays tennis
from 6 hours to 8 hours, his opportunity cost is 10 per-
centage points. Wendell’s opportunity cost of playing ten-
nis increases as he spends more time on tennis.
5a. Wendell’s grade in economics is 66 percent.
When Wendell increases the time he plays tennis from 4
hours to 6 hours, his opportunity cost of the additional 2
hours of tennis is 5 percentage points. So his opportunity
cost of an additional 1 hour is 2.5 percentage points. So
plot this opportunity cost at 5 hours on the graph (the
midpoint between 4 and 6 hours). When he increases the
time he plays tennis from 6 hours to 8 hours, his opportu-nity cost of the additional 2 hours of tennis is 10 percent-
age points. So his opportunity cost of the additional 1hour of tennis is 5 percentage points. So plot this opportunity
cost at 7 hours on the graph (the midpoint between 6 and
8 hours). When he increases the time he plays tennis from
8 hours to 10 hours, his opportunity cost of the additional
2 hours of tennis is 20 percentage points. So his opportu-
nity cost of the additional 1hour of tennis is 10 percentage points. So plot this opportunity cost at 9 hours on the
graph (the midpoint between 8 and 10 hours). Wendell’s
opportunity cost of playing tennis increases as he spends
more time on tennis. Join up the points plotted. This curve is Wendell’s marginal cost of a additional hour of tennis.
Wendell uses his time efficiently if he plays tennis for 7
hours a week—marginal benefit from tennis equals its
marginal cost. Wendell’s marginal benefit is 5 percentage
points and his marginal cost is 5 percentage points. When Wendell plays 7 hours of tennis, his grade in economics
(from his PPF) is 65 percent.
5b. If Wendell studied for enough hours to get a higher grade, he would have fewer hours to play tennis. Wendell’s mar-
ginal benefit from tennis would be greater than his mar-
ginal cost, so he would be more efficient (better off) if he
played more hours of tennis and took a lower grade.
7a.Sunland’s PPF is a straight line.
T o make a graph of Sunland’s PPF measure the quantity of one good on the x-axis and the quantity of the other good on the y-axis. Then plot the quantities in each row of the
table and join up the points.
7b.The opportunity cost of 1 pound of food is 1/2 gallon of sunscreen.
The opportunity cost of the first 100 pounds of food is 50 gallons of sunscreen. T o find the opportunity cost of the
first 100 pounds of food, increase the quantity of food
from 0 pounds to 100 pounds. In doing so, Sunland’s pro-duction of sunscreen decreases from 150 gallons to 100
gallons. The opportunity cost of the first 100 pounds of
food is 50 gallons of sunscreen. Similarly, the opportunity costs of producing the second 100 pounds and the third
100 pounds of food are 50 gallons of sunscreen.
The opportunity cost of 1 gallon of sunscreen is 2 pounds of food. The opportunity cost of producing the first 50
gallons of sunscreen is 100 pounds of food. T o calculate
this opportunity cost, increase the quantity of sunscreen
from 0 gallons to 50 gallons. Sunland’s production of food decreases from 300 pounds to 200 pounds. Similarly, the
opportunity cost of producing the second 50 gallons and
the third 50 gallons of sunscreen are 100 pounds of food. 9a.The marginal benefit curve slopes downward.
T o draw the marginal benefit from sunscreen, plot the
quantity of sunscreen on the x-axis and the willingness to
2S OLUTIONS TO O DD-N UMBERED P ROBLEMS
pay for sunscreen (that is, the number of pounds of food
that they are willing to give up to get a gallon of sun-
screen) on the y-axis.
9b. The efficient quantity is 75 gallons a month.
The efficient quantity to produce is such that the mar-
ginal benefit from the last gallon equals the opportunity
cost of producing it. The opportunity cost of a gallon of
sunscreen is 2 pounds of food. The marginal benefit of
the 75th gallon of sunscreen is 2 pounds of food. And
the marginal cost of the 75th gallon of sunscreen is 2
pounds of food.
Busyland’s opportunity cost of a pound of food is 2 gal-
lons of sunscreen, and its opportunity cost of a gallon of
sunscreen is 1/2 pound of food.
When Busyland increases the food it produces by 50
pounds a month, it produces 100 gallons of sunscreen less.
The opportunity cost of 1 pound of food is 2 gallons of
sunscreen. Similarly, when Busyland increases the sun-
screen it produces by 100 gallons a month, it produces 50
pounds of food less. The opportunity cost of 1 gallon of
sunscreen is 1/2 pound of food.
11.Busyland’s opportunity cost of a pound of food is 2 gal-
lons of sunscreen, and its opportunity cost of a gallon of
sunscreen is 0.5 pound of food.
When Busyland increases the food it produces by 50
pounds a month, it produces 100 gallons of sunscreen less.
The opportunity cost of 1 pound of food is 2 gallons of
sunscreen. Similarly, when Busyland increases the sun-
screen it produces by 100 gallons a month, it produces 50
pounds of food less. The opportunity cost of 1 gallon of
sunscreen is 0.5 pound of food.
13a.Sunland sells food and buys sunscreen.
Sunland sells the good in which it has a comparative advan-
tage and buys the other good from Busyland. Sunland’s
opportunity cost of 1 pound of food is 1/2 gallon of sun-
screen, while Busyland’s opportunity cost of 1 pound of food
is 2 gallons of sunscreen. Sunland’s opportunity cost of food
is less than Busyland’s, so Sunland has a comparative advan-
tage in producing food.
Sunland’s opportunity cost of 1 gallon of sunscreen is 2
pounds of food, while Busyland’s opportunity cost of 1 gal-
lon of sunscreen is 1/2 pound of food. Busyland’s opportu-
nity cost of sunscreen is less than Sunland’s, so Busyland has
a comparative advantage in producing sunscreen.
13b.The gains from trade for each country are 50 pounds of food and 50 gallons of sunscreen.
With specialization and trade, together they can produce
300 pounds of food and 300 gallons of sunscreen. So each
will get 150 pounds of food and 150 gallons of sun-
screen—an additional 50 pounds of food and 50 gallons
of sunscreen.
C H A P T E R3
1a.The price of an audiotape will rise, and the quantity of audiotapes sold will increase.
CDs and audiotapes are substitutes. If the price of a CD
rises, people will buy more audiotapes and fewer CDs.
The demand for audiotapes will increase. The price of an
audiotape will rise, and more audiotapes will be sold.
1b.The price of an audiotape will fall, and fewer audiotapes will be sold.
Walkmans and audiotapes are complements. If the price of
a Walkman rises, fewer Walkmans will be bought. The
demand for audiotapes will decrease. The price of an
audiotape will fall, and people will buy fewer audiotapes. 1c.The price of an audiotape will fall and fewer audiotapes will be sold.
The increase in the supply of CD players will lower the price of a CD player. With CD players cheaper than they were,
some people will buy CD players. The demand for CDs will
increase, and the demand for audiotapes will decrease. The
price of an audiotape will fall, and people will buy fewer
audiotapes.
1d.The price of an audiotape will rise, and the quantity sold will increase.
An increase in consumers’ income will increase the
demand for audiotapes. As a result, the price of an audio-
tape will rise and the quantity bought will increase.
1e.The price of an audiotape will rise, and the quantity sold will decrease.
If the workers who make audiotapes get a pay raise, the
cost of making an audiotape increases and the supply of
audiotapes decreases. The price will rise, and people will
buy fewer audiotapes.
1f.The quantity sold will decrease, but the price might rise, fall, or stay the same.
Walkmans and audiotapes are complements. If the price
of a Walkman rises, fewer Walkmans will be bought and
so the demand for audiotapes will decrease. The price of
an audiotape will fall, and people will buy fewer audio-
tapes. If the wages paid to workers who make audiotapes
rise, the supply of audiotapes decreases. The quantity of
audiotapes sold will decrease, and the price of an audio-
tape will rise. Taking the two events together, the quan-
tity sold will decrease, but the price might rise, fall, or
stay the same.
3a.(ii) and (iii) and (iv)
The demand for gasoline will change if the price of a car
changes, all speed limits on highways are abolished, or
robot production cuts the cost of producing a car. If the
price of a car rises, the quantity of cars bought decrease. So the demand for gasoline decreases. If all speed limits on
highways are abolished, people will drive faster and use
more gasoline. The demand for gasoline increases. If robot production plants lower the cost of producing a car, the
supply of cars will increase. With no change in the
demand for cars, the price of a car will fall and more cars
will be bought. The demand for gasoline increases.
3b.(i)
The supply of gasoline will change if the price of crude oil
changes. If the price of crude oil rises, the cost of produc-
ing gasoline will rise. So the supply of gasoline decreases. 3c.(i)
S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S3
If the price of crude oil (a resource used to make gasoline) rises, the cost of producing gasoline will rise. So the supply of gasoline decreases. The demand for gasoline does not
change, so the price of gasoline will rise and there is a
movement up the demand curve for gasoline. The quan-
tity demanded of gasoline decreases.
3d.(ii) and (iii) and (iv)
If the price of a car rises, the quantity of cars bought
decrease. So the demand for gasoline decreases. The sup-
ply of gasoline does not change, so the price of gasoline
falls and there is a movement down the supply curve of
gasoline. The quantity supplied of gasoline decreases.
If all speed limits on highways are abolished, people will
drive faster and use more gasoline. The demand for gaso-
line increases. The supply of gasoline does not change, so
the price of gasoline rises and there is a movement up
along the supply curve. The quantity supplied of gasoline
increases.
If robot production plants lower the cost of producing a
car, the supply of cars will increase. With no change in the demand for cars, the price of a car will fall and more cars
will be bought. The demand for gasoline increases. The
supply of gasoline does not change, so the price of gasoline rises and the quantity of gasoline supplied increases.
5a. The demand curve is the curve that slopes down toward to the right. The supply curve is the curve that slopes up
toward to the right.
5b. The equilibrium price is $14 a pizza, and the equilibrium quantity is 200 pizzas a day.
Market equilibrium is determined at the intersection of
the demand curve and supply curve.
7a. The equilibrium price is 50 cents a pack, and the equilib-rium quantity is 120 million packs a week.
The price of a pack adjusts until the quantity demanded
equals the quantity supplied. At 50 cents a pack, the quan-tity demanded is 120 million packs a week and the quan-
tity supplied is 120 million packs a week.
7b.At 70 cents a pack, there will be a surplus of gum and the price will fall.
At 70 cents a pack, the quantity demanded is 80 million
packs a week and the quantity supplied is 160 million
packs a week. There is a surplus of 80 million packs a
week. The price will fall until market equilibrium is
restored—50 cents a pack.
9a.The supply curve has shifted leftward.
As the number of gum-producing factories decreases, the
supply of gum decreases. There is a new supply schedule,
and the supply curve shifts leftward.
9b. There has been a movement along the demand curve.
The supply of gum decreases, and the supply curve shifts
leftward. Demand does not change, so the price rises along the demand curve.
9c.The equilibrium price is 60 cents, and the equilibrium quantity is 100 million packs a week.
Supply decreases by 40 millions packs a week. That is, the quantity supplied at each price decreases by 40 million
packs. The quantity supplied at 50 cents is now 80 million
packs, and there is a shortage of gum. The price rises to 60
cents a pack, at which the quantity supplied equals the
quantity demanded (100 million packs a week).
11.The new price is 70 cents a pack, and the quantity is 120
million packs a week.
The demand for gum increases, and the demand curve shifts
rightward. The quantity demanded at each price increases by
40 million packs. The result of the fire is a price of 60 cents a
pack. At this price, there is now a shortage of gum. The price
of gum will rise until the shortage is eliminated.
C H A P T E R4
1a.The price elasticity of demand is 1.25.
The price elasticity of demand equals the percentage
change in the quantity demanded divided by the percent-
age change in the price. The price rises from $4 to $6 a
box, a rise of $2 a box. The average price is $5 a box. So
the percentage change in the price equals $2 divided by
$5, which equals 40 percent.
The quantity decreases from 1,000 to 600 boxes, a
decrease of 400 boxes. The average quantity is 800 boxes.
So the percentage change in quantity equals 400 divided
by 800, which equals 50 percent.
The price elasticity of demand for strawberries equals 50
divided by 40, which is 1.25.
1b.The price elasticity of demand exceeds 1, so the demand for strawberries is elastic.
3a.The price elasticity of demand is 2.
When the price of a videotape rental rises from $3 to $5,
the quantity demanded of videotapes decreases from 75 to
25 a day. The price elasticity of demand equals the per-
centage change in the quantity demanded divided by the
percentage change in the price.
The price increases from $3 to $5, an increase of $2 a
videotape. The average price is $4 a videotape. So the per-
centage change in the price equals $2 divided by $4,
which equals 50 percent.
The quantity decreases from 75 to 25 videotapes, a
decrease of 50 videotapes. The average quantity is 50
videotapes. So the percentage change in quantity equals 50
divided by 50, which equals 100 percent.
The price elasticity of demand for videotape rentals equals
100 divided by 50, which is 2.
3b.The price elasticity of demand equals 1 at $3 a videotape.
The price elasticity of demand equals 1 at the price
halfway between the origin and the price at which the
demand curve hits the y-axis. That price is $3 a videotape.
