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Class 11 Economics Questions asked by Filo students

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Discuss the efficiency and equity implications of each of the following policies. How would you go about balancing the concerns of equity and efficiency in these areas?a. The government pays the full tuition for every college student to study whatever subject he or she wishes.b. When people lose their jobs, the government provides unemployment benefits until they find new ones.

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Economics

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In each of the following situations, explain how government intervention could improve society's welfare by changing people's incentives. In what sense is the market going wrong?a. Pollution from auto emissions has reached unhealthy levels.b. Everyone in Woodville would be better off if streetlights were installed in the town. But no individual resident is willing to pay for installation of a streetlight in front of his or her house because it is impossible to recoup the cost by charging other residents for the benefit they receive from it.

Topic:

Economics

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Two important industries on the island of Bermuda are fishing and tourism. According to data from the Food and Agriculture Organization of the United Nations and the Bermuda Department of Statistics, in 2009 the 306 registered fishermen in Bermuda caught 387 metric tons of marine fish. And the 2,719 people employed by hotels produced 554,400 hotel stays (measured by the number of visitor arrivals). Suppose that this production point is efficient in production. Assume also that the opportunity cost of 1 additional metric ton of fish is 2,000 hotel stays and that this opportunity cost is constant (the opportunity cost does not change).a. If all 306 registered fishermen were to be employed by hotels (in addition to the 2,719 people already working in hotels), how many hotel stays could Bermuda produce?b. If all 2,719 hotel employees were to become fishermen (in addition to the 306 fishermen already working in the fishing industry), how many metric tons of fish could Bermuda produce?c. Draw a production possibility frontier for Bermuda, with fish on the horizontal axis and hotel stays on the vertical axis, and label Bermuda's actual production point for the year

2009.

Topic:

Economics

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A representative of the American clothing industry recently made the following statement: "Workers in Asia often work in sweatshop conditions earning only pennies an hour. American workers are more productive and as a result earn higher wages. In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing."a. Which parts of this quote are positive statements? Which parts are normative statements?b. Is the policy that is being advocated consistent with the preceding statements about the wages and productivities of American and Asian workers?c. Would such a policy make some Americans better off without making any other Americans worse off? That is, would this policy be efficient from the viewpoint of all Americans?d. Would low-wage Asian workers benefit from or be hurt by such a policy?

Topic:

Economics

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Evaluate the following statement: "It is easier to build an economic model that accurately reflects events that have already occurred than to build an economic model to forecast future events." Do you think this is true or not? Why? What does this imply about the difficulties of building good economic models?

Topic:

Economics

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Assess the following statement: "If economists just had enough data, they could solve all policy questions in a way that maximizes the social good. There would be no need for divisive political debates, such as whether the government should provide free medical care for all."

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Economics

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Will Shakespeare is a struggling playwright in sixteenth-century London. As the price he receives for writing a play increases, he is willing to write more plays. For the following situations, use a diagram to illustrate how each event affects the equilibrium price and quantity in the market for Shakespeare's plays.a. The playwright Christopher Marlowe, Shakespeare's chief rival, is killed in a bar brawl.b. The bubonic plague, a deadly infectious disease, breaks out in London.c. To celebrate the defeat of the Spanish Armada, Queen Elizabeth declares several weeks of festivities, which involves commissioning new plays.

Topic:

Economics

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Determine the amount of producer surplus generated in each of the following situations.a. Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of 75. After five days of bidding, the final high bid is exactly 75 . He accepts the bid.b. So-Hee advertises her car for sale in the used-car section of the student newspaper for 2,000, but she is willing to sell the car for any price higher than 1,500. The best offer she gets is \\ 1,200, which she declines.c. Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is \\\\ 80,000$

Topic:

Economics

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a. In an auction, potential buyers compete for a good by submitting bids. Adam Galinsky, a social psychologist at Northwestern University, compared eBay auctions in which the same good was sold. He found that, on average, the larger the number of bidders, the higher the sales price. For example, in two auctions of identical iPods, the one with the larger number of bidders brought a higher selling price. According to Galinsky, this explains why smart sellers on eBay set absurdly low opening prices (the lowest price that the seller will accept), such as 1 cent for a new iPod. Use the concepts of consumer and producer surplus to explain Galinsky's reasoning.b. You are considering selling your vintage 1969 convertible Volkswagen Beetle. If the car is in good condition, it is worth a lot; if it is in poor condition, it is useful only as scrap. Assume that your car is in excellent condition but that it costs a potential buyer \ 500$ for an inspection to learn the car's condition. Use what you learned in part a to explain whether or not you should pay for an inspection and share the results with all interested buyers.

Topic:

Economics

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Question 10

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The accompanying diagram illustrates a taxi driver's individual supply curve (assume that each taxi ride is the same distance).a. Suppose the city sets the price of taxi rides at 4 per ride, and at 4 the taxi driver is able to sell as many taxi rides as he desires. What is this taxi driver's producer surplus? (Recall that the area of a right triangle is

1/2 \times

the height of the triangle

\times

the base of the triangle.)b. Suppose that the city keeps the price of a taxi ride set at 4, but it decides to charge taxi drivers a "licensing fee." What is the maximum licensing fee the city could extract from this taxi driver?c. Suppose that the city allowed the price of taxi rides to increase to \\\\ 8$ per ride. Again assume that, at this price, the taxi driver sells as many rides as he is willing to offer. How much producer surplus does an individual taxi driver now get? What is the maximum licensing fee the city could charge this taxi driver?

