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11. Appendix: Book Review – “The Power of Productivity” 12. Appendix: Foreign Aid Curse 13. Appendix: “Sweatshops” in LDCs 14. Appendix: Think Like an Economist – Working in a “Sweatshop” 15. Study Guide 16. Chapter Summary 17. Questions for Chapter 15 18. Answers for Chapter 15 19. Answer to Think Like an Economist Chapter 16 International Trade 1. Some International Trade Facts 2. Why Nations Trade 3. Comparative Advantage Example 4. Other Benefits of Free International Trade 5. Trade Restrictions 6. The Effects of a Quota of Zero 7. Gain to Domestic Producers 8. Loss to Domestic Consumers 9. The Politics of Trade Restrictions 10. Arguments for Trade Restrictions 11. The Movement toward Freer Trade 12. Appendix: “Petition of the Candlemakers” 13. Appendix: Comparative Advantage versus Absolute Advantage 14. Appendix: Exchange Rates 15. Appendix: International Trade and Economic Growth in China and India 16. Appendix: Book Review – “The Wealth of Nations, Book 4” 17. Study Guide for Chapter 16 18. Chapter Summary 19. Questions for Chapter 16 20. Answers for Chapter 16 Chapter 17 Elasticity 1. Elasticity 2. Price Elasticity of Demand 3. Two Extreme Examples 4. Perfectly Inelastic Demand 5. Perfectly Elastic Demand 6. Computing Price Elasticity of Demand 7. Price Elasticity of Demand Classifications and Total Revenue 8. Determinants of Price Elasticity of Demand 9. Income Elasticity of Demand 10. Normal Goods and Inferior Goods 11. Cross Elasticity of Demand 12. Substitutes and Complements 13. Price Elasticity of Supply 14. The Burden of a Tax and Price Elasticity 15. Appendix: The Deadweight Loss of a Tax 16. Appendix: Think Like an Economist – An Increase in the Gasoline Tax 17. Study Guide for Chapter 17 18. Chapter Summary 19. Questions for Chapter 17 20. Answers for Chapter 17 21. Answers to Think Like an Economist Chapter 18 Utility 1. Utility 2. Utility is a Subjective Measurement 3. Marginal Utility 4. Law of Diminishing Marginal Utility 5. Marginal Utility and Consumer Behavior 6. Diminishing Marginal Utility and Income Distribution 7. Diamond-Water Paradox 8. Utility Maximization 9. Utility Maximization Rules 10. Providing Essential Goods Free of Charge 11. Efficiency: Equating Marginal Benefit and Marginal Cost 12. Appendix: Consumer Behavior, Indifference Curves, and Budget Constraints 13. Deriving a Demand Curve 14. Appendix: The Efficiency of Money Gifts 15. Study Guide for Chapter 18 16. Chapter Summary 17. Questions for Chapter 18 18. Answers for Chapter 18 Chapter 19 The Firm 1. Firms and Efficiency 2. Firms and Reduced Transaction Costs 3. Firms and Team Production 4. Shirking in Team Production 5. The Principal-Agent Problem 6. Business Firms 7. The Chief Goal of Business Firms 8. Legal Types of Business Firms 9. Proprietorship 10. Partnership 11. Corporation 12. Financing Business Activity 13. The Balance Sheet of a Business Firm 14. Nonprofit Firms 15. Private versus Public Nonprofit Firms 16. Appendix: Book Review – “The Wealth of Nations, Book 1” 17. Appendix: Think Like an Economist – Hiring an Attorney 18. Study Guide for Chapter 19 19. Chapter Summary 20. Questions for Chapter 19 21. Answers for Chapter 19 22. Answer to Think Like an Economist FOR REVIEW ONLY - NOT FOR DISTRIBUTION Contents - 5 Table of Contents
Chapter 20 Production and Costs 1. Explicit Costs versus Implicit Costs 2. Accounting Profit versus Economic Profit 3. Sunk Cost 4. Short Run Production versus Long Run Production 5. Marginal Physical Product 6. Law of Diminishing Marginal Returns 7. Diminishing Marginal Returns and Marginal Cost 8. Fixed Costs versus Variable Costs 9. Total Cost 10. Average Costs of Production 11. Cost Curves Graph 12. Appendix: Completing a Cost Table 13. Appendix: The Long Run, Economies of Scale, and Minimum Efficient Scale 14. Appendix: Total Revenue, Total Cost, and Break-Even 15. Study Guide for Chapter 20 16. Chapter Summary 17. Questions for Chapter 20 18. Answers for Chapter 20 Chapter 21 Perfect Competition 1. Market Structure and Market Power 2. Perfect Competition is the Ideal Market Structure 3. The Key Characteristic of Perfect Competition 4. Why a Perfect Competitor has no Market Power 5. The Demand Curve for a Perfect Competitor 6. A Perfect Competitor is a Price Taker 7. Profit-Maximization 8. Marginal Revenue 9. Shutdown Point 10. The Supply Curve for a Perfect Competitor 11. Perfect Competition in the Long Run 12. Perfect Competition and Economic Efficiency 13. Economic Efficiency Rule 14. Perfect Competition’s Happy Coincidence 15. Perfect Competition and Individual Freedom 16. Appendix: Economic Profit and Economic Loss 17. Appendix: Perfect Competition in the Long Run 18. Study Guide for Chapter 21 19. Chapter Summary 20. Questions for Chapter 21 21. Answers for Chapter 21 Chapter 22 Monopoly 1. Monopoly and Market Power 2. Monopoly and Barriers to Entry 3. Legal Barriers 4. Economies of Scale 5. Exclusive Ownership of an Essential Resource 6. Demand and Marginal Revenue for a Monopoly 7. Demand Curve and MR Curve for a Monopoly 8. Profit-Maximization 9. Comparing Monopoly to Perfect Competition 10. The Economic Inefficiency of Monopoly 11. Deadweight Loss 12. Rent Seeking 13. Other Problems with Monopoly 14. Price Discrimination 15. Appendix: Comparing Monopoly to Perfect Competition; Profit 16. Appendix: Corruption and Public Franchise 17. Study Guide for Chapter 22 18. Chapter Summary 19. Questions for Chapter 22 20. Answers for Chapter 22 Chapter 23 Monopolistic Competition and Oligopoly 1. Monopolistic Competition 2. Product Differentiation 3. Demand and Marginal Revenue for a Monopolistic Competitor 4. Profit-Maximization for a Monopolistic Competitor 5. Comparing Monopolistic Competition to Perfect Competition 6. The Economic Inefficiency of Monopolistic Competition 7. Deadweight Loss 8. Monopolistic Competition and Profits in the Long Run 9. Oligopoly 10. Theories of Oligopoly Behavior 11. Kinked Demand Curve Theory 12. Unkinked Demand Curve Theory 13. Cartel Theory 14. The Economic Inefficiency of Oligopoly 15. Appendix: Game theory 16. The “Prisoners’ Dilemma” Game 17. Payoff Matrix 18. Dominant Strategy 19. Nash Equilibrium FOR REVIEW ONLY - NOT FOR DISTRIBUTION Table of Contents Contents - 6
Page 2 and 3: PRINCIPLES OF ECONOMICS JEFF HOLT S
Page 4 and 5: Principles of Economics, 6th Editio