5.The demand for dental services is unit elastic.
The price elasticity of demand for dental services equals
the percentage change in the quantity of dental services
demanded divided by the percentage change in the price
of dental services.
The price elasticity of demand equals 10 divided by 10,
which is 1. The demand is unit elastic.
4S OLUTIONS TO O DD-N UMBERED P ROBLEMS
7a. T otal revenue increases.
When the price of a chip is $400, 30 million chips are
sold and total revenue equals $12,000 million. When the
price of a chip falls to $350, 35 million chips are sold and total revenue is $12,250 million. T otal revenue increases
when the price falls.
7b.T otal revenue decreases.
When the price is $350 a chip, 35 million chips are sold
and total revenue is $12,250 million. When the price of a
chip is $300, 40 million chips are sold and total revenue
decreases to $12,000 million. T otal revenue decreases as the price falls.
7c.T otal revenue is maximized at $350 a chip.
When the price of a chip is $300, 40 million chips are
sold and total revenue equals $12,000 million. When the
price is $350 a chip, 35 million chips are sold and total
revenue equals $12,250 million. T otal revenue increases as the price rises from $300 to $350 a chip. When the price
is $400 a chip, 30 million chips are sold and total revenue equals $12,000 million. T otal revenue decreases as the
price rises from $350 to $400 a chip. T otal revenue is
maximized when the price is $350 a chip.
7d.The demand for chips is unit elastic.
The total revenue test says that if the price changes and
total revenue remains the same, the demand is unit elastic at the average price. For an average price of $350 a chip,
cut the price from $400 to $300 a chip. When the price of
a chip falls from $400 to $300, total revenue remains at
$12,000 million. So at the average price of $350 a chip,
demand is unit elastic.
9.The demand for chips is inelastic.
The total revenue test says that if the price falls and total
revenue falls, the demand is inelastic. When the price falls from $300 to $200 a chip, total revenue decreases from
$12,000 million to $10,000 million. So at an average
price of $250 a chip, demand is inelastic.
11. The cross elasticity of demand between orange juice and
apple juice is 1.17.
The cross elasticity of demand is the percentage change in the quantity demanded of one good divided by the per-
centage change in the price of another good. The rise in
the price of orange juice resulted in an increase in the
quantity demanded of apple juice. So the cross elasticity of demand is the percentage change in the quantity
demanded of apple juice divided by the percentage change in the price of orange juice. The cross elasticity equals 14
divided by 12, which is 1.17.
13.Income elasticity of demand for (i) bagels is 1.33 and (ii)
donuts is ?1.33.
Income elasticity of demand equals the percentage change in the quantity demanded divided by the percentage
change in income. The change in income is $2,000 and
the average income is $4,000, so the percentage change in income equals 50 percent.
(i) The change in the quantity demanded is 4 bagels and
the average quantity demanded is 6 bagels, so the percent-age change in the quantity demanded equals 66.67 per-
cent. The income elasticity of demand for bagels equals
66.67/50, which is 1.33.
(ii) The change in the quantity demanded is ?6 donuts
and the average quantity demanded is 9 donuts, so
the percentage change in the quantity demanded is
?66.67. The income elasticity of demand for donuts
equals ?66.67/50, which is ?1.33.
15a.The elasticity of supply is 1.
The elasticity of supply is the percentage change in the
quantity supplied divided by the percentage change in the
price. When the price falls from 40 cents to 30 cents, the
change in the price is 10 cents and the average price is 35
cents. The percentage change in the price is 28.57.
When the price falls from 40 cents to 30 cents, the quan-
tity supplied decreases from 800 to 600 calls. The change
in the quantity supplied is 200 calls, and the average
quantity is 700 calls, so the percentage change in the
quantity supplied is 28.57.
The elasticity of supply equals 28.57/28.57, which
equals1.
15b.The elasticity of supply is 1.
The formula for the elasticity of supply calculates the elas-
ticity at the average price. So to find the elasticity at an aver-
age price of 20 cents a minute, change the price such that
20 cents is the average price—for example, a fall in the price
from 30 cents to 10 cents a minute.
When the price falls from 30 cents to 10 cents, the
change in the price is 20 cents and the average price is 20
cents. The percentage change in the price is 100. When
the price falls from 30 cents to 10 cents, the quantity
supplied decreases from 600 to 200 calls. The change in
the quantity supplied is 400 calls and the average quan-
tity is 400 calls. The percentage change in the quantity
supplied is 100.
The elasticity of supply is the percentage change in the
quantity supplied divided by the percentage change in
the price. The elasticity of supply is 1.
C H A P T E R5
1a.Equilibrium price is $1.00 a floppy disc, and the equilib-rium quantity is 3 floppy discs a month.
1b.Consumers paid $3.
The amount paid equals quantity bought multiplied by
the price paid. That is, the amount paid equals 3 floppy
discs multiplied by $1.00 a disc.
1c.The consumer surplus is $2.25.
The consumer surplus is the area of the triangle under
the demand curve above the market price. The market
price is $1.00 a disc. The area of the triangle equals
(2.50 ?1.00)/2 multiplied by 3, which is $2.25.
1d.Producer surplus is $0.75.
The producer surplus is the area of the triangle above the
supply curve below the price. The price is $1.00 a disc.
The area of the triangle equals (1.00 ?0.50)/2 multiplied
by 3, which is $0.75.
1e.The cost of producing the discs sold is $2.25.
S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S5
The cost of producing the discs is the amount received
minus the producer surplus. The amount received is $1.00
a disc for 3 discs, which is $3.00. Producer surplus is
$0.75, so the cost of producing the discs sold is $2.25.
1f.The efficient quantity is 3 floppy discs a month.
The efficient quantity is the quantity that makes the mar-ginal benefit from the last disc equal to the marginal cost
of producing the last disc. The demand curve shows the
marginal benefit and the supply curve shows the marginal cost. Only if 3 floppy discs are produced is the quantity
produced efficient.
3a.The maximum price that consumers will pay is $3.
The demand schedule shows the maximum price that con-sumers will pay for each sandwich. The maximum price
that consumers will pay for the 250th sandwich is $3.
3b.The minimum price that producers will accept is $5.
The supply schedule shows the minimum price that pro-
ducers will accept for each sandwich. The minimum price that produces will accept for the 250th sandwich is $5.
3c.250 sandwiches exceed the efficient quantity.
The efficient quantity is such that marginal benefit from
the last sandwich equals the marginal cost of producing it.
The efficient quantity is the equilibrium quantity—200
sandwiches an hour.
3d.Consumer surplus is $400.
The equilibrium price is $4. The consumer surplus is the
area of the triangle under the demand curve above the
price. The area of the triangle is (8 ?4)/2 multiplied by
200, which is $400.
3e.Producer surplus is $400.
The producer surplus is the area of the triangle above the
supply curve below the price. The price is $4. The area of
the triangle is (4 ?0)/2 multiplied by 200, which is $400. 3f.The deadweight loss is $50.
Deadweight loss is the sum of the consumer surplus and
producer surplus that is lost because the quantity produced is not the efficient quantity. The deadweight loss equals the
quantity (250 ?200) multiplied by (5 ?3)/2, which is $50. 5a.Ben’s consumer surplus is $122.50. Beth’s consumer sur-plus is $22.50, and Bo’s consumer surplus is $4.50.
Consumer surplus is the area under the demand curve
above the price. At 40 cents, Ben will travel 350 miles,
Beth will travel 150 miles, and Bo will travel 30 miles. T o
find Ben’s consumer surplus extend his demand schedule
until you find the price at which the quantity demanded
by Ben is zero—the price at which Ben’s demand curve
cuts the y-axis. This price is 110 cents. So Ben’s consumer
surplus equals (110 ?40)/2 multiplied by 350, which
equals $122.50. Similarly, Beth’s consumer surplus equals
(70 ?40)/2 multiplied by 150, which equals $22.50. And
Bo’s consumer surplus equals (70 ?40)/2 multiplied by
30, which equals $4.50.
5b. Ben’s consumer surplus is the largest because he places a higher value on each unit of the good than the other two do. 5c.Ben’s consumer surplus falls by $32.50. Beth’s consumer surplus falls by $12.50, and Bo’s consumer surplus falls by $2.50.
At 50 cents a mile, Ben travels 300 miles and his con-
sumer surplus is $90. Ben’s consumer surplus equals
(110 ?50)/2 multiplied by 300, which equals $90.
Ben’s consumer surplus decreases from $122.50 to $90,
a decrease of $32.50. Beth travels 100 miles and her
consumer surplus is $10, a decrease of $12.50. Bo trav-
els 20 miles and her consumer surplus is $2.00, a
decrease of $2.50.
C H A P T E R6
1a.Equilibrium price is $200 a month and the equilibrium quantity is 10,000 housing units.
1b.The quantity rented is 5,000 housing units.
The quantity of housing rented is equal to the quantity
supplied at the rent ceiling.
1c.The shortage is 10,000 housing units.
At the rent ceiling, the quantity of housing demanded is
15,000 but the quantity supplied is 5,000, so there is a
shortage of 10,000 housing units.
1d.The maximum price that someone is willing to pay for the 5,000th unit available is $300 a month.
The demand curve tells us the maximum price willingly
paid for the 5,000th unit.
3a.The equilibrium wage rate is $4 an hour, and employment is 2,000 hours a month.
3b.Unemployment is zero. Everyone who wants to work for $4 an hour is employed.
3c.They work 2,000 hours a month.
A minimum wage rate is the lowest wage rate that a per-
son can be paid for an hour of work. Because the equilib-
rium wage rate exceeds the minimum wage rate, the mini-
mum wage is ineffective. The wage rate will be $4 an hour
and employment is 2,000 hours.
3d.There is no unemployment.
The wage rate rises to the equilibrium wage—the quantity
of labor demanded equals the quantity of labor supplied.
So there is no unemployment.
3e.At $5 an hour, 1,500 hours a month are employed and 1,000 hours a month are unemployed.
The quantity of labor employed equals the quantity
demanded at $5 an hour. Unemployment is equal to the
quantity of labor supplied at $5 an hour minus the quantity
of labor demanded at $5 an hour. The quantity supplied is
2,500 hours a month, and the quantity demanded is 1,500
hours a month. So 1,000 hours a month are unemployed. 3f.The wage rate is $5 an hour, and unemployment is 500 hours a month.
At the minimum wage of $5 an hour, the quantity demanded
is 2,000 hours a month and the quantity supplied is 2,500
hours a month. So 500 hours a month are unemployed.
5a.With no tax on brownies, the price is 60 cents a brownie and 4 million a day are consumed.
5b. The price is 70 cents a brownie, and 3 million brownies a day are consumed. Consumers and producers each pay 10
cents of the tax on a brownie.
6S OLUTIONS TO O DD-N UMBERED P ROBLEMS
The tax decreases the supply of brownies and raises the
price of a brownie. With no tax, producers are willing to
sell 3 million brownies a day at 50 cents a brownie. But
with a 20 cent tax, they are willing to sell 3 million
brownies a day only if the price is 20 cents higher at 70
cents a brownie.
7. With a subsidy on rice, the price is $1.20 a box, the mar-
ginal cost $1.50 a box, and the quantity produced is 3,000
boxes a week.
The subsidy of $0.30 lowers the price at which each quan-
tity in the table is supplied. For example, rice farmers will
supply 3,000 boxes a week if the price is $1.50 minus
$0.30, which is $1.20. With a subsidy, the market equilib-
rium occurs at $1.20 a box. At this price, the quantity
demanded is 3,000 boxes and the quantity supplied is
3,000 boxes. The marginal cost of producing rice is given
by the supply schedule. The marginal cost of supplying
3,000 boxes a week is $1.50 a box.
C H A P T E R7
1a.T o draw a graph of Jason’s total utility from rock CDs, plot the number of CDs on the x-axis and Jason’s utility
from CDs on the y-axis. The curve will look similar to Fig.
7.2(a). T o draw a graph of Jason’s total utility from spy
novels, repeat the above procedure but use the spy novel
data.
1b.Jason gets more utility from any number of rock CDs than he does from the same number of spy novels.
1c.T o draw a graph of Jason’s marginal utility from rock CDs plot the number of CDs on the x-axis and Jason’s marginal
utility from CDs on the y-axis. The curve will look similar
to Fig. 7.2(b). T o draw a graph of Jason’s marginal utility
from spy novels, repeat the above procedure but use the
spy novel data.
Jason’s marginal utility from rock CDs is the increase in total
utility he gets from one additional rock CD. Similarly,
Jason’s marginal utility from spy novels is the increase in total
utility he gets from one additional spy novel.
1d.Jason gets more marginal utility from an additional rock CD than he gets from an additional spy novel when he has
the same number of each.
1e.Jason buys 5 rock CDs and 1 spy novel.
When Jason buys 5 rock CDs and 1 spy novel he spends
$60. Jason maximizes his utility when he spends all of his
money and the marginal utility per dollar spent on rock
CDs and spy novels is the same. When Jason buys 5 rock
CDs his marginal utility per dollar spent is 2 units per
dollar and when Jason buys 1 spy novel his marginal util-
ity per dollar spent is 2 units per dollar.