Topic:

Economics

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Question 11

Views: 5,194

In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same distance and therefore cost the same. The accompanying table shows the demand and supply schedules for taxi rides.a. Assume that there are no restrictions on the number of taxi rides that can be supplied (there is no medallion system). Find the equilibrium price and quantity.b. Suppose that the mayor sets a price ceiling at \ 5.50$. How large is the shortage of rides? Illustrate with a diagram. Who loses and who benefits from this policy?c. Suppose that the stock market crashes and, as a result, people in Gotham City are poorer. This reduces the quantity of taxi rides demanded by 6 million rides per year at any given price. What effect will the mayor's new policy have now? Illustrate with a diagram.d. Suppose that the stock market rises and the demand for taxi rides returns to normal (that is, returns to the demand schedule given in the table). The mayor now decides to ingratiate himself with taxi drivers. He announces a policy in which operating licenses are given to existing taxi drivers; the number of licenses is restricted such that only 10 million rides per year can be given. Illustrate the effect of this policy on the market, and indicate the resulting price and quantity transacted. What is the quota rent per ride?

Topic:

Economics

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Question 12

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In the late eighteenth century, the price of bread in New York City was controlled, set at a predetermined price above the market price.a. Draw a diagram showing the effect of the policy. Did the policy act as a price ceiling or a price floor?b. What kinds of inefficiencies were likely to have arisen when the controlled price of bread was above the market price? Explain in detail. One year during this period, a poor wheat harvest caused a leftward shift in the supply of bread and therefore an increase in its market price. New York bakers found that the controlled price of bread in New York was below the market price.c. Draw a diagram showing the effect of the price control on the market for bread during this one-year period. Did the policy act as a price ceiling or a price floor?d. What kinds of inefficiencies do you think occurred during this period? Explain in detail.

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Economics

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Question 13

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In Maine, you must have a license to harvest lobster commercially; these licenses are issued yearly. The state of Maine is concerned about the dwindling supplies of lobsters found off its coast. The state fishery department has decided to place a yearly quota of 80,000 pounds of lobsters harvested in all Maine waters. It has also decided to give licenses this year only to those fishermen who had licenses last year. The accompanying diagram shows the demand and supply curves for Maine lobsters.a. In the absence of government restrictions, what are the equilibrium price and quantity?b. What is the demand price at which consumers wish to purchase 80,000 pounds of lobsters?c. What is the supply price at which suppliers are willing to supply 80,000 pounds of lobsters?d. What is the quota rent per pound of lobster when 80,000 pounds are sold? Illustrate the quota rent and the deadweight loss on the diagram.e. Explain a transaction that benefits both buyer and seller but is prevented by the quota restriction.

Topic:

Economics

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Question 14

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What can you conclude about the price elasticity of demand in each of the following statements?a. "The pizza delivery business in this town is very competitive. I'd lose half my customers if I raised the price by as little as

10%

."b. "I owned both of the two Jerry Garcia autographed lithographs in existence. I sold one on eBay for a high price. But when I sold the second one, the price dropped by

80%

."c. "My economics professor has chosen to use the Krugman/Wells textbook for this class. I have no choice but to buy this book."d. "I always spend a total of exactly \ 10$ per week on coffee."

Topic:

Economics

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Question 15

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Taiwan is a major world supplier of semiconductor chips. A recent earthquake severely damaged the production facilities of Taiwanese chip-producing companies, sharply reducing the amount of chips they could produce.a. Assume that the total revenue of a typical nonTaiwanese chip manufacturer rises due to these events. In terms of an elasticity, what must be true for this to happen? Illustrate the change in total revenue with a diagram, indicating the price effect and the quantity effect of the Taiwan earthquake on this company's total revenue.b. Now assume that the total revenue of a typical nonTaiwanese chip manufacturer falls due to these events. In terms of an elasticity, what must be true for this to happen? Illustrate the change in total revenue with a diagram, indicating the price effect and the quantity effect of the Taiwan earthquake on this company's total revenue.

Topic:

Economics

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Question 16

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Worldwide, the average coffee grower has increased the amount of acreage under cultivation over the past few years. The result has been that the average coffee plantation produces significantly more coffee than it did 10 to 20 years ago. Unfortunately for the growers, however, this has also been a period in which their total revenues have plunged. In terms of an elasticity, what must be true for these events to have occurred? Illustrate these events with a diagram, indicating the quantity effect and the price effect that gave rise to these events.

Topic:

Economics

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Question 17

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The U.S. government is considering reducing the amount of carbon dioxide that firms are allowed to produce by issuing a limited number of tradable allowances for carbon dioxide

(CO_{2})

emissions. In an April 25 , 2007, report, the U.S. Congressional Budget Office

(CBO)

argues that "most of the cost of meeting a cap on

CO_{2}

emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline

\dots

poorer households would bear a larger burden relative to their income than wealthier households would." What assumption about one of the elasticities you learned about in this chapter has to be true for poorer households to be disproportionately affected?

Topic:

Economics

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Question 18

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The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. The hypothetical pre-tax demand and supply schedules for imported trucks are given in the accompanying table.a. In the absence of government interference, what is the equilibrium price of an imported truck? The equilibrium quantