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Infant %Population %ofPopulation Population Nation percapita GDP Mortality/1000 GrowthRate Age0-14 persq.km U.S. $52,800 6 .8 19 32 Netherlands 43,300 4 .4 17 406 Canada 43,100 5 .8 16 3 Australia 43,000 4 1.1 18 3 Taiwan 39,600 4 .3 14 649 Germany 39,500 3 -.2 13 227 United Kingdom 37,300 4 .5 17 262 Japan 37,100 2 -.1 13 336 Israel 36,200 4 1.5 27 377 France 35,700 3 .5 19 103 South Korea 33,200 4 .2 14 492 Saudi Arabia 31,300 15 1.5 28 13 Spain 30,100 3 .8 15 94 Italy 29,600 3 .3 14 205 Poland 21,100 6 -.1 15 123 Argentina 18,600 10 1.0 25 15 Russia 18,100 7 0 16 8 Malaysia 17,500 14 1.5 29 91 Mexico 15,600 13 1.2 28 61 Turkey 15,300 21 1.1 26 104 Venezuela 13,600 19 1.4 28 32 World 13,100 37 1.1 26 48 Iran 12,800 39 1.2 24 49 Brazil 12,100 19 .8 24 24 South Africa 11,500 42 -.5 28 40 Colombia 11,100 15 1.1 25 41 Peru 11,100 20 1.0 27 23 Thailand 9,900 10 .4 18 132 China 9,800 15 .4 17 141 Algeria 7,500 22 1.9 28 16 Ukraine 7,400 8 -.6 14 73 Iraq 7,100 38 2.2 37 74 Egypt 6,600 22 1.8 32 87 Morocco 5,500 25 1.0 27 74 Indonesia 5,200 25 1.0 26 133 Philippines 4,700 18 1.8 34 359 India 4,000 43 1.3 29 376 Vietnam 4,000 19 1.0 24 282 Pakistan 3,100 57 1.5 33 246 Nigeria 2,800 74 2.5 43 192 Sudan 2,600 53 1.8 41 19 Bangladesh 2,100 46 1.6 32 1155 Kenya 1,800 41 2.1 42 78 North Korea 1,800 25 .5 22 206 Burma 1,700 45 1.0 26 82 Tanzania 1,700 44 2.8 45 52 Uganda 1,500 61 3.2 49 149 Nepal 1,500 40 1.8 32 211 Ethiopia 1,300 56 2.9 44 88 Haiti 1,300 49 1.1 34 360 Afghanistan 1,100 117 2.3 42 49 Somalia 600 100 1.8 44 16 Congo, D.R. 400 73 2.5 43 33 FOR REVIEW ONLY - NOT FOR DISTRIBUTION Less Developed Countries 15 - 4

Obstacles to Economic Development for LDCs Given the hardships associated with low standards of living, LDCs usually desire to achieve economic development. But LDCs often face one or more of the following obstacles to economic development: 1. Rapid population growth. Population growth rates tend to be higher in LDCs than in developed countries. Example 12: The ten highest per capita GDP nations in the table on page 15-4 have an average population growth rate of .56%. The ten lowest per capita GDP nations in the table have an average population growth rate of 1.99%. The problem created by a rapid population growth rate is not overpopulation. Generally, developed countries are more densely populated (more population per square kilometer) than LDCs. Example 13: Taiwan is over four times more densely populated than China. South Korea is over twice as densely populated as North Korea. The Netherlands is more densely populated than India. Japan and the United Kingdom are both more densely populated than Pakistan. The problem created by a rapid population growth rate is a high dependency ratio. A high dependency ratio means that a large percentage of the population consists of children and the elderly. Example 14: For the ten highest per capita GDP nations in the table on page 15-4, 17% of their populations are age 0-14. For the ten lowest per capita GDP nations in the table, 38% of their populations are age 0-14. A high dependency ratio makes it difficult for the working-age population to support themselves and the large number of dependents, and also make investments toward economic development. Some economists (e.g. Peter Bauer) have argued that rapid population growth is not an obstacle to economic development. Bauer pointed out that most developed countries had high population growth rates in their earlier stages of economic development, which did not hinder their economic development. Example 15: The U.S. had a population growth rate of about 3% per year from 1790 to 1860. The eight-fold increase in the population during this seventy year period accompanied significant economic growth. 2. Low savings rate. Standards of living are very low in LDCs. These low standards of living make it difficult to save (delay consumption). But saving is necessary if investments in physical capital and human capital are to be made. This situation, where LDCs have low standards of living because they don’t save and invest, and don’t save and invest because they have low standards of living is called the “vicious circle of poverty”. An LDC might be able to escape the vicious circle of poverty by attracting foreign investment. Foreign investment in physical capital will increase labor productivity and the standard of living. The higher standard of living will make it easier to save, leading to more investment. To attract foreign investment, an LDC needs to avoid the counterproductive governmental policies discussed later in this chapter. FOR REVIEW ONLY - NOT FOR DISTRIBUTION Some economists (e.g. Peter Bauer) have argued that no “vicious circle of poverty” exists. Bauer pointed out that every developed country was at one time less developed, and obviously managed to save and invest and escape from low development. 15 - 5 Less Developed Countries

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    PRINCIPLES OF ECONOMICS JEFF HOLT S

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    Principles of Economics, 6th Editio

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    16. Study Guide for Chapter 7 17. C

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    11. Appendix: Book Review - “The

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    20. Appendix: The NCAA Cartel 21. S

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    Introduction: A Brief History of U.

