Holt 7525-9 S15_IT

More documents

Recommendations

Info

Answers for Chapter 26 Fill-in-the-blanks: 1. Interest 2. real 3. Economic rent 4. Arbitrage Multiple Choice: 1. d. 8. b. 15. d. 2. b. 9. c. 16. d. 3. a. 10. b. 17. d. 4. c. 11. a. 18. c. 5. d. 12. b. 19. d. 6. a. 13. d. 20. c. 7. b. 14. d. 21. a. Problems: 1. The private demand for loanable funds comes from: (1) Consumers, who have a positive rate of time preference. A positive rate of time preference means consumers prefer earlier consumption to later consumption. This positive rate of time preference causes people to be willing to borrow (and pay interest) in order to consume now rather than later. (2) Business firms, which wish to invest in physical capital. Investing in physical capital can increase a business firm’s productivity. Investing in physical capital may require the use of loanable funds. 2. PV = F ÷ (1 + i) n = $75,000 ÷ (1 + .06) 5 = $75,000 ÷ (1.06) 5 = $75,000 ÷ 1.3382 = $56,044.36 3. Economic rent performs two functions: (1) Economic rent allocates resources to their most valuable uses (2) Economic rent provides incentive for resources owners to develop the productivity of their resources 4. The four sources of economic profit are: (1) Arbitrage (2) Uncertainty (3) Innovation (4) Monopoly profits FOR REVIEW ONLY - NOT FOR DISTRIBUTION Interest, Present Value, Rent, and Profit 26 - 14
Chapter 27 Market Failure The basic economic problem is scarcity. Human wants are unlimited. Resources are limited. The basic goal in dealing with the problem of scarcity is to produce as much consumer satisfaction as possible with the limited resources available. To achieve this goal, society must use its limited resources as efficiently as possible. Private markets generally work very well. Private markets produce in response to consumer demand. Private producers are motivated to produce the goods and services that will maximize consumer satisfaction, and to do so at the lowest opportunity cost, in order to maximize profits. As demand or supply change, the equilibrium price in a private market will adjust to eliminate any surplus or shortage. And private markets function based on the voluntary actions of consumers and producers. Private markets allow for maximum individual freedom. But private markets are not flawless. Private markets do not always produce the most efficient quantity of output. Economic efficiency rule – produce the quantity of output where marginal social benefit equals marginal social cost. Chapter 21 introduced the economic efficiency rule. In Chapter 21, we saw that perfectly competitive markets generally produce the optimal (economically efficient) quantity of output. In a perfectly competitive market, the firm’s goal of profit-maximization coincides with society’s goal of economic efficiency. A perfect competitor will maximize profits by producing the quantity of output where marginal revenue equals marginal cost. This will also be the quantity where price equals marginal cost and thus (assuming no externalities), where marginal social benefit equals marginal social cost. Chapters 22 and 23 illustrated that when a market is not perfectly competitive (e.g. monopoly, monopolistic competition, and oligopoly), it will not produce the optimal (economically efficient) quantity of output. This is an example of market failure. Market failure – occurs when the market does not produce the optimal quantity of output. One cause of market failure is a lack of perfect competition. The inefficiency resulting from a lack of perfect competition was discussed in Chapters 22 and 23. In Chapter 22, we saw that the deadweight loss caused by monopoly is the area between the demand curve and the marginal cost curve for the amount of underproduction. The deadweight loss for Monop Company is illustrated in Chapter 22 on page 22-7. Government regulation of natural monopoly in order to increase economic efficiency will be discussed in Chapter 29. This chapter illustrates other causes of market failure. Externalities When goods are produced and consumed, private benefits and private costs are generated. Sometimes benefits and costs are generated that are external to the private consumer and producer. These benefits and costs are called externalities. Externality – a benefit or a cost of an activity that affects third parties. When an external benefit or an external cost is generated, the private market will fail to produce the optimal (economically efficient) quantity. When an external benefit is generated, the private market equilibrium will be less than the optimal quantity. When an external cost is generated, the private market equilibrium will be greater than the optimal quantity. Over the next few pages, we will see how external benefits and costs cause the private market equilibrium to differ from the optimal quantity. FOR REVIEW ONLY - NOT FOR DISTRIBUTION 27 - 1 Market Failure
Page 1 and 2:
PRINCIPLES OF ECONOMICS JEFF HOLT S
Page 3 and 4:
Principles of Economics, 6th Editio
Page 5 and 6:
16. Study Guide for Chapter 7 17. C
Page 7 and 8:
11. Appendix: Book Review - “The
Page 9 and 10:
20. Appendix: The NCAA Cartel 21. S
Page 11 and 12:
Introduction: A Brief History of U.
Page 13 and 14:
In the twentieth century, per capit
Page 15 and 16:
Appendix: The 35 Largest National E
Page 17 and 18:
Multiple Choice: ___ 1. The Jamesto
Page 19 and 20:
2. Describe the economic cost of th
Page 21 and 22:
Chapter 1 Scarcity and Choices The
Page 23 and 24:
Example 5B: At the end of 1982, the
Page 25 and 26:
Example 11: When Cindy quits her jo
Page 27 and 28:
consequences may result in failure
Page 29 and 30:
An upward sloping curve (as in Exam
Page 31 and 32:
In making decisions, humans tend to
Page 33 and 34:
5. ______________________ _________
Page 35 and 36:
___ 13. If the value of one variabl
Page 37 and 38:
Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
Page 39 and 40:
Chapter 2 Trade and Economic System
Page 41 and 42:
Example 4B: The following quantitie
Page 43 and 44:
1. An increase in the quantity of r
Page 45 and 46:
3. For whom to produce? This is det
Page 47 and 48:
The graph below illustrates the shi
Page 49 and 50:
The two primary economic systems ar
Page 51 and 52:
___ 12. The capitalist vision sees
Page 53 and 54:
___ 25. According to the book “Ca
Page 55 and 56:
Chapter 3 Demand, Supply, and Equil
Page 57 and 58:
. For inferior goods, income and de
Page 59 and 60:
The same information can be placed
Page 61 and 62:
Not only does a free market elimina
Page 63 and 64:
$7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3
Page 65 and 66:
Example 17: The graph below illustr
Page 67 and 68:
Questions for Chapter 3 Fill-in-the
Page 69 and 70:
___ 12. Assuming a market originall
Page 71 and 72:
$8 - 7 - 6 - 5 - Price 4 - 3 - 2 -
Page 73 and 74:
Chapter 4 Inflation and Unemploymen
Page 75 and 76:
Computing the Rate of Inflation The
Page 77 and 78:
Full Employment Though unemployment
Page 79 and 80:
3. Cyclical unemployment - due to d
Page 81 and 82:
During the Great Depression, the ec
Page 83 and 84:
Appendix: Think Like an Economist -
Page 85 and 86:
Answer questions 8. and 9. based on
Page 87 and 88:
___ 25. The extension of unemployme
Page 89 and 90:
Chapter 5 Measuring Total Output: G
Page 91 and 92:
5. Leisure. Leisure time is by defi
Page 93 and 94:
The U.S. is a high per capita GDP c
Page 95 and 96:
Example 17: In “An International
Page 97 and 98:
The simple circular flow diagram be
Page 99 and 100:
___ 3. Which of the following would
Page 101 and 102:
2. Explain what nonproduction trans
Page 103 and 104:
Chapter 6 The Aggregate Market The
Page 105 and 106:
Example 2C: Assume the same facts a
Page 107 and 108:
Example 5B: The price of crude oil
Page 109 and 110:
Price Level Real GDP SRAS AD 2 AD 1
Page 111 and 112:
Appendix: Why the Aggregate Demand
Page 113 and 114:
___ 3. DEF Company can invest in ne
Page 115 and 116:
2. List and explain the two factors
Page 117 and 118:
Chapter 7 Classical Economic Theory
Page 119 and 120:
Notice that the investment demand c
Page 121 and 122:
Long-Run Equilibrium If Real GDP is
Page 123 and 124:
Example 6B: When the economy is in
Page 125 and 126:
Laissez-faire If the economy is sel
Page 127 and 128:
___ 5. According to Say’s Law: a.
Page 129 and 130:
3. On the graph below, draw an aggr
Page 131 and 132:
Chapter 8 Keynesian Economic Theory
Page 133 and 134:
Example 2B: The graph below illustr
Page 135 and 136:
Example 5: Assume that the table be
Page 137 and 138:
Notice on the graph on the previous
Page 139 and 140:
According to Keynesian theory, a ch
Page 141 and 142:
“The General Theory” also inclu
Page 143 and 144:
___ 8. If the consumption function
Page 145 and 146:
3. If the MPC is .667, and investme
Page 147 and 148:
Chapter 9 Fiscal Policy The basic e
Page 149 and 150:
Keynesian Fiscal Policy Theory and
Page 151 and 152:
Example 5A: The federal government
Page 153 and 154:
The Laffer Curve What will happen t
Page 155 and 156:
Appendix: The Importance of Incenti
Page 157 and 158:
___ 4. A decrease in government exp
Page 159 and 160:
2. Explain what automatic stabilize
Page 161 and 162:
Chapter 10 Money, Money Creation, a
Page 163 and 164:
Example 4B: The castaways on Gillig
Page 165 and 166:
Looking at the balance sheet below,
Page 167 and 168:
Demand-side One-shot Inflation Exam
Page 169 and 170:
4. Inflation increases uncertainty
Page 171 and 172:
life; it came into existence not by
Page 173 and 174:
calculated by using the potential d
Page 175 and 176:
___ 12. If the required-reserve rat
Page 177 and 178:
4. Referring to the balance sheet f
Page 179 and 180:
Chapter 11 The Federal Reserve Syst
Page 181 and 182:
5. After Bank X sells the $300,000
Page 183 and 184:
Low Mortgage Interest Rates Mortgag
Page 185 and 186:
Relaxed Standards for Mortgage Loan
Page 187 and 188:
The Bursting of the Housing Bubble
Page 189 and 190:
On February 17, 2009, the federal g
Page 191 and 192:
Fed policies caused short-term inte
Page 193 and 194:
___ 10. The Fed’s most important
Page 195 and 196:
___ 25. In response to the recessio
Page 197 and 198:
Chapter 12 Monetary Policy The basi
Page 199 and 200:
2. A change in aggregate demand (AD
Page 201 and 202:
Monetarist Transmission Mechanism C
Page 203 and 204:
3. Borrowers do not have to seek ou
Page 205 and 206:
Appendix: Book Review - “The Age
Page 207 and 208:
Questions for Chapter 12 Fill-in-th
Page 209 and 210:
___ 16. The primary source of incom
Page 211 and 212:
7. According to Alan Greenspan, wha
Page 213 and 214:
Chapter 13 Taxes, Deficits, and the
Page 215 and 216:
Example 5: In 2015, Taxpayer A had
Page 217 and 218:
of $5 and a quantity of 10 units. T
Page 219 and 220:
The complexity of the tax law also
Page 221 and 222:
the current government spending and
Page 223 and 224:
cut of 1964. The top rate was lower
Page 225 and 226:
___ 6. Federal excise taxes: a. are
Page 227 and 228:
3. How would eliminating the loopho
Page 229 and 230:
Chapter 14 Economic Growth The basi
Page 231 and 232:
2. Labor. Labor can contribute to e
Page 233 and 234:
estricting international trade (e.g
Page 235 and 236:
An improvement in technology (e.g.
Page 237 and 238:
The table below shows the economic
Page 239 and 240:
will increase both Real GDP and per
Page 241 and 242:
___ 8. Which of the following is co
Page 243 and 244:
___ 26. The opinion that economic g
Page 245 and 246:
Chapter 15 Less Developed Countries
Page 247 and 248:
Example 8: Countries A, B, C, and D
Page 249 and 250:
Obstacles to Economic Development f
Page 251 and 252:
c. Restrictions on international tr
Page 253 and 254:
Appendix: Book Review - “The Powe
Page 255 and 256:
Example 25: In Brazil, about half t
Page 257 and 258:
Study Guide for Chapter 15 Chapter
Page 259 and 260:
___ 13. Among the counterproductive
Page 261 and 262:
4. List four ways that governments
Page 263 and 264:
Chapter 16 International Trade The
Page 265 and 266:
Other Benefits of Free Internationa
Page 267 and 268:
Example 6: The graph below illustra
Page 269 and 270:
competitive disadvantage. But dumpi
Page 271 and 272:
is only 25% as productive as before
Page 273 and 274:
Smith was skeptical of government a
Page 275 and 276:
___ 4. For Country X, what is the o
Page 277 and 278:
___ 18. Frédéric Bastiat’s “P
Page 279 and 280:
4. On the graph below: (1) What is
Page 281 and 282:
Chapter 17 Elasticity We are often
Page 283 and 284:
Example 4A: What is price elasticit
Page 285 and 286:
Example 5A: Gertie’s Gas and Go i
Page 287 and 288:
Example 10A: When the price of Good
Page 289 and 290:
Example 13B: On the graph below, su
Page 291 and 292:
$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
Page 293 and 294:
In the long run, would the deadweig
Page 295 and 296:
___ 7. The factors that determine w
Page 297 and 298:
3. a. Which price (or prices) from
Page 299 and 300:
Chapter 18 Utility The basic econom
Page 301 and 302:
Nonetheless, society generally assu
Page 303 and 304:
Example 9: Capital City operates a
Page 305 and 306:
Marginal rate of substitution - the
Page 307 and 308:
The diamond-water paradox is the ob
Page 309 and 310:
Complete the table below to answer
Page 311 and 312:
4. The graph below shows indifferen
Page 313 and 314:
Chapter 19 The Firm The basic econo
Page 315 and 316:
than contributing to team productio
Page 317 and 318:
1. Difficulty in raising large amou
Page 319 and 320:
Corporations also use self-financin
Page 321 and 322:
Example 24: A blacksmith who produc
Page 323 and 324:
For financing needs, proprietorship
Page 325 and 326:
___ 13. Corporations: a. are comple
Page 327 and 328:
5. List two things that the absence
Page 329 and 330:
Chapter 20 Production and Costs The
Page 331 and 332:
In Example 5B, Birdwell finds that
Page 333 and 334:
variable cost initially decreases,
Page 335 and 336:
Quantity TC MC AFC AVC ATC 0 240 X
Page 337 and 338:
If the scale of operation is increa
Page 339 and 340:
average total cost. Average fixed c
Page 341 and 342:
___ 11. Concerning the cost curves:
Page 343 and 344:
5. Complete the following cost tabl
Page 345 and 346:
Chapter 21 Perfect Competition The
Page 347 and 348:
Even though a perfect competitor ca
Page 349 and 350:
Example 6C: This example builds on
Page 351 and 352:
At what price will there be neither
Page 353 and 354:
Appendix: Perfect Competition in th
Page 355 and 356:
Multiple Choice: ___ 1. A perfect c
Page 357 and 358:
___ 17. Perfect competition: a. req
Page 359 and 360:
Answers for Chapter 21 Fill-in-the-
Page 361 and 362:
Chapter 22 Monopoly Of the four mar
Page 363 and 364:
3. Exclusive ownership of an essent
Page 365 and 366:
maximizing quantity (4 units) creat
Page 367 and 368:
$22 - 20 - 18 - 16 - 14 - Deadweigh
Page 369 and 370:
2. Negotiating, beginning at a high
Page 371 and 372:
Legal barriers are created by gover
Page 373 and 374:
___ 8. The slope of the demand curv
Page 375 and 376:
Price Quantity 3. List some of the
Page 377 and 378:
Chapter 23 Monopolistic Competition
Page 379 and 380:
For Percomp (the perfect competitor
Page 381 and 382:
Example 7A: The graph below represe
Page 383 and 384:
Example 9: The Organization of the
Page 385 and 386:
Example 12 illustrates the dilemma
Page 387 and 388: its current price and quantity. The
Page 389 and 390: ___ 14. Game theory: a. is a method
Page 391 and 392: Answers for Chapter 23 Fill-in-the-
Page 393 and 394: Chapter 24 Factor Markets The basic
Page 395 and 396: $ $240 - 200 - 160 - 120 - 80 - 40
Page 397 and 398: Since producers will attempt to equ
Page 399 and 400: 2. Differences in nonmoney aspects
Page 401 and 402: were his strikeouts, walks, and hom
Page 403 and 404: ___ 3. To maximize profits, a produ
Page 405 and 406: ___ 19. According to the book, “M
Page 407 and 408: Multiple Choice: 1. a. 8. c. 15. d.