3.T o maximize his utility, Max windsurfs for 3 hours and
snorkels for 1 hour.
Max will spend his $35 such that all of the $35 is spent
and that the marginal utility per dollar spent on each
activity is the same. When Max windsurfs for 3 hours and
snorkels for 1 hour, he spends $30 renting the windsurfing
equipment and $5 renting the snorkeling equipment—a
total of $35.
The marginal utility from the third hour of windsurfing is
80 and the rent of the windsurfing equipment is $10 an
hour, so the marginal utility per dollar spent on windsurf-
ing is 8. The marginal utility from the first hour of snor-
keling is 40 and the rent of the snorkeling equipment is $5 an hour, so the marginal utility per dollar spent on snor-
keling is 8. The marginal utility per dollar spent on wind-
surfing equals the marginal utility per dollar spent on
snorkeling.
5a.Max’s consumption possibilities line is a straight line that runs from 5.5 hours windsurfing and 0 hours snorkeling
to 11 hours snorkeling and 0 hours windsurfing.
Max’s possibilities line shows the various combinations of
hours spent snorkeling and hours spent windsurfing that
has a total expenditure of $55. Windsurfing is $10 an
hour, so if Max spends all his money on windsurfing, he
can windsurf for 5.5 hours.
Snorkeling is $5 an hour, so if Max spends all his money
on snorkeling, he can snorkel for 5.5 hours.
5b.T o maximize his utility, Max windsurfs for 4 hours and snorkels for 3 hour.
Max will spend his $55 such that all of the $55 is spent
and that the marginal utility per dollar spent on each
activity is the same. When Max windsurfs for 4 hours and
snorkels for 3 hours, he spends $40 renting the windsurf-
ing equipment and $15 renting the snorkeling equip-
ment—a total of $55.
The marginal utility from the fourth hour of windsurfing is
60 and the rent of the windsurfing equipment is $10 an
hour, so the marginal utility per dollar spent on windsurfing
is 6. The marginal utility from the third hour of snorkeling is
30 and the rent of the snorkeling equipment is $5 an hour,
so the marginal utility per dollar spent on snorkeling is 6.
The marginal utility per dollar spent on windsurfing equals
the marginal utility per dollar spent on snorkeling.
7.T o maximize his utility, Max windsurfs for 6 hours and
snorkels for 5 hours. Max will spend his $55 such that all
of the $55 is spent and that the marginal utility per dollar
spent on each activity is the same. When Max windsurfs
for 6 hours and snorkels for 5 hours, he spends $30 rent-
ing the windsurfing equipment and $25 renting the snor-
keling equipment—a total of $55.
The marginal utility from the sixth hour of windsurfing is
12 and the rent of the windsurfing equipment is $5 an
hour, so the marginal utility per dollar spent on windsurf-
ing is 2.4. The marginal utility from the fifth hour of
snorkeling is 12 and the rent of the snorkeling equipment
is $5 an hour, so the marginal utility per dollar spent on
snorkeling is 2.4. The marginal utility per dollar spent on
windsurfing equals the marginal utility per dollar spent on snorkeling.
9.T o maximize his utility, Max windsurfs for 5 hours and
snorkels for 1 hour.
Because the equipment is free, Max does not have to allo-
cate his income between the two activities; instead, he allo-cates his time between the two activities. Max spends 6
hours on these activities. Max allocates the 6 hours such
that the marginal utility from each activity is the same.
When Max windsurfs for 5 hours and snorkels for 1 hour, S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S7
he spends 6 hours. His marginal utility from the fifth hour
of windsurfing is 40 and his marginal utility from the first
hour of snorkeling is 40—so the marginal utilities are equal.
11.The market demand curve passes through the following
points: 90 cents and 3 cartons; 70 cents and 6 cartons; 50
cents and 10 cartons; 30 cents and 14 cartons; and 10
cents and 18 cartons.
At each price, the quantity demand by the market is equal
to the sum of the cartons of popcorn that Shirley demands
and the cartons of popcorn that Dan demands. For exam-
ple, at 50 cents a carton, the quantity demanded by
Shirley and Dan is 10, the sum of Shirley’s 6 and Dan’s 4.
C H A P T E R8
1a.Sara’s real income is 4 cans of cola.
Sara’s real income in terms of cans of cola is equal to her
money income divided by the price of a can of cola. Sara’s
money income is $12, and the price of cola is $3 a can.
Sara’s real income is $12 divided by $3 a can of cola,
which is 4 cans of cola.
1b.Sara’s real income is 4 bags of popcorn.
Sara’s real income in terms of popcorn is equal to her
money income divided by the price of a bag of popcorn,
which is $12 divided by $3 a bag or 4 bags of popcorn.
1c.The relative price of cola is 1 bag per can.
The relative price of cola is the price of cola divided by the
price of popcorn. The price of cola is $3 a can and the
price of popcorn is $3 a bag, so the relative price of cola is
$3 a can divided by $3 a bag, which equals 1 bag per can. 1d.The opportunity cost of a can of cola is 1 bag of popcorn.
The opportunity cost of a can of cola is the quantity of
popcorn that must be forgone to get a can of cola. The
price of cola is $3 a can and the price of popcorn is $3 a
bag, so to buy one can of cola Sara must forgo 1 bag of
popcorn.
1e.The equation that describes Sara’s budget line is
Q P?4 ?Q C
Call the price of popcorn P P and the quantity of popcorn
Q P, the price of cola P C and the quantity of cola Q C, and
income y. Sara’s budget equation is
P P Q P?P C Q C?y.
If we substitute $3 for the price of popcorn, $3 for the
price of cola, and $12 for the income, the budget equation
becomes
$3 ?Q P ?$3?Q C?$12.
Dividing both sides by $3 and subtracting
Q C from both sides gives
Q P?4 ?Q C.
1f.T o draw a graph of the budget line, plot the quantity of cola on the x-axis and the quantity of popcorn on the
y-axis. The budget line is a straight line running from
4bags on the y-axis to 4 cans on the x-axis.
1g.The slope of the budget line, when cola is plotted on the x-axis is minus 1. The magnitude of the slope is equal to
the relative price of cola.
The slope of the budget line is “rise over run.” If the quan-tity of cola decreases from 4 to 0, the quantity of popcorn increases from 0 to 4. The rise is 4 and the run is ?4.
Therefore the slope equals 4/?4, which is ?1.
3a.Sara buys 2 cans of cola and 2 bags of popcorn.
Sara buys the quantities of cola and popcorn that gets her
onto the highest indifference curve, given her income and the prices of cola and popcorn. The graph shows Sara’s
indifference curves. So draw Sara’s budget line on the
graph. The budget line is tangential to indifference curve
I0at 2 cans of cola and 2 bags of popcorn. The indiffer-
ence curve I0is the highest indifference curve that Sara can get onto.
3b.Sara’s marginal rate of substitution is 1.
The marginal rate of substitution is the magnitude of the
slope of the indifference curve at Sara’s consumption
point, which equals the magnitude of the slope of the
budget line. The slope of Sara’s budget line is ?1, so the
marginal rate of substitution is 1.
5a.Sara buys 6 cans of cola and 1 bag of popcorn.
Draw the new budget line on the graph with Sara’s indiffer-
ence curves. The budget line now runs from 8 cans of cola
on the x-axis to 4 bags of popcorn on the y-axis. The new
budget line is tangential to indifference curve I1at 6 cans of
cola and 1 bag of popcorn. The indifference curve I1is the
highest indifference curve that Sara can now get onto.
5b.T wo points on Sara’s demand for cola are the following: At $3 a can of cola, Sara buys 2 cans of cola. At $1.50 a can
of cola, Sara buys 6 cans.
5c.The substitution effect is 2 cans of cola.
T o divide the price effect into a substitution effect and an
income effect, take enough income away from Sara and
gradually move her new budget line back toward the ori-
gin until it just touches Sara’s indifference curve I0. The
point at which this budget line just touches indifference
curve I0is 4 cans of cola and 0.5 bag of popcorn. The sub-stitution effect is the increase in the quantity of cola from
2 cans to 4 cans along the indifference curve I0. The sub-
stitution effect is 2 cans of cola.
5d.The income effect is 2 cans of cola.
The income effect is the change in the quantity of cola
from the price effect minus the change from the substitu-
tion effect. The price effect is 4 cans of cola (6 cans minus the initial 2 cans). The substitution effect is an increase in the quantity of cola from 2 cans to 4 cans. So the income
effect is 2 cans of cola.
5e.Cola is a normal good for Sara because the income effect is positive. An increase in income increases the quantity of
cola she buys from 4 to 6 cans.
7a.Pam can still buy 30 cookies and 5 comic books.
When Pam buys 30 cookies at $1 each and 5 comic books at $2 each, she spends $40 a month. Now that the price of
a cookie is 50 cents and the price of a comic book is $5,
30 cookies and 5 comic books will cost $40. So Pam can
still buy 30 cookies and 5 comic books.
8S OLUTIONS TO O DD-N UMBERED P ROBLEMS
7b.Pam will not want to buy 30 cookies and 5 comic books because the marginal rate of substitution does not equal
the relative price of the goods. Pam will move to a point
on the highest indifference curve possible where the mar-
ginal rate of substitution equals the relative price.
7c.Pam prefers cookies at 50 cents each and comic books at $5 each because she can get onto a higher indifference curve
than when cookies are $1 each and comic books are $2 each. 7d.Pam will buy more cookies and fewer comic books.
The new budget line and the old budget line pass through
the point at 30 cookies and 5 comic books. If comic books
are plotted on the x-axis, the marginal rate of substitution
at this point on Pam’s indifference curve is equal to the rel-
ative price of a comic book at the original prices, which is
2. The new relative price of a comic book is $5/50 cents,
which is 10. That is, the budget line is steeper than the
indifference curve at 30 cookies and 5 comic books. Pam
will buy more cookies and fewer comic books.
7e.There will be a substitution effect and an income effect.
A substitution effect arises when the relative price changes
and the consumer moves along the same indifference curve
to a new point where the marginal rate of substitution
equals the new relative price. An income effect arises when
the consumer moves from one indifference curve to
another, keeping the relative price constant.
C H A P T E R9
1.Explicit costs are $30,000. Explicit costs are all the costs
for which there is a payment. Explicit costs are the sum
the wages paid ($20,000) and the goods and services
bought from other firms ($10,000).
Implicit costs are the sum of the costs that do not involve
a payment. Implicit costs are the sum of the interest for-
gone on the $50,000 put into the firm; the $30,000
income forgone by Jack not working at his previous job;
$15,000, which is the value of 500 hours of Jill’s leisure
(10 hours a week for 50 weeks); and the economic depre-
ciation of $2,000 ($30,000 minus $28,000).
3a.All methods other than “pocket calculator with paper and pencil” are technologically efficient.
T o use a pocket calculator with paper and pencil to com-
plete the tax return is not a technologically efficient
method because it takes the same number of hours as it
would with a pocket calculator but it uses more capital.
3b.The economically efficient method is to use (i) a pocket calculator, (ii) a pocket calculator, (iii) a PC.
The economically efficient method is the technologically
efficient method that allows the task to be done at least cost.
When the wage rate is $5 an hour: T otal cost with a PC is
$1,005, total cost with a pocket calculator is $70, and
total cost with paper and pencil is $81. T otal cost is least
with a pocket calculator.
When the wage rate is $50 an hour: T otal cost with a PC
is $1,050, total cost with a pocket calculator is $610, and
the total cost with paper and pencil is $801. T otal cost is
least with a pocket calculator.
When the wage rate is $500 an hour: T otal cost with a PC
is $1,500, total cost with a pocket calculator is $6,010,
and total cost with pencil and paper is $8,001. T otal cost
is least with a PC.
5a.Methods A, B, C, and D are technologically efficient.
Compare the amount of labor and capital used by the four
methods. Start with method A. Moving from A to B to C
to D, the amount of labor increases and the amount of
capital decreases in each case.
5b.The economically efficient method in (i) is method D, in (ii) is methods C and D, and in (iii) is method A.
The economically efficient method is the technologically
efficient method that allows the 100 shirts to be washed at
least cost.
(i) T otal cost with method A is $1,001, total cost with
method B is $805, total cost with method C is $420, and
total cost with method D is $150. Method D has the low-
est total cost.
(ii) T otal cost with method A is $505, total cost with
method B is $425, total cost with method C is $300, and
total cost with method D is $300. Methods C and D have
the lowest total cost.
(iii) T otal cost with method A is $100, total cost with method
B is $290, total cost with method
C is $1,020, and total cost
with method D is $2,505. Method A has the lowest total cost. 7a.The four-firm concentration ratio is 60.49.
The four-firm concentration ratio equals the ratio of the
total sales of the largest four firms to the total industry
sales expressed as a percentage. The total sales of the
largest four firms is $450 ?$325 ?$250 ? $200, which
equals $1,225. T otal industry sales equal $1,225 ?$800,
which equals $2,025. The four-firm concentration ratio
equals ($1,225/$2,025) ?100, which is 60.49 percent.
7b.This industry is highly concentrated because the four-firm concentration ratio exceeds 60 percent.
9a.The Herfindahl-Hirschman Index is 1,800.
The Herfindahl-Hirschman Index equals the sum of the
squares of the market shares of the 50 largest firms or of
all firms if there are less than 50 firms. The Herfindahl-
Hirschman Index equals 152?102 ?202?152 ?252 ?
152, which equals 1,800.
9b.This industry is moderately competitive because the
Herfindahl-Hirschman Index lies in the range 1,000 to 1,800.
C H A P T E R10
1a.T o draw the total product curve measure labor on the x-axis and output on the y-axis. The total product curve is
upward sloping.
1b.The average product of labor is equal to total product divided by the quantity of labor employed. For example,
when 3 workers are employed, they produce 6 boats a
week, so the average product is 2 boats per worker.
The average product curve is upward sloping when the
number of workers is between 1 and 8, but it becomes
downward sloping when 9 and 10 workers are employed. S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S9
1c.The marginal product of labor is equal to the increase in total product when an additional worker is employed. For example, when 3 workers are employed, total product is 6 boats a week. When a fourth worker is employed, total
product increases to 10 boats a week. The marginal prod-
uct of going from 3 to 4 workers is 4 boats.
The marginal product curve is upward sloping when up to
5.5 workers a week are employed and downward sloping
when more than 5.5 workers a week are employed.
1d.(i) When Rubber Dinghies produces fewer than 30 boats
a week, it employs fewer than 8 workers a week. With
fewer than 8 workers a week, marginal product exceeds
average product and average product is increasing. Up to an output of 30 boats a week, each additional worker
adds more to output than the average. Average product
increases.
(ii) When Rubber Dinghies produces more than 30 boats
a week, it employs more than 8 workers a week. With
more than 8 workers a week, average product exceeds
marginal product and average product is decreasing. For
outputs greater than 30 boats a week, each additional
worker adds less to output than average. Average product decreases.
3a.Total cost is the sum of the costs of all the inputs that Rubber Dinghies uses in production. Total variable cost
is the total cost of the variable inputs. Total fixed cost is
the total cost of the fixed inputs.
For example, the total variable cost of producing 10
boats a week is the total cost of the workers employed,
which is 4 workers at $400 a week, which equals $1,600.
Total fixed cost is $1,000, so the total cost of producing
10 boats a week is $2,600.
To draw the short-run total cost curves, plot output on
the x-axis and the total cost on the y-axis. The total fixed cost curve is a horizontal line at $1,000. The total vari-
able cost curve and the total cost curve have shapes simi-lar to those in Fig. 10.4, but the vertical distance
between the total variable cost curve and the total cost
curve is $1,000.
3b.Average fixed cost is total fixed cost per unit of output.
Average variable cost is total variable cost per unit of out-put. Average total cost is the total cost per unit of out-
put.
For example, when the firm makes 10 boats a week:
Total fixed cost is $1,000, so average fixed cost is $100
per boat; total variable cost is $1,600, so average variable cost is $160 per boat; and total cost is $2,600, so average total cost is $260 per boat.
Marginal cost is the increase in total cost divided by the
increase in output. For example, when output increases
from 3 to 6 boats a week, total cost increases from
$1,800 to $2,200, an increase of $400. That is, the
increase in output of 3 boats increases total cost by $400.
Marginal cost is equal to $400 divided by 3 boats, which is $133.33 a boat.
The short-run average and marginal cost curves are simi-lar to those in Fig. 10.5.
3c.The following table sets out the data to use to draw the curves.
Labor Output AP MP TC MC AVC (workers)(boats)(boats per worker)(dollars)(dollars per boat)
11 1.001,000400.00
2.00200.00
23 1.501,400266.67
3.00133.33
36 2.001,800200.00
4.00100.00
410 2.502,200160.00
5.0080.00
515 3.002,600133.33
6.0066.67
621 3.503,000114.29
5.0080.00
726 3.713,400107.69
4.00100.00
830 3.753,800106.67
3.00133.33
933 3.674,200109.09
2.00200.00
1035 3.504,600114.29 5.The increase in total fixed cost increases total cost but does
not change total variable cost. Average fixed cost is total
fixed cost per unit of output. The average fixed cost curve
shifts upward. Average total cost is total cost per unit of
output. The average total cost curve shifts upward.
Marginal cost and average variable cost do not change.
7a.T otal cost is the cost of all the inputs. For example, when
3 workers are employed they now produce 12 boats a
week. With 3 workers, the total variable cost is $1,200 a
week and the total fixed cost is $2,000 a week. The total
cost is $3,200 a week. The average total cost of producing
12 boats is $266.67.
7b.The long-run average cost curve is made up the lowest parts of the firm’s short-run average total cost curves when
the firm operates 1 plant and 2 plants. The long-run aver-
age cost curve is similar to Fig. 10.8.
7c.It is efficient to operate the number of plants that has the lower average total cost of a boat. It is efficient to operate
one plant when output is less than 27 boats a week, and it
is efficient to operate two plants when the output is more
than 27 boats a week.
Over the output range 1 to 27 boats a week, average total
cost is less with one plant than with two, but if output
exceeds 27 boats a week, average total cost is less with two
plants than with one.
9a.For example, the average total cost of producing a balloon ride when Bonnie rents 2 balloons and employs 4 workers
equals the total cost ($1,000 rent for the balloons plus
$1,000 for the workers) divided by the 20 balloon rides
produced. The average total cost equals $2,000/20, which
is $100 a ride.
The average total cost curve is U-shaped, as in Fig. 10.5. 9b.The long-run average cost curve is similar to that in Fig.
10.8.
10S OLUTIONS TO O DD-N UMBERED P ROBLEMS
9c.Bonnie’s minimum efficient scale is 13 balloon rides when Bonnie rents 1 balloon.
The minimum efficient scale is the smallest output at
which the long-run average cost is a minimum. T o find
the minimum efficient scale, plot the average total cost
curve for each plant and then check which plant has the
lowest minimum average total cost.
9d.Bonnie will choose the plant (number of balloons to rent) that gives her minimum average total cost for the normal
or average number of balloon rides that people buy.
C H A P T E R11
1a.Quick Copy’s profit-maximizing quantity is 80 pages an hour.
Quick Copy maximizes its profit by producing the quan-
tity at which marginal revenue equals marginal cost. In
perfect competition, marginal revenue equals price, which
is 10 cents a page. Marginal cost is 10 cents when Quick
Copy produces 80 pages an hour.
1b.Quick Copy’s profit is $2.40 an hour.
Profit equals total revenue minus total cost. T otal revenue
equals $8.00 an hour (10 cents a page multiplied by 80
pages). The average total cost of producing 80 pages is 7
cents a page, so total cost equals $5.60 an hour (7 cents
multiplied by 80 pages). Profit equals $8.00 minus $5.60,
which is $2.40 an hour.
1c.The price will fall in the long run to 6 cents a page.
At a price of 10 cents a page, firms make economic profit.
In the long run, the economic profit will encourage new
firms to enter the copying industry. As they do, the price
will fall and economic profit will decrease. Firms will enter
until economic profit is zero, which occurs when the price is
6 cents a copy (price equals minimum average total cost).
3a.(i) At $14 a pizza, Pat’s profit-maximizing output is 4 piz-zas an hour and economic profit is $10 an hour.
Pat’s maximizes its profit by producing the quantity at
which marginal revenue equals marginal cost. In perfect
competition, marginal revenue equals price, which is $14
a pizza. Marginal cost is the change in total cost when out-
put is increased by 1 pizza an hour. The marginal cost of
increasing output from 3 to 4 pizzas an hour is $13 ($54
minus $41). The marginal cost of increasing output from
4 to
5 pizzas an hour is $15 ($69 minus $54). So the mar-
ginal cost of the fourth pizza is half-way between $13 and
$15, which is $14. Marginal cost equals marginal revenue
when Pat produces 4 pizzas an hour.
Economic profit equals total revenue minus total cost.
T otal revenue equals $64 ( $14 multiplied by 4). T otal cost
is $54, so economic profit is $10.
(ii) At $12 a pizza, Pat’s profit-maximizing output is 3 piz-
zas an hour and economic profit is ?$5.
Pat’s maximizes its profit by producing the quantity at
which marginal revenue equals marginal cost. Marginal
revenue equals price, which is $12 a pizza. Marginal cost
of increasing output from 2 to 3 pizzas an hour is $11
($41 minus $30). The marginal cost of increasing output
from 3 to 4 pizzas an hour is $13. So the marginal cost of
the third pizza is half-way between $11 and $13, which is
$12. Marginal cost equals marginal revenue when Pat pro-
duces 3 pizzas an hour.
Economic profit equals total revenue minus total cost.
T otal revenue equals $36 ($12 multiplied by 3). T otal cost
is $41, so economic profit is ?$5.
(iii) At $10 a pizza, Pat’s profit-maximizing output is 2
pizzas an hour and economic profit is ?$10.
Pat’s maximizes its profit by producing the quantity at
which marginal revenue equals marginal cost. Marginal
revenue equals price, which is $10 a pizza. Marginal cost
of increasing output from 1 to 2 pizzas an hour is $9 ($30
minus $21). The marginal cost of increasing output from
2 to
3 pizzas an hour is $11. So the marginal cost of the
second pizza is half-way between $9 and $11, which is
$10. Marginal cost equals marginal revenue when Pat pro-
duces 2 pizzas an hour.
Economic profit equals total revenue minus total cost.
T otal revenue equals $20 ($10 multiplied by 2). T otal cost
is $30, so economic profit is ?$10.
3b.Pat’s shutdown point is at a price of $10 a pizza.
The shutdown point is the price that equals minimum
average variable cost. T o calculate total variable cost, sub-
tract total fixed cost ($10, which is total cost at zero out-
put) from total cost. Average variable cost equals total vari-
able cost divided by the quantity produced. For example,
the average variable cost of producing 2 pizzas is $10 a
pizza. Average variable cost is a minimum when marginal
cost equals average variable cost. The marginal cost of pro-
ducing 2 pizzas is $10. So the shutdown point is a price of
$10 a pizza.
3c.Pat’s supply curve is the same as the marginal cost curve at prices equal to or above $10 a pizza and the y-axis at prices
below $10 a pizza.
3d.Pat will exit the pizza industry if in the long run the price is less than $13 a pizza.
Pat’s Pizza Kitchen will leave the industry if it incurs an
economic loss in the long run. T o incur an economic loss,
the price will have to be below minimum average total
cost. Average total cost equals total cost divided by the
quantity produced. For example, the average total cost of
producing 2 pizzas is $15 a pizza. Average total cost is a
minimum when it equals marginal cost. The average total
cost of 3 pizzas is $13.67, and the average total cost of 4
pizzas is $13.50. Marginal cost when Pat’s produces 3 piz-
zas is $12 and marginal cost when Pat’s produces 4 pizzas
is $14. At 3 pizzas, marginal cost is less than average total
cost; at 4 pizzas, marginal cost exceeds average total cost.
So minimum average total cost occurs between 3 and 4
pizzas—$13 at 3.5 pizzas an hour.
5a.The market price is $8.40 a cassette.
The market price is the price at which the quantity
demanded equals the quantity supplied. The firm’s supply
curve is the same as its marginal cost curve at prices above
minimum average variable cost. Average variable cost is a
minimum when marginal cost equals average variable cost.
Marginal cost equals average variable cost at the quantity
250 cassettes a week. So the firm’s supply curve is the same S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S11
as the marginal cost curve for the outputs equal to 250
cassettes or more. When the price is $8.40 a cassette, each
firm produces 350 cassettes and the quantity supplied by
the 1,000 firms is 350,000 cassettes a week. The quantity
demanded at $8.40 is 350,000 a week.
5b.The industry output is 350,000 cassettes a week.
5c.Each firm produces 350 cassettes a week.
5d.Each firm incurs an economic loss of $581 a week.
Each firm produces 350 cassettes at an average total cost
of $10.06 a cassette. The firm can sell the 350 cassettes for
$8.40 a cassette. The firm incurs a loss on each cassette of
$1.66 and incurs an economic loss of $581a week.
5e.In the long run, some firms exit the industry because they are incurring economic losses.
5f.The number of firms in the long run is 750.
In the long run, as firms exit the industry, the price rises.
In long-run equilibrium, the price will equal the mini-
mum average total cost. When output is 400 cassettes a
week, marginal cost equals average total cost and average
total cost is a minimum at $10 a cassette. In the long run,
the price is $10 a cassette. Each firm remaining in the
industry produces 400 cassettes a week. The quantity
demanded at $10 a cassette is 300,000 a week. So the
number of firms is 300,000 cassettes divided by 400 cas-
settes per firm, which is 750 firms.
7a.The market price is $7.65 a cassette.
When the price is $7.65 a cassette, each firm produces
300 cassettes and the quantity supplied by the 1,000 firms
is 300,000 cassettes a week. The quantity demanded at
$7.65 is 300,000 a week.
7b.The industry output is 300,000 cassettes a week.
7c.Each firm produces 300 cassettes a week.
7d.Each firm makes an economic loss of $834 a week.
Each firm produces 300 cassettes at an average total cost
of $10.43 a cassette. The firm can sell the 300 cassettes for
$7.65 a cassette. The firm incurs a loss on each cassette of
$2.78 and incurs an economic loss of $834 a week.