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    In the twentieth century, per capit

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    Appendix: The 35 Largest National E

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    Multiple Choice: ___ 1. The Jamesto

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    2. Describe the economic cost of th

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    Chapter 1 Scarcity and Choices The

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    Example 5B: At the end of 1982, the

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    Example 11: When Cindy quits her jo

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    consequences may result in failure

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    An upward sloping curve (as in Exam

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    In making decisions, humans tend to

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    5. ______________________ _________

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    ___ 13. If the value of one variabl

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    Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7

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    Chapter 2 Trade and Economic System

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    Example 4B: The following quantitie

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    1. An increase in the quantity of r

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    3. For whom to produce? This is det

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    The graph below illustrates the shi

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    The two primary economic systems ar

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    ___ 12. The capitalist vision sees

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    ___ 25. According to the book “Ca

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    Chapter 3 Demand, Supply, and Equil

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    . For inferior goods, income and de

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    The same information can be placed

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    Not only does a free market elimina

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    $7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3

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    Example 17: The graph below illustr

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    Questions for Chapter 3 Fill-in-the

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    ___ 12. Assuming a market originall

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    $8 - 7 - 6 - 5 - Price 4 - 3 - 2 -

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    Chapter 4 Inflation and Unemploymen

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    Computing the Rate of Inflation The

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    Full Employment Though unemployment

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    3. Cyclical unemployment - due to d

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    During the Great Depression, the ec

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    Appendix: Think Like an Economist -

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    Answer questions 8. and 9. based on

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    ___ 25. The extension of unemployme

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    Chapter 5 Measuring Total Output: G

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    The U.S. is a high per capita GDP c

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    Example 17: In “An International

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    The simple circular flow diagram be

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    ___ 3. Which of the following would

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    2. Explain what nonproduction trans

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    Chapter 6 The Aggregate Market The

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    Example 2C: Assume the same facts a

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    Example 5B: The price of crude oil

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    Price Level Real GDP SRAS AD 2 AD 1

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    Appendix: Why the Aggregate Demand

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    ___ 3. DEF Company can invest in ne

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    2. List and explain the two factors

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    Chapter 7 Classical Economic Theory

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    Notice that the investment demand c

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    Long-Run Equilibrium If Real GDP is

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    Example 6B: When the economy is in

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    Laissez-faire If the economy is sel

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    ___ 5. According to Say’s Law: a.

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    3. On the graph below, draw an aggr

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    Chapter 8 Keynesian Economic Theory

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    Example 2B: The graph below illustr

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    Example 5: Assume that the table be

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    Notice on the graph on the previous

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    According to Keynesian theory, a ch

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    “The General Theory” also inclu

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    ___ 8. If the consumption function

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    3. If the MPC is .667, and investme

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    Chapter 9 Fiscal Policy The basic e

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    Keynesian Fiscal Policy Theory and

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    Example 5A: The federal government

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    The Laffer Curve What will happen t

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    Appendix: The Importance of Incenti

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    ___ 4. A decrease in government exp

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    2. Explain what automatic stabilize

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    Chapter 10 Money, Money Creation, a

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    Example 4B: The castaways on Gillig

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    Looking at the balance sheet below,

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    Demand-side One-shot Inflation Exam

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    4. Inflation increases uncertainty

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    life; it came into existence not by

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    calculated by using the potential d

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    ___ 12. If the required-reserve rat

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    4. Referring to the balance sheet f

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    Chapter 11 The Federal Reserve Syst

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    5. After Bank X sells the $300,000

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    Low Mortgage Interest Rates Mortgag

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    Relaxed Standards for Mortgage Loan

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    The Bursting of the Housing Bubble

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    On February 17, 2009, the federal g

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    Fed policies caused short-term inte

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    ___ 10. The Fed’s most important

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    ___ 25. In response to the recessio

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    Chapter 18 Utility The basic econom

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    Nonetheless, society generally assu

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    Example 9: Capital City operates a

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    Marginal rate of substitution - the

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    The diamond-water paradox is the ob

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    Complete the table below to answer

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    4. The graph below shows indifferen

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    Chapter 19 The Firm The basic econo

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    than contributing to team productio

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    1. Difficulty in raising large amou

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    Corporations also use self-financin

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    Example 24: A blacksmith who produc

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    For financing needs, proprietorship

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    ___ 13. Corporations: a. are comple

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    5. List two things that the absence

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    Chapter 20 Production and Costs The

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    In Example 5B, Birdwell finds that

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    variable cost initially decreases,

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    Quantity TC MC AFC AVC ATC 0 240 X

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    If the scale of operation is increa

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    average total cost. Average fixed c

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    ___ 11. Concerning the cost curves:

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    5. Complete the following cost tabl

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    Chapter 21 Perfect Competition The

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    Even though a perfect competitor ca

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    Example 6C: This example builds on

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    At what price will there be neither

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    Appendix: Perfect Competition in th

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    Multiple Choice: ___ 1. A perfect c

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    ___ 17. Perfect competition: a. req

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    Answers for Chapter 21 Fill-in-the-

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    Chapter 22 Monopoly Of the four mar

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    3. Exclusive ownership of an essent

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    maximizing quantity (4 units) creat

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    $22 - 20 - 18 - 16 - 14 - Deadweigh

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    2. Negotiating, beginning at a high

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    Legal barriers are created by gover

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    ___ 8. The slope of the demand curv

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    Price Quantity 3. List some of the

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    Chapter 23 Monopolistic Competition

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    For Percomp (the perfect competitor

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    Example 7A: The graph below represe

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    Example 9: The Organization of the

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    Example 12 illustrates the dilemma

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    its current price and quantity. The

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    ___ 14. Game theory: a. is a method

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    Answers for Chapter 23 Fill-in-the-

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    Chapter 24 Factor Markets The basic

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    $ $240 - 200 - 160 - 120 - 80 - 40

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    Since producers will attempt to equ

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    2. Differences in nonmoney aspects

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    were his strikeouts, walks, and hom

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    ___ 3. To maximize profits, a produ

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    ___ 19. According to the book, “M

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    Multiple Choice: 1. a. 8. c. 15. d.

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    Chapter 25 Labor Unions The primary

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    The elasticity of demand for union

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    Example 4A: Assume that the graph b

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    Notice from the graph in Example 6

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    Wage Factory A Quantity of Labor S

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    As a cartel, a labor union faces a

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    ___ 10. For a monopsony: a. there i

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    3. The graph below represents a lab

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    Chapter 26 Interest, Present Value,

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    An increase in expected rates of re

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    An asset is valuable because we exp

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    Example 13B: General Ordnance prove

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    Appendix: Present Value Table One f

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    ___ 4. An increase in expected rate

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    Problems: 1. List and explain the t

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    Chapter 27 Market Failure The basic

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    External Benefit If a market genera

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    Example 2: To encourage the consump

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    $100 - 90 - 80 - MSC 70 - $ 60 - 50

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    A common good is nonexcludable. Non

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    Study Guide for Chapter 27 Chapter

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    ___ 5. What government policy would

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    4. Based on the information on the

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    Chapter 28 Public Choice and Govern

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    Candidates and the Median Voter Mod

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    Example 8: According to State and F

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    Example 10: When Elvis Presley was

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    4. Pessimistic bias. This is the te

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    ___ 5. An elected official will: a.

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    2. If a certain policy will yield s

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    Chapter 29 Government Regulation of

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    underproduction is the amount that

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    micromanagement results in business

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    market. They may agree with their c

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    Questions for Chapter 29 Fill-in-th

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    ___ 10. The public interest theory

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    4. List the four types of costs imp

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    Chapter 30 Agriculture and Health C

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    weather may cause bumper crops. Bad

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    Security and Rural Investment Act o

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    Example 12: From 1960 to 2013, the

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    1. NHI would provide universal heal

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    d. Insurance providers are not allo

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    Study Guide for Chapter 30 Chapter

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    Answer questions 7. through 10. by

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    ___ 21. If there were no individual

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    Chapter 31 Income Distribution and

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    Income is more equally distributed

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    over a typical career is the accumu

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    Ideal Income Redistribution The ide

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    Poverty - a family whose income fal

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    Appendix: Income Inequality around

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    How is this story an analogy for th

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    ___ 2. In 2013, the Lowest Income 6

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    Problems: 1. Explain the two primar

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    Absolute advantage - when one natio

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    Fiat money - money by government de

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    Nonrivalrous good - a good for whic

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    Absolute advantage, 16-9 Absolute e

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    “Company town”, 25-6 Comparativ

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    Eli Lilly and Company, 22-1 Emergen

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    Houston, Texas, 15-10 Human capital

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    Market, 3-1, 3-8-9 Market basket, 4

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    Political bias, 9-4, 12-7 Political

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    Short run production, 20-2-3 Short-

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    Upturns, 9-4 USDA, 27-9, 30-1-2, 30

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