Page 409 and 410: Chapter 25 Labor Unions The primary
Page 411 and 412: The elasticity of demand for union
Page 413 and 414: Example 4A: Assume that the graph b
Page 415 and 416: Notice from the graph in Example 6
Page 417 and 418: Wage Factory A Quantity of Labor S
Page 419 and 420: As a cartel, a labor union faces a
Page 421 and 422: ___ 10. For a monopsony: a. there i
Page 423 and 424: 3. The graph below represents a lab
Page 425 and 426: Chapter 26 Interest, Present Value,
Page 427 and 428: An increase in expected rates of re
Page 429 and 430: An asset is valuable because we exp
Page 431 and 432: Example 13B: General Ordnance prove
Page 433 and 434: Appendix: Present Value Table One f
Page 435 and 436: ___ 4. An increase in expected rate
Page 437: Problems: 1. List and explain the t
Page 441 and 442: External Benefit If a market genera
Page 443 and 444: Example 2: To encourage the consump
Page 445 and 446: $100 - 90 - 80 - MSC 70 - $ 60 - 50
Page 447 and 448: A common good is nonexcludable. Non
Page 449 and 450: Study Guide for Chapter 27 Chapter
Page 451 and 452: ___ 5. What government policy would
Page 453 and 454: 4. Based on the information on the
Page 455 and 456: Chapter 28 Public Choice and Govern
Page 457 and 458: Candidates and the Median Voter Mod
Page 459 and 460: Example 8: According to State and F
Page 461 and 462: Example 10: When Elvis Presley was
Page 463 and 464: 4. Pessimistic bias. This is the te
Page 465 and 466: ___ 5. An elected official will: a.
Page 467 and 468: 2. If a certain policy will yield s
Page 469 and 470: Chapter 29 Government Regulation of
Page 471 and 472: underproduction is the amount that
Page 473 and 474: micromanagement results in business
Page 475 and 476: market. They may agree with their c
Page 477 and 478: Questions for Chapter 29 Fill-in-th
Page 479 and 480: ___ 10. The public interest theory
Page 481 and 482: 4. List the four types of costs imp
Page 483 and 484: Chapter 30 Agriculture and Health C
Page 485 and 486: weather may cause bumper crops. Bad
Page 487 and 488: Security and Rural Investment Act o
Page 489 and 490:
Example 12: From 1960 to 2013, the
Page 491 and 492:
1. NHI would provide universal heal
Page 493 and 494:
d. Insurance providers are not allo
Page 495 and 496:
Study Guide for Chapter 30 Chapter
Page 497 and 498:
Answer questions 7. through 10. by
Page 499 and 500:
___ 21. If there were no individual
Page 501 and 502:
Chapter 31 Income Distribution and
Page 503 and 504:
Income is more equally distributed
Page 505 and 506:
over a typical career is the accumu
Page 507 and 508:
Ideal Income Redistribution The ide
Page 509 and 510:
Poverty - a family whose income fal
Page 511 and 512:
Appendix: Income Inequality around
Page 513 and 514:
How is this story an analogy for th
Page 515 and 516:
___ 2. In 2013, the Lowest Income 6
Page 517 and 518:
Problems: 1. Explain the two primar
Page 519 and 520:
Absolute advantage - when one natio
Page 521 and 522:
Fiat money - money by government de
Page 523 and 524:
Nonrivalrous good - a good for whic
Page 525 and 526:
Absolute advantage, 16-9 Absolute e
Page 527 and 528:
“Company town”, 25-6 Comparativ
Page 529 and 530:
Eli Lilly and Company, 22-1 Emergen
Page 531 and 532:
Houston, Texas, 15-10 Human capital
Page 533 and 534:
Market, 3-1, 3-8-9 Market basket, 4
Page 535 and 536:
Political bias, 9-4, 12-7 Political
Page 537 and 538:
Short run production, 20-2-3 Short-
Page 539 and 540:
Upturns, 9-4 USDA, 27-9, 30-1-2, 30
show all

Holt 7525-9 S15_IT

Create successful ePaper yourself

Delete template?

Save as template?