7e.In the long run, some firms exit the industry because they are incurring economic losses.
7f.The number of firms in the long run is 500.
In the long run, as firms exit the industry, the price rises.
Each firm remaining in the industry produces 400 cas-
settes a week. The quantity demanded at $10 a cassette is
200,000 a week. So the number of firms is 200,000 cas-
settes divide by 400 cassettes per firm, which is 500 firms.
C H A P T E R12
1a.Minnie’s total revenue schedule lists the total revenue at each quantity sold. For example, Minnie’s can sell 1 bottle
for $8 a bottle, which is $8 of total revenue at the quantity
1 bottle.
1b.Minnie’s marginal revenue schedule lists the marginal revenue that results from increasing the quantity sold by
1bottle. For example, Minnie’s can sell 1 bottle for a total
revenue of $8. Minnie’s can sell 2 bottles for $6 each,
which is $12 of total revenue at the quantity 2 bottles. So by increasing the quantity sold from 1 bottle to 2 bottles,
marginal revenue is $4 a bottle ($12 minus $8).
3a.Marginal cost is the increase in total cost that results from increasing output by 1 unit. When Minnie’s increases out-put from 1 bottle to 2 bottles, total cost increases by $4,
so the marginal cost is $4 a bottle.
3b.Minnie’s profit-maximizing output is 1.5 bottles.
The marginal cost of increasing the quantity from 1 bottle to 2 bottles is $4 a bottle ($7 minus $3). That is, the mar-ginal cost of the 1.5 bottles is $4 a bottle. The marginal
revenue of increasing the quantity sold from 1 bottle to 2
bottles is $4 ($12 minus $8). So the marginal revenue
from 1.5 bottles is $4 a bottle. Profit is maximized when
the quantity produced makes the marginal cost equal to
marginal revenue. The profit-maximizing output is 1.5
bottles.
Minnie’s profit-maximizing price is $7 a bottle.
The profit-maximizing price is the highest price that
Minnie’s can sell the profit-maximizing output of 1.5 bot-tles. Minnie’s can sell 1 bottle for $8 and 2 bottles for $6,
so it can sell 1.5 bottles for $7 a bottle.
3c.Minnie’s economic profit is $5.50.
Economic profit equals total revenue minus total cost.
T otal revenue equals price ($7 a bottle) multiplied by
quantity (1.5 bottles), which is $10.50. T otal cost of pro-
ducing 1 bottle is $3 and the total cost of producing 2
bottles is $7, so the total cost of producing 1.5 bottles is
$5. Profit equals $10.50 minus $5, which is $5.50.
3d.Minnie’s is inefficient. Minnie’s charges a price of $7 a bottle, so consumers get a marginal benefit of $7 a bottle.
Minnie’s marginal cost is $4 a bottle. That is, the marginal benefit of $7 a bottle exceeds Minnie’s marginal cost.
5a.The profit-maximizing quantity is 150 newspapers a day and price is 70 cents a paper.
Profit is maximized when the firm produces the output at which marginal cost equals marginal revenue. Draw in the marginal revenue curve. It runs from 100 on the y-axis to
250 on the x-axis. The marginal revenue curve cuts the
marginal cost curve at the quantity 150 newspapers a day.
The highest price that the publisher can sell 150 newspa-
pers a day is read from the demand curve.
5b.The daily total revenue is $105 (150 papers at 70 cents each).
5c.Demand is elastic.
Along a straight-line demand curve, demand is elastic at
all prices above the midpoint of the demand curve. The
price at the midpoint is 50 cents. So at 70 cents a paper,
demand is elastic.
5d.The consumer surplus is $22.50 a day and the deadweight loss is $15 a day.
Consumer surplus is the area under the demand curve
above the price. The price is 70 cents, so consumer surplus equals (100 cents minus 70 cents) multiplied by 150/2
papers a day, which is $22.50 a day.
Deadweight loss arises because the publisher does not pro-duce the efficient quantity. Output is restricted to 150,
12S OLUTIONS TO O DD-N UMBERED P ROBLEMS
and the price is increased to 70 cents. The deadweight loss
equals (70 cents minus 40 cents) multiplied by 100/2.
5e.The newspaper will not want to price discriminate unless it can find a way to prevent sharing and resale of the news-
paper from those who are charged a lower price to those
who are charged a higher price.
7a.The firm will produce 2 cubic feet a day and sell it for 6 cents a cubic foot. Deadweight loss will be 4 cents a day.
Draw in the marginal revenue curve. It runs from 10 on
the y-axis to 2.5 on the x-axis. The profit-maximizing out-
put is 2 cubic feet at which marginal revenue equals mar-
ginal cost. The price charged is the highest that people will
pay for 2 cubic feet a day, which is 6 cents a cubic foot.
The efficient output is 4 cubic feet, at which marginal cost
equals price (marginal benefit). So the deadweight loss is
(4 minus 2 cubic feet) multiplied by (6 minus 2 cents)/2. 7b.The firm will produce 3 cubic feet a day and charge 4 cents a cubic foot. Deadweight loss is 1 cent a day.
If the firm is regulated to earn only normal profit, it pro-
duces the output at which price equals average total cost—at
the intersection of the demand curve and the ATC curve.
7c.The firm will produce 4 cubic feet a day and charge 2 cents a cubic foot. There is no deadweight loss.
If the firm is regulated to be efficient, it will produce the
quantity at which price (marginal benefit) equals marginal
cost—at the intersection of the demand curve and the
marginal cost curve.
C H A P T E R13
1a.Lite and Kool produces 100 pairs a week.
T o maximize profit, Lite and Kool produces the quantity
at which marginal revenue equals marginal cost.
1b.Lite and Kool charges $20 a pair.
T o maximize profit, Lite and Kool charges the highest price
for the 100 pairs of shoes, as read from the demand curve. 1c.Lite and Kool makes a profit of $500 a week.
Economic profit equals total revenue minus total cost. The
price is $20 a pair and the quantity sold is 100 pairs, so
total revenue is $2,000. Average total cost is $15 a pair, so
total cost equals $1,500. Economic profit equals $2,000
minus $1,500, which is $500 a week.
3a.(i) The firm produces 100 pairs.
T o maximize profit, the firm produces the quantity at
which marginal cost equals marginal revenue. Marginal
cost is $20 a pair. The firm can sell 200 pairs at $20 a pair,
so the marginal revenue is $20 at 100 pairs. (Marginal rev-
enue curve lies halfway between the y-axis and the demand
curve.)
(ii) The firm sells them for $60 a pair.
The firm sells the 100 pairs at the highest price that con-
sumers will pay, which is read from the demand curve.
This price is $60 a pair.
(iii) The firm’s economic profit is zero.
The firm produces 100 pairs and sells them for $60 a pair,
so total revenue is $6,000. T otal cost is the sum of total
fixed cost plus total variable cost of 100 pairs. T otal cost
equals $4,000 plus ($20 multiplied by 100), which is
$6,000. The firm’s profit is zero.
3b.(i) The firm produces 200 pairs.
T o maximize profit, the firm produces the quantity at
which marginal cost equals marginal revenue. Marginal
cost is $20 a pair. At $20 a pair, the firm can sell 400 pairs
(twice the number with no advertising), so the marginal
revenue is $20 at 200 pairs. (The marginal revenue curve
lies halfway between the y-axis and the demand curve.)
(ii) The firm sells them for $60 a pair.
The firm sells the 200 pairs at the highest price that con-
sumers will pay—read from the demand curve. This price
is $60 a pair.
(iii) The firm makes an economic profit of $1,000.
The firm produces 200 pairs and sells them for $60 a pair,
so total revenue is $12,000. T otal cost is the sum of total
fixed cost plus the advertising cost plus total variable cost
of 200 pairs. T otal cost equals $4,000 plus $3,000 plus
($20 multiplied by 200), which is $11,000. The firm
makes an economic profit of $1,000.
3c.The firm will spend $3,000 advertising because it makes more economic profit than when it does not advertise.
5.The firm will not change the quantity it produces or the
price it charges. The firm makes less economic profit.
The firm maximizes profit by producing the output at
which marginal cost equals marginal revenue. An increase
in fixed cost increases total cost, but it does not change
marginal cost. So the firm does not change its output or
the price it charges. The firm’s total costs have increased
and its total revenue has not changed, so the firm makes
less economic profit.
7a.The price rises, output increases, and economic profit increases.
The dominant firm produces the quantity and sets the
price such that it maximizes its profit. When demand
increases, marginal revenue increases, so the firm produces
a larger output. The highest price at which the dominant
firm can sell its output increases. Because price exceeds
marginal cost, economic profit increases.
7b.The price rises, output increases, and economic profit increases.
The small firms are price takers, so the price they charge
rises. Because these firms are price takers, the price is also
marginal revenue. Because marginal revenue increases, the
small firms move up along their marginal cost curves (supply
curves) and increase the quantity they produce. Because
price exceeds marginal cost, economic profit increases.
9a.The game has 2 players (A and B), and each player has 2 strategies: to answer honestly or to lie. There are 4 payoffs:
Both answer honestly; both lie; A lies, and B answers hon-
estly; and B lies, and A answers honestly.
9b.The payoff matrix has the following cells: Both answer honestly: A gets $100, and B gets $100; both lie: A gets
$50, and B gets $50; A lies and B answers honestly: A gets
$500, and B gets $0; B lies and A answers honestly: A gets
$0, and B gets $500.
S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S13
9c.Equilibrium is that each player lies and gets $50.
If B answers honestly, the best strategy for A is to lie
because he would get $500 rather than $100. If B lies, the
best strategy for A is to lie because he would get $50 rather
than $0. So A’s best strategy is to lie, no matter what B
does. Repeat the exercise for B. B’s best strategy is to lie,
no matter what A does.
11a.The best strategy for each firm is to cheat.
(i) Each firm makes a zero economic profit or normal profit.
If both firms cheat, each firm will lower the price in an
attempt to gain market share from the other firm. In the
process, the price will be driven down until each firm is
making normal profit.
(ii) If Suddies abides by the agreement, the best strategy
for Soapy is to cheat because it would make a profit of
$1.5 million rather than $1 million. If Suddies cheats,
the best strategy for Soapy is to cheat because it would
make a profit of $0 (the competitive outcome) rather
than incur a loss of $0.5 million. So Soapy’s best strategy
is to cheat, no matter what Suddies does. Repeat the
exercise for Suddies. Suddies’s best strategy is to cheat, no
matter what Soapy does.
(iii) The payoff matrix has the following cells: Both abide
by the agreement: Soapy makes $1 million profit, and
Suddies makes $1 million profit; both cheat: Soapy makes
$0 profit, and Suddies makes $0 profit; Soapy cheats and
Suddies abides by the agreement: Soapy makes $1.5 mil-
lion profit, and Suddies incurs a $0.5 million loss; Suddies
cheats and Soapy abides by the agreement: Suddies makes
$1.5 million profit, and Soapy incurs $0.5 million loss.
(iv) The equilibrium is that both firms cheat and each
makes normal profit.
11b.Each firm can adopt a tit-for-tat strategy or a trigger strat-egy. Page 307 gives descriptions of these strategies.
C H A P T E R14
1a.The price is 30 cents a bottle.
Elixir Springs is a natural monopoly. It produces the quan-
tity that makes marginal revenue equal to marginal cost,
and it charges the highest price it can for the quantity
produced. The marginal revenue curve is twice as steep as
the demand curve, so it runs from 50 on the y-axis to 1.25
on the x-axis. Marginal revenue equals marginal cost at 1
million bottles a year. The highest price at which Elixir
can sell 1 million bottles a year is 30 cents a bottle, read
from the demand curve.
1b.Elixir Springs sells 1 million bottles a year.
1c.Elixir maximizes producer surplus.
If Elixir maximizes total surplus, it would produce the
quantity that makes price equal to marginal cost. That is,
it would produce 2 million bottles a year and sell them for
10 cents a bottles. Elixir is a natural monopoly, and it
maximizes its producer surplus.
3a.The price is 10 cents a bottle.
Marginal cost pricing regulation sets the price equal to
marginal cost, 10 cents a bottle.
3b.Elixir sells 2 million bottles.
With the price set at 10 cents, Elixir maximizes profit by pro-
ducing 2 million bottles—at the intersection of the demand
curve (which shows price) and the marginal cost curve.
3c.Elixir incurs an economic loss of $150,000 a year.
Economic profit equals total revenue minus total cost.
T otal revenue is $200,000 (2 million bottles at 10 cents a
bottle). T otal cost is $350,000 (total variable cost of
$200,000 plus total fixed cost of $150,000). So Elixir
incurs an economic loss of $150,000 (a revenue of
$200,000 minus $350,000).
3d.Consumer surplus is $400,000 a year.
Consumer surplus is the area under the demand curve
above the price. Consumer surplus equals 40 cents a bottle
(50 cents minus 10 cents) multiplied by 2 million bottles
divided by 2, which is $400,000.
3e.The regulation is in the public interest because total sur-plus is maximized. The outcome is efficient.
The outcome is efficient because marginal benefit (or
price) equals marginal cost. When the outcome is effi-
cient, total surplus is maximized.
5a.The price is 20 cents a bottle.