Page 6 and 7: 16. Study Guide for Chapter 7 17. C
Page 10 and 11: 20. Appendix: The NCAA Cartel 21. S
Page 12 and 13: Introduction: A Brief History of U.
Page 14 and 15: In the twentieth century, per capit
Page 16 and 17: Appendix: The 35 Largest National E
Page 18 and 19: Multiple Choice: ___ 1. The Jamesto
Page 20 and 21: 2. Describe the economic cost of th
Page 22 and 23: Chapter 1 Scarcity and Choices The
Page 24 and 25: Example 5B: At the end of 1982, the
Page 26 and 27: Example 11: When Cindy quits her jo
Page 28 and 29: consequences may result in failure
Page 30 and 31: An upward sloping curve (as in Exam
Page 32 and 33: In making decisions, humans tend to
Page 34 and 35: 5. ______________________ _________
Page 36 and 37: ___ 13. If the value of one variabl
Page 38 and 39: Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
Page 40 and 41: Chapter 2 Trade and Economic System
Page 42 and 43: Example 4B: The following quantitie
Page 44 and 45: 1. An increase in the quantity of r
Page 46 and 47: 3. For whom to produce? This is det
Page 48 and 49: The graph below illustrates the shi
Page 50 and 51: The two primary economic systems ar
Page 52 and 53: ___ 12. The capitalist vision sees
Page 54 and 55: ___ 25. According to the book “Ca
Page 56 and 57: 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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5. Leisure. Leisure time is by defi
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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 12 Monetary Policy The basi
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2. A change in aggregate demand (AD
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Monetarist Transmission Mechanism C
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3. Borrowers do not have to seek ou
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Appendix: Book Review - “The Age
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Questions for Chapter 12 Fill-in-th
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___ 16. The primary source of incom
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7. According to Alan Greenspan, wha
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Chapter 13 Taxes, Deficits, and the
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Example 5: In 2015, Taxpayer A had
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of $5 and a quantity of 10 units. T
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The complexity of the tax law also
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the current government spending and
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cut of 1964. The top rate was lower
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___ 6. Federal excise taxes: a. are
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3. How would eliminating the loopho
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Chapter 14 Economic Growth The basi
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2. Labor. Labor can contribute to e
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estricting international trade (e.g
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An improvement in technology (e.g.
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The table below shows the economic
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will increase both Real GDP and per
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___ 8. Which of the following is co
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___ 26. The opinion that economic g
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Chapter 15 Less Developed Countries
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Example 8: Countries A, B, C, and D
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Obstacles to Economic Development f
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c. Restrictions on international tr
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Appendix: Book Review - “The Powe
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Example 25: In Brazil, about half t
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Study Guide for Chapter 15 Chapter
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___ 13. Among the counterproductive
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4. List four ways that governments
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Chapter 16 International Trade The
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Other Benefits of Free Internationa
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Example 6: The graph below illustra
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competitive disadvantage. But dumpi
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is only 25% as productive as before
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Smith was skeptical of government a
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___ 4. For Country X, what is the o
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___ 18. Frédéric Bastiat’s “P
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4. On the graph below: (1) What is
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Chapter 17 Elasticity We are often
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Example 4A: What is price elasticit
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Example 5A: Gertie’s Gas and Go i
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Example 10A: When the price of Good
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Example 13B: On the graph below, su
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$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
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In the long run, would the deadweig
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___ 7. The factors that determine w
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3. a. Which price (or prices) from
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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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___ 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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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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