Average cost pricing regulation sets the price equal to aver-age total cost. Average total cost equals average fixed cost
plus average variable cost. Because marginal cost is con-
stant at 10 cents, average variable cost equals marginal
cost. Average fixed cost is total fixed cost ($150,000)
divided by the quantity produced. For example, when
Elixir produces 1.5 million bottles, average fixed cost is 10 cents, so average total cost is 20 cents. The price at which
Elixir can sell 1.5 million bottles a year is 20 cents a bottle. 5b.Elixir sells 1.5 million bottles.
5c.Elixir makes zero economic profit.
Economic profit equals total revenue minus total cost.
T otal revenue is $300,000 (1.5 million bottles at 20 cents
a bottle). T otal cost is $300,000 (1.5 million bottles at an
average total cost of 20 cents). So Elixir makes zero eco-
nomic profit.
5d.Consumer surplus is $225,000 a year.
Consumer surplus is the area under the demand curve
above the price. Consumer surplus equals 30 cents a bottle
(50 cents minus 20 cents) multiplied by 1.5 million bot-
tles divided by 2, which is $225,000.
5e.The regulation creates a deadweight loss, so the outcome is inefficient. The regulation is not in the social interest. 7a.The price is $500 a trip, and the quantity is 2 trips a day.
Regulation in the social interest is marginal cost pricing. Each airline charges $500 a trip and produces the quantity at which price equals marginal cost. Each airline makes 1 trip a day.
7b.The price is $750 a trip, and the number of trips is 1 trip
a day (one by each airline on alternate days).
If the airlines capture the regulator, the price will be the
same as the price that an unregulated monopoly would
charge. An unregulated monopoly produces the quantity and charges the price that maximizes profit that is, the quantity that makes marginal revenue equal to marginal
cost. This quantity is 1 trip a day, and the highest price
that the airlines can charge for that trip (read from the
demand curve) is $750.
14S OLUTIONS TO O DD-N UMBERED P ROBLEMS
7c. Deadweight loss is $125 a day.
Deadweight loss arises because the number of trips is cut
from 2 to 1 a day and the price is increased from $500 to
$750. Deadweight loss equals (2 minus 1) trip multi-
plied by ($750 minus $500) divided by 2. Deadweight
loss is $125 a day.
7d.If there are only a few large producers and many con-sumers, public choice theory predicts that regulation will
protect the producer’s interest and politicians will be
rewarded with campaign contributions. But if there is a
significant number of small producers with large costs or
if the cost of organizing consumers is low, regulation will
be in the social interest.
9.Regulation consists of rules administered by government
agency to influence economic activity by determining
prices, product standards and types, and the conditions
under which new firms may enter an industry. Antitrust
law regulates or prohibits price fixing and the attempt to
monopolize. Regulation applies mainly to natural
monopoly and antitrust law to oligopoly. Regulation of
electric utilities is an example of regulation. The ruling
against Microsoft is an example of the application of the
antitrust law.
C H A P T E R15
1a. 5 tons per week are produced and the marginal cost falling on the trout farmer is $167 a ton.
When 5 tons a week are produced, the pesticide producer’s
marginal cost is $75 a ton and the marginal benefit of pes-
ticide is $75 a ton. At this quantity, the trout farmer’s MC
from pesticide production is $167 a ton.
1b. 3 tons per week are produced and the pesticide producer pays the farmer $100 a ton ?$300 a week.
The efficient quantity is 3 tons at which marginal social
cost equals marginal benefit. If the trout farmer owns the
lake, the cost of pollution can be forced back onto the pes-
ticide producer, who when has the incentive to produce
the efficient quantity.
1c. 3 tons per week; the rent is $1,000 minus $300 ?$700 a week.
The efficient quantity is 3 tons at which marginal social
cost equals marginal benefit. If the pesticide producer
owns the lake, the cost of pollution is born by the pesti-
cide producer in the form of a decreased rent from the
trout farmer.
1d.Quantities in 1b and 1c are equal because the Coase theo-rem applies.
3a.$100 a ton.
3b.The pollution tax equals the marginal external cost—it is a Pigovian tax.
5a. 3 tons a week.
5b.$300 a permit. Pesticide producer buys permit from trout farmer for $300.
5c.The same as amount paid by producer to farmer with property rights—Pigovian tax.
7a.If schools are competitive, 30,000 students enroll and tuition is $4,000 a year.
In a competitive market, schools maximize profit. They
produce the quantity at which the marginal benefit of
the last student enrolled equals the marginal cost of edu-
cating the last student enrolled. T uition is $4,000 a
student.
7b.Efficient number of places is 50,000, and tuition is $4,000
a student.
The efficient number of places is such that the marginal
social benefit of education equals the marginal cost of edu-
cation. The marginal social benefit equals the marginal
private benefit plus the external benefit. For example, the
marginal social benefit of 50,000 places equals the mar-
ginal private benefit of $2,000 plus the external benefit of
$2,000, which is $4,000.
C H A P T E R16
1a.The capacity that achieves maximum net benefit is 2.5 mil-lion gallons a day.
Net benefit is maximized at the capacity where marginal
benefit equals marginal cost, which is 2.5 million gallons
a day.
1b.$62.50 per person.
The efficient capacity is the one that maximizes net bene-
fit. T otal cost of the sewerage system is the sum of the
marginal cost of each additional gallon of capacity. That is,
total cost is the area under the marginal cost curve up to
2.5 million gallons, which equals $62.5 million. The pop-
ulation is 1 million, so each person will have to pay
$62.50.
1c.The political equilibrium will be a sewerage system that has a capacity of 2.5 million gallons.
If voters are well informed, the political equilibrium will
be the efficient capacity.
1d.Bureaucrats will provide a capacity of 5 million gallons.
With voters rationally ignorant, bureaucrats will maximize
the budget. That is, they will increase the capacity until
net benefit is zero. The total benefit from a capacity of 5
million gallons is $250 million. The total cost of a capac-
ity of 5 million gallons is $250 million. So the net benefit
from a capacity of 5 million gallons is zero.
3a.The marginal private benefit of each fishing boat is the average catch per boat. The table shows the marginal pri-
vate benefit (MPB) of each boat.
Value of catch MPB
Numbe r(thousands(thousands
of boats of dollars)of dollars)
00
102,000200
203,500175
304,500150
404,800120
505,000100
604,80080
704,20060
802,40030
S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S15
3b.The marginal social cost is $70,000.
The marginal social cost is the same as the marginal cost of operating a boat because there are no external costs. 3c.With no regulation, the number of boats will be 65 and the catch will be $4,500,000.
The number of boats will increase until the marginal pri-
vate benefit of a boat equals the marginal cost of a boat.
The marginal cost is $70,000 a boat and with 65 boats the marginal private benefit is $70,000 per boat. The 65 boats will take a catch that is valued at $4,500,000.
3d.The equilibrium is an overfishing equilibrium because fewer boats can take a larger catch—the maximum catch
occurs with 50 boats.
3e.The marginal social benefit of each fishing boat is the increase in the value of the catch that results from one
additional fishing boat. The following table shows the
marginal social benefit (MSB) of each boat.
Value of cod caught MSB Number(thousands(thousands
of boats of dollars)of dollars) 00
200 102,000
150 203,500
100 304,500
30 404,800
20 505,000
–20 604,800
–60 704,200
–180 802,400
3f.The efficient number of boats, ignoring the value placed on the cod stock by concerned citizens, is about 30.
The number of boats is efficient if marginal social benefit
from operating boats equals the marginal cost of operating that number of boats. The marginal cost is $70,000. The
marginal social benefit is $70,000 when about 30 boats
are used.
But there is an externality. The marginal external benefit is ?$100,000 per boat. Taking account of this externality,
the efficient number of boats is about 10. The efficient
number of boats is such that the sum of the marginal
social benefit from the catch and the marginal external
benefit equals the marginal cost of operating a boat. With
10 boats, the marginal social benefit ($175,000) plus the
marginal external benefit (?$100,000) is $75,000. So the efficient number of boats is about 10.
3g.The efficient value of the catch is about $2,000,000 a month—the catch of 10 boats.
3h.The concerned citizens and the industry do not agree on the cod catch. The industry wants to catch $4,500,000 of
cod a month, but concerned citizens would like the catch
to be $2,000,000 a month.
3i.The price of an ITQ would be $130,000.
The price of the ITQ that would deliver the efficient
number of boats equals the marginal private benefit per
boat when about 10 boats operate minus the cost of oper-
ating a boat. That is, the price of the ITQ would be
$200,000 minus $70,000, which equals $130,000.
C H A P T E R17
1a.The wage rate is $6 an hour. The wage rate adjusts to make the quantity of labor demanded equal to the quan-
tity supplied.
1b.The number of pickers hired is 400 a day. At a wage rate of $6 an hour, 400 pickers a day are hired.
1c.The income received by blueberry pickers is $2,400 an hour. Income equals the wage rate ($6 an hour) multiplied
by the number of pickers (400).
3a.Marginal product of labor is the increase in total product that results from hiring one additional student. For exam-
ple, if Wanda increases the number of students hired from
4 to 5, total product (the quantity of fish packed) increases
from 120 to 145 pounds. The marginal product of
increasing the number of students from 4 to 5 is 25
pounds of fish.
T o plot the marginal product curve, the marginal product
is plotted at the mid-point. For example, when the num-
ber of students increases from 4 to 5 a day, marginal prod-
uct is 25 pounds of fish. The 25 pounds of fish is plotted
at 4.5 students a day.
3b.Marginal revenue product of labor is the increase in total revenue that results from hiring one additional student.
For example, if Wanda hires 4 students, they produce 120
pounds of fish. Wanda sells the fish for 50 cents a pound,
so total revenue is $60. If Wanda increases the number of
students hired from 4 to 5, total product increases to 145
pounds. T otal revenue from the sale of this fish is $72.50.
Marginal revenue product resulting from hiring the fifth
student is $12.50 ($72.50 minus $60). Alternatively, mar-
ginal revenue product equals marginal product multiplied
by marginal revenue (price). Marginal revenue product of
hiring the fifth student is $12.50, which is 25 pounds of
fish she sells at 50 cents a pound.
3c.One point on Wanda’s demand for labor curve: At a wage rate of $12.50 an hour, Wanda will hire 4.5 students. The
demand for labor curve is the same as the marginal rev-
enue product curve.
3d.Wanda hires 6.5 students a day.
Wanda hires the number of students that makes the mar-
ginal revenue product equals to the wage rate of $7.50 an
hour. When Wanda increases the number of students from
6 to 7, marginal product is 15 pounds of fish an hour,
which Wanda sells for 50 cents a pound. Marginal revenue
product is $7.50—the same as the wage rate. Remember
16S OLUTIONS TO O DD-N UMBERED P ROBLEMS
the marginal revenue product is plotted at the mid-point
between 6 and 7 students a day—6.5 students a day.
5a.Marginal product does not change. If Wanda hires 5.5 stu-dents a day, marginal product is still 25 pounds of fish.
5b.Marginal revenue product decreases.
If Wanda hires 5.5 students a day, marginal product is 25
pounds of fish. Now Wanda sells the fish for 33.33 cents,
so marginal revenue product is now $8.33, down from
$12.50.
5c.Wanda’s demand for labor decreases, and her demand for labor curve shifts leftward. Wanda is willing to pay the stu-
dents their marginal revenue product, and the fall in the
price of fish has lowered their marginal revenue product.
5d.Wanda will hire fewer students. At the wage rate of $7.50, the number of students Wanda hires decreases as the
demand for labor curve shifts leftward.
7a.Marginal revenue product does not change. If Wanda hires
5.5 students an hour, marginal product is 25 pounds of
fish, which she sells at 50 cents a pound. So marginal rev-
enue product remains at $12.50.
7b.Wanda’s demand for labor remains the same because mar-ginal revenue product has not changed.
7c.Wanda will hire fewer students. At the wage rate of $10 an hour, Wanda hires the number of students that makes
marginal revenue product equal to $10 an hour. Wanda
now hires 5.5 students an hour—down from 6.5 students
an hour. The marginal product of 5.5 students is 20
pounds of fish an hour, and Wanda sells this fish for 50
cents a pound. Marginal revenue product is $10 an hour.
9.Wanda maximizes her profit when marginal revenue prod-
uct equals the wage rate and when marginal revenue
equals marginal cost.
When the wage rate is $7.50 an hour, Wanda hires 6.5 stu-
dents an hour. Marginal revenue product is marginal prod-
uct (15 pounds of fish an hour) multiplied by the price of
fish (50 cents a pound), which equals $7.50 an hour.
Marginal revenue resulting from selling an additional
pound of fish is 50 cents. The cost a student is $7.50 an
hour and the marginal product of 15 pounds of fish, so
the marginal cost of an additional pound of fish is $7.50
an hour divided by 15 pounds of fish, which is 50 cents.
So when Wanda hires 6.5 students an hour, marginal rev-
enue equals marginal cost and profit is maximized.
11.T o answer this problem, we need to know the interest rate
and the price that Greg expects next year. If he expects the
price to rise by a percentage that exceeds the interest rate,
he pumps none and waits for the higher price. If he
expects the price to rise by a percentage less than the inter-est rate, he pumps it all now. If he expects the price to rise
by a percentage equal to the interest rate, he doesn’t mind
how much he pumps.
13a.Income of $2,400 a day is divided between opportunity cost and economic rent. Economic rent is the area above
the supply curve below the wage rate. T o show the eco-
nomic rent on the graph, extend the supply curve until it
touches the y-axis. Shade in the area above the supply
curve up to the wage rate $6 an hour.13b.Opportunity cost is the area under the supply curve. T o show the opportunity cost on the graph, shade in the area
under the supply curve up to 400 pickers on the x-axis.
A P P E N D I X T O C H A P T E R17
1a.The wage rate is $10 a day.
The monopsony firm maximizes its profit by hiring the
quantity of labor that makes the marginal cost of labor
equal to the marginal revenue product of labor (see Fig.
A14.2). The marginal product of the fifth worker is 10
grains per day. Gold sells for $1.40 per grain, so the mar-
ginal revenue product of the fifth worker is $14 a day. The
marginal cost of the fifth worker a day equals the total
labor cost of 5 workers a day minus the total labor cost of
4 workers a day. The supply of labor tells us that to hire 5
workers a day, the gold company must pay $10 a day, so
the total labor cost is $50 a day. The supply of labor also
tells us that to hire 4 workers a day, the gold company
must pay $9 a day, so the total labor cost is $36 a day. So
the marginal cost of the fifth worker is $14 a day ($50
minus $36).
The profit-maximizing quantity of labor is 5 workers
because the marginal cost of the fifth worker equals the
marginal revenue product of the fifth worker. The monop-
sony pays the 5 workers the lowest wage possible: the wage
rate at which the 5 workers are willing to supply their
labor. The supply of labor schedule tells us that 5 workers
are willing to supply their labor for $10 a day.
1b.The gold company hires 5 workers a day.
1c.The marginal revenue product of the fifth worker is $14
a day.
C H A P T E R18
1a.Money income equals market income (wages, interest, and rent) plus cash payments from the government.
1b.T o draw the Lorenz curve, plot the cumulative percentage of households on the x-axis and the cumulative percentage of
income on the y-axis. Make the scale on the two axes the
same. The Lorenz curve will pass through the following
points: 20 percent on the x-axis and 4 percent on the y-axis;
40 percent on the x-axis and 14.8 percent on the y-axis; 60
percent on the x-axis and 32.1 percent on the y-axis; 80 per-
cent on the x-axis and 56.3 percent on the y-axis; and 100
percent on the x-axis and 100 percent on the y-axis.
1c.U.S. money income is distributed more equally in 1967 than in 2001.
The line of equality shows an equal distribution of
income. The closer the Lorenz curve is to the line of
equality, the more equal is the income distribution. The
Lorenz curve for the U.S. economy in 1967 lies closer to
the Line of equality than does the Lorenz curve in 2001. 1d.The biggest difference in the distribution of income in the United States in 1967 and 2001 is the share of income
received by the highest 20 percent. This share increased
from 43.7 percent to 50.1 percent. Smaller differences are
the shares received by the four other groups, each of which S O L U T I O N S T O O D D-N U M B E R E D P R O B L E M S17
17S OLUTIONS TO O DD-N UMBERED P ROBLEMS
18S OLUTIONS
TO
O DD -N UMBERED P ROBLEMS
C H A P T E R 19
1a.Lee’s expected income is $2,000 a month.
Lee’s expected income is (0.5)($4,000) ?(0.5)($0) ?$2,000 a month.
1b.Lee’s utility is 50 units.
When Lee’s income is $4,000, her utility is 100. When Lee’s income is $0, her utility is 0. So Lee’s expected utility is (0.5)(100) ?(0.5)(0) ?50.
1c.Lee would have to be offered about $1,300 a month with
certainty to persuade her not to take the risky job.
Lee would have to be offered the income that would give her with certainty 50 units of utility. This income is read from the graph at the 50 units on the y-axis.3a.Zenda is more risk adverse.
Zenda is more risk adverse than Jimmy because Zenda’s marginal utility of wealth decreases more quickly than does Jimmy’s. The table sets out their marginal utility of wealth.
Jimmy's
Zenda's
Jim m y's m arginal Zenda’s m arginal Wealth
utility
utility utility
utility
2.00
5.12100200
512
1.00
1.28
200300
640
0.50
0.32
300350
672
0.25
0.06
400375
678
0.12
0.03
500387
681
0.06
0.02
600393
683
0.03
0.01
700
396
6845.Lee is willing to pay up to $4,500 for insurance.
Lee’s expected wealth is 0.75 ($0) ?0.25 ($5,000), which equals $1,250. With $1,250 of expected wealth, Lee’s expected utility is 0.75 (0) ?0.25 (105), which equals 26units. Her guaranteed wealth is $500, the wealth at which her utility is 26 units. The maximum amount Lee is will-ing to pay for insurance is $5,000 minus $500, which is $4,500.
7.The search problem is the same as set out on pp.441–442. Lee is searching for information about the
prices of cars and the quality of cars. She searches for it by visiting car dealers. She sets a reservation price (and qual-ity) and buys when she finds a price (and quality) equal to her reservation price (and quality).
9a.Zaneb is well known for her honesty and integrity, so she
creates no moral hazard or adverse selection problems for the car dealer or for the bank.
9b.The car dealer creates a moral hazard and adverse selection
problems for Zaneb because the car might be a lemon.9c.Warranties are designed to help cope with the moral haz-ard and adverse selection problems on cars. The bank has
decreased. The most likely explanation for these differ-ences (and the one provided in the chapter) is that the information technologies of the 1990s are substitutes for low-skilled labor and complements of high-skilled labor.The demand for low-skilled labor has decreased relative to the supply of low-skilled labor and the wage rate of low-skilled labor has increased more slowly than the average.The demand for high-skilled labor has increased relative to the supply of high-skilled labor and the wage rate of high-skilled labor has increased faster than the average.3a.
The wage rate of low-skilled workers is $5 an hour.The wage rate adjusts to make the quantity of labor demanded equal to the quantity supplied.
3b.Firms employ 5,000 hours of low-skilled workers a day. At a wage rate of $5 an hour, 5,000 hours are employed each day.3c.
The wage rate of high-skilled workers is $8 an hour.Because the marginal product of high-skilled workers is twice the marginal product of low-skilled workers, firms are willing to pay high-skilled workers twice the wage rate that they are willing to pay low-skilled workers. For exam-ple, the demand curve for low-skilled workers tells us that firms are willing to hire 6,000 hours of low-skilled workers at a wage rate of $4 an hour. So with high-skilled workers twice as productive as low-skilled workers, firms are will-ing to hire 6,000 hours of high-skilled workers at $8 an hour. That is, the demand curve for high-skilled labor lies above the demand curve for low-skilled workers such that at each quantity of workers the wage rate for high-skilled workers is double that for low-skilled workers.
The supply of high-skilled workers lies above the supply of low-skilled workers such that the vertical distance between the two supply curves equals the cost of acquiring the high skill—$2 an hour. That is, high-skilled workers will supply 6,000 hours a day if the wage rate is $8 an hour.
Equilibrium in the labor market for high-skilled workers occurs at a wage rate of $8 an hour.
3d.Firms employ 6,000 hours of high-skilled workers a day. 5a.Market income is the income earned by factors of produc-tion in the marketplace. Labor earns wages, capital earns interest, land earns rent and entrepreneurship earns profit.5b.
T o draw the Lorenz curve, plot the cumulative percentage of households on the x -axis and the cumulative percentage of market income on the y -axis. Make the scale on the two axes the same. The Lorenz curve will pass through the following points: 20 percent on the x -axis and 1.1 percent on the y -axis; 40 percent on the x -axis and 8.2 percent on the y -axis;60 percent on the x -axis and 22.1 percent on the y -axis; 80percent on the x -axis and 44.9 percent on the y -axis; and 100percent on the x -axis and 100 percent on the y -axis.
5c.
U.S. money income is distributed more equally in than market income in 2001.
The Lorenz curve for the U.S. money income in 2001 lies closer to the Line of equality than does the Lorenz curve for U.S. market income in 2001. Money income is distrib-uted more equally than market income because money income includes cash payments to poor household, which increases their income.
C H A P T E R 21
1a.Aggregate expenditure is $120 million. Aggregate expen-diture is the sum of consumption expenditure, invest-ment, government purchases, and net exports. In the fig-ure, B is consumption expenditure, D is investment, C is government purchases, and E is net exports. Therefore aggregate expenditure equals $60 million plus $30 mil-lion plus $24 million plus $6 million, which is $120 million.
1b.Aggregate income is $120 million.
Aggregate income equals aggregate expenditure, which from 1(a) is $120 million.
1c.GDP is $120 million. GDP equals aggregate expenditure,
which from 1(a) is $120 million.
https://www.wendangku.net/doc/a211674846.html,ernment budget deficit is $4 million.
Government budget deficit equals government purchases minus net taxes. C is government purchases, and A is net taxes. So the government budget deficit equals $24 million minus $20 million, which is $4 million.1e.Household saving is $40 million.
Household saving equals aggregate income minus con-sumption expenditure minus net taxes. From 1(b), income is $120 million. In the figure, B is consumption expendi-ture and A is net taxes. Therefore household saving equals $120 million minus $60 million minus $20 million,which is $40 million.
https://www.wendangku.net/doc/a211674846.html,ernment saving is minus $4 million.
Government saving equals net taxes minus government pur-chases. In the figure, A is net taxes and C is government expenditure. Therefore government saving equals $20 mil-lion minus $24 million, which is minus $4 million.1g.National saving is $36 million.
National saving equals the sum of household saving and government saving. Household saving is $40 million (see answer 1e). Government saving is minus $2 million (see answer 1f). Therefore national saving equals $40 million minus $4 million, which is $36 million.
1h.Borrowing from the rest of the world is minus $6 million.
Borrowing from the rest of the world equals minus net exports. E is net exports, and net exports equals $6 mil-lion. We are in surplus, so foreigners are in deficit and they must borrow from us to pay for their deficit.
3.Martha’s initial capital stock is 10 copiers, depreciation is 1 copier per year, gross investment is 5 copiers, net invest-ment is 4 copiers, and the final capital stock is 14 copiers.Final capital stock equals initial capital stock plus net
investment. Net investment equals gross investment minus depreciation.
5a.Ecoland’s GDP is $1,100,000.
GDP equals the sum of consumption expenditure plus investment plus government purchases plus exports minus imports. That is, GDP equals $600,000 plus $250,000plus $200,000 plus $300,000 minus $250,000. GDP equals $1,100,000.
S O L U T I O N S
T O
O D D -N U M B E R E D P R O B L E M S 19
information on Zaneb’s income and reputation, so doesn’t face moral hazard and adverse selection problems.
C H A P T E R 20
Data Graphing in MyEconLab allows students to plot the time-series graph or scatter diagram based on the data. T o answer problems that involve more than one country, use the International Comparisons dataset and not the indi-vidual country datasets. After plotting the graph, students can print it, and then use the printed graph to answer the questions.
1a.The growth rate of real GDP in 2002 was highest in Canada.1b.The unemployment rate in 2002 was highest in Canada.1c. The inflation rate in 2002 was lowest in the United Kingdom.
1d.The government budget deficit in 2002 was largest in the United States.
3a.India’s economic growth rate was positive in every year from 1989 to 1996. Its economic growth rate was fastest in 1989.
3b.Pakistan’s economic growth rate was not negative during this period. Its economic growth rate was slowest in 1993.3c.
From 1989 to 1993, when India’s economic growth rate increased, Pakistan’s decreased. But from 1993 to 1995,both economic growth rates increased. In 1996, they were the same.
5a.
Germany had one recession in the third and fourth quar-ters of 1992.
A recession is a period during which real GDP decreases for at least two successive quarters. Real GDP decreased in the third and fourth quarters of 1992.
5b.
Germany experienced a business cycle peak in the fourth quarter of 1991. A business cycle peak is the upper turn-ing point. A peak occurs when real GDP stops growing and starts to decrease.
5c.
Germany experienced a business cycle trough in the fourth quarter of 1992. A business cycle trough is the lower turn-ing point of a business cycle where a recession ends and an expansion begins.
5d.
Germany experienced an expansion during the third and fourth quarters of 1991 and from the first quarter of 1993through the second quarter of 1994. An expansion is a period during which real GDP increases.
7a.In 2002, Japan and the United States had similar large budget deficits as a percentage of GDP .
7b.In 2002, Canada, Japan, and Germany had current account surpluses, while the United States had a current account deficit. Japan had the largest current account surplus.
9a.There is no clear relationship, either positive or negative,between inflation and unemployment.
9b.
No, there is no evidence from the data that low unem-ployment brings an increase in the inflation rate. Low lev-els of both seem to be consistent with the data.
5b.Expenditure approach. Income approach cannot be used because there are no data on interest, rent, depreciation,
and indirect taxes and subsidies.
5c.Investment is financed by private saving plus government saving plus borrowing from the rest of the world.
Private saving equals GDP minus consumption expendi-
ture minus net taxes, which is $300,000. Government sav-ing equals the budget surplus, which equals net taxes
minus government purchases. Net taxes equal taxes
($250,000) minus transfer payments ($50,000), which is
$200,000. Government saving equals net taxes ($200,000) minus government purchases ($200,000), which is zero.
Private saving exceeds investment by $50,000 and this
amount is lent to the rest of the world.
7a.In 2002, nominal GDP is $7,000. In 2003, nominal GDP is $7,500.
Nominal GDP in 2002 is equal to total expenditure on
the goods and services produced by Bananaland in 2002.
Expenditure on bananas is 1,000 bunches at $2 a bunch,
which is $2,000. Expenditure on sunscreen is 500 bottles
at $10 a bottle, which is $5,000. T otal expenditure is
$7,000. So nominal GDP in 2002 is $7,000.
Nominal GDP in 2003 is equal to total expenditure on
the goods and services produced by Bananaland in 2003.
Expenditure on bananas is 1,100 bunches at $3 a bunch,
which is $3,300. Expenditure on sunscreen is 525 bottles
at $8 a bottle, which is $4,200. T otal expenditure is
$7,500. So nominal GDP in 2002 is $7,500.
7b. Real GDP in 2003 using base-year prices method is $7,450.
The base-year prices method is to calculate the market
value of the 2003 quantities at the base-year prices of
2002. T o value the 2003 output at 2002 prices, expendi-
ture on bananas is 1,100 bunches at $2 a bunch (which is $2,200), and expenditure on sunscreen is 525 bottles at
$10 a bottle (which is $5,250). So real GDP in 2003
using the base-year prices method is $7,450.
9a.The growth rate of real GDP in 2003 is 6.79 percent.
The chain-weighted output index method uses the prices
of 2002 and 2003 to calculate the growth rate in 2003.
The value of the 2002 quantities at 2002 prices is $7,000.
The value of the 2003 quantities at 2002 prices is $7,450.
We now compare these values. The increase in the value is $450. The percentage increase is ($450/$7,000) ?100,
which is 6.43 percent.
The value of the 2002 quantities at 2003 prices is $7,000.
The value of the 2003 quantities at 2003 prices is $7,500.
We now compare these values. The increase in the value is $500. The percentage increase is ($500/$7,000) ?100,
which is 7.14 percent.
The chain-weighted output index calculates the growth
rate as the average of these two percentage growth rates.
That is, the growth rate in 2003 is 6.79 percent
9b.The GDP deflator in 2003 is 100.33.
GDP deflator equals nominal GDP in 2003 divided by
real GDP in 2003, multiplied by 100.
Real GDP in 2003 is 6.79 percent higher than real GDP
in 2002. Real GDP in 2002 is $7,000, so real GDP in
2003 is $7,475.3.
GDP deflator equals ($7,500/$7,475.3) ?100 ?100.33. 9c.Real GDP in 2003 using the base-year prices method is $7,450. Real GDP in 2003 using the chain-weighted out-
put index method is $7,475.3. The base-year prices
method measures real GDP growth as being slower than
the chain-weighted index measure.
C H A P T E R22
1a.Unemployment rate is 4.0 percent.
The unemployment rate is the percentage of the labor
force that is unemployed. The labor force is the sum of
the people unemployed and the people employed. So
the number of people who are unemployed is
141,544,000 minus 135,888,000, which is 5,656,000.
The unemployment rate equals (the number of people
unemployed divided by the labor force) multiplied by
100. That is, (5,656,000/141,544,000) ?100, which is
4.0 percent.
1b.The labor force participation rate is 67.2 percent.
The labor force participation rate is the percentage of the
working-age population that is in the labor force. The
working-age population is 210,743,000 and the labor
force is 141,544,000, so the labor force participation rate
equals (141,544,000/210,743,000) ?100, which equals
67.2 percent.
1c.The employment-to-population ratio is 64.5 percent.
The employment-to-population ratio is the percentage of
the people of working age who have jobs. The employ-
ment-to-population ratio is equal to the number of peo-
ple employed divided by the working-age population all
multiplied by 100. The employment-to-population ratio
is (135,888,000/210,743,000) ?100, which is 64.5
percent.
3.Unemployment decreased by 64,000.
The number of people not in the labor force increased by
600,000. During 2000, employment in the United States
increased by 1,375,000 and the labor force increased by
1,311,000. The number of unemployed is calculated as the
labor force minus the number employed. When the labor
force increased by 1,311,000 and employment increased by
1,375,000, unemployment decreased by 64,000.
5a.The number of job losers probably increased.
The number of job leavers probably did not change much.
The increase in the unemployment rate is an indication
that the economy was slowing and possibly going into
recession. Normally, in a recession, the number of job los-
ers increases but the number of job leavers does not
change much.
https://www.wendangku.net/doc/a211674846.html,bor force entrants and re-entrants probably decreased.
In a recession, discouraged workers remain outside the
labor force. So it is likely that entrants and re-entrants
decreased.
7a.The labor force in July is 11,000. It is the number employed plus the number unemployed.
20S OLUTIONS TO O DD-N UMBERED P ROBLEMS
计量经济学题库及答案
计量经济学题库 一、单项选择题（每小题1分） 1．计量经济学是下列哪门学科的分支学科（C）。 A．统计学 B．数学 C．经济学 D．数理统计学 2．计量经济学成为一门独立学科的标志是（B）。 A．1930年世界计量经济学会成立B．1933年《计量经济学》会刊出版 C．1969年诺贝尔经济学奖设立 D．1926年计量经济学（Economics）一词构造出来 3．外生变量和滞后变量统称为（D）。 A．控制变量 B．解释变量 C．被解释变量 D．前定变量4．横截面数据是指（A）。 A．同一时点上不同统计单位相同统计指标组成的数据B．同一时点上相同统计单位相同统计指标组成的数据 C．同一时点上相同统计单位不同统计指标组成的数据D．同一时点上不同统计单位不同统计指标组成的数据 5．同一统计指标，同一统计单位按时间顺序记录形成的数据列是（C）。 A．时期数据 B．混合数据 C．时间序列数据 D．横截面数据6．在计量经济模型中，由模型系统内部因素决定，表现为具有一定的概率分布的随机变量，其数值受模型中其他变量影响的变量是（ A ）。 A．内生变量 B．外生变量 C．滞后变量 D．前定变量7．描述微观主体经济活动中的变量关系的计量经济模型是（ A ）。 A．微观计量经济模型 B．宏观计量经济模型 C．理论计量经济模型 D．应用计量经济模型 8．经济计量模型的被解释变量一定是（ C ）。 A．控制变量 B．政策变量 C．内生变量 D．外生变量9．下面属于横截面数据的是（ D ）。 A．1991－2003年各年某地区20个乡镇企业的平均工业产值 B．1991－2003年各年某地区20个乡镇企业各镇的工业产值 C．某年某地区20个乡镇工业产值的合计数 D．某年某地区20个乡镇各镇的工业产值 10．经济计量分析工作的基本步骤是（ A ）。 A．设定理论模型→收集样本资料→估计模型参数→检验模型B．设定模型→估计参数→检验模型→应用
c语言试题及答案
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B.平均储蓄倾向。 C.边际消费倾向。 D.边际储蓄倾向 6. 如果消费函数为C=100+0.8(Y-T)，那么政府支出乘数是（D）。 A.0.8 B.1.253 C.4 D.5 7. 如果消费函数为C=100+0.8(Y-T)，并且税收和政府支出同时增加一元，则均衡的收入水平将（ C ）。 A.保持不变。 B.增加3元。 C.增加1元。 D.下降4元。 8．边际消费倾向小于1，意味着当前可支配收入的增加将使意愿的消费支出（ A ）。 A.增加，但幅度小于可支配收入的增加幅度。 B.有所下降，这是由于收入的增加会增加储蓄。 C.增加，其幅度等于可支配收入的增加幅度。 D.保持不变，这是由于边际储蓄倾向同样小于1。 9．投资乘数等于（A）。 A.收入变化除以投资变化。 B.投资变化除以收入变化。 C.边际消费倾向的倒数。
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2016《书法鉴赏》期末考试答案(1)
.
一、 单选题（题数：50，共 50.0 分）
1
颜真卿曾拜谁为师
? A、
欧阳询
? B、
王羲之
? C、
褚遂良
? D、
张旭
我的答案：D
2
石鼓文在书法史的地位为上承什么文，下启秦代小篆
? A、
甲骨文 ;..
.
? B、
金文
? C、
大篆
? D、
钟鼎文
我的答案：B
3
《草书蒲团》中用笔多用（）
? A、
中锋
? B、
侧锋
? C、
回锋
;..
.
? D、
藏锋
我的答案：B
4
下列选项中不是魏碑书写共同的特征是
? A、
点画浑厚丰润
? B、
笔势飞动，相互呼应
? C、
结字自然气势开张
? D、
方折用笔
我的答案：D
5
柳公权是唐朝哪个时期的书法家
;..
.
? A、
初唐
? B、
中唐
? C、
盛唐
? D、
晚唐
我的答案：D
6
魏晋南北朝时期的楷书也叫什么
? A、
魏碑
? B、
晋碑
;..
.
? C、
南碑
? D、
北碑
我的答案：A
7
碑刻是（）开始盛行的一种石刻类型。
? A、
秦
? B、
魏
? C、
晋
? D、
东汉
;..
JAVA语言程序设计期末考试试题及答案
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计量经济学题库超完整版)及答案-计量经济学题库
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A．1991－2003年各年某地区20个乡镇企业的平均工业产值 B．1991－2003年各年某地区20个乡镇企业各镇的工业产值 C．某年某地区20个乡镇工业产值的合计数D．某年某地区20个乡镇各镇的工业产值 10．经济计量分析工作的基本步骤是（）。 A．设定理论模型→收集样本资料→估计模型参数→检验模型B．设定模型→估计参数→检验模型→应用模型 C．个体设计→总体估计→估计模型→应用模型D．确定模型导向→确定变量及方程式→估计模型→应用模型 11．将内生变量的前期值作解释变量，这样的变量称为（）。 A．虚拟变量B．控制变量C．政策变量D．滞后变量 12．（）是具有一定概率分布的随机变量，它的数值由模型本身决定。 A．外生变量B．内生变量C．前定变量D．滞后变量 13．同一统计指标按时间顺序记录的数据列称为（）。 A．横截面数据B．时间序列数据C．修匀数据D．原始数据 14．计量经济模型的基本应用领域有（）。 A．结构分析、经济预测、政策评价B．弹性分析、乘数分析、政策模拟 C．消费需求分析、生产技术分析、D．季度分析、年度分析、中长期分析 15．变量之间的关系可以分为两大类，它们是（）。 A．函数关系与相关关系B．线性相关关系和非线性相关关系 C．正相关关系和负相关关系D．简单相关关系和复杂相关关系 16．相关关系是指（）。 A．变量间的非独立关系B．变量间的因果关系C．变量间的函数关系D．变量间不确定性
c语言考试试题以及答案
1. 编程求和1-2+3-4+5-6+…+99-100 #include<> int main() { int i,t,s; s=0; t=1; for(i=1;i<=100;i++) { t=-t; s=s+(-t)*i; } printf("%d\n",s); system("pause"); return 0; } 2．求：1+（1+2）+（1+2+3）+…+(1+2+3+….10) 的和 #include<> int main() { int i,t,s; s=0; t=0; for(i=1;i<=10;i++) { t=t+i; s=s+t; } printf("%d\n",s); system("pause"); return 0; } 3. 求n的值，其中a是一个不为0的数字，例如2+22+222+2222+22222，其中数字a和n由键盘输入。 #include<> int main() { int a,n,i=1,sn=0,tn=0; printf("a,n:"); scanf("%d %d",&a,&n); while(i<=n) {tn=tn+a; sn=sn+tn; a=a*10; i++; } printf("%d\n",sn); system("pause"); return 0; } 4. 有一个函数如下： x (x<5) y= 2x+6 (5<=x<15) 2x-6 (x>=15) 输入x的值，计算出相应的y值。 #include<>
int main() { int x,y; printf("输入X："); scanf("%d",&x); if(x<5) { y=x; printf("x=%3d,y=x=%d\n",x,y); } else if(x>=5&&x<15) {y=2*x+6; printf("x=%3d,y=2*x+6=%d\n",x,y); } else {y=2*x-6; printf("x=%3d,y=2*x-6=%d\n",x,y); } system("pause"); return 0; } 5. 某国的税收政策为：1000元以下免税，1000~2000元缴纳5%的税，2000~4000元上税10%，4000元以上按20%交税。试编写程序，输入一个人的收入，计算其需要上缴的税额。 #include<> int main() { float a; scanf("%f",&a); if(a<=1000) { printf("免税",a); } if(a>1000&&a<=2000) { printf("%f",a*); } if(a>2000&&a<=4000) { printf("%f",a*); } else printf("%f",a*); system("pause"); return 0; } 6. 编程分段统计学生成绩，输入为负数时结束。要求按90－100、80－89、70－79、60－69、60以下五档分别统计各分数段人数 #include<> int main() { float score; int a[6]={0,0,0,0,0,0}; char grade; int i; do{ scanf("%f",&score);
计量经济学题库及答案
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宏观经济学习题册+本科+参考答案
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计量经济学题库及答案71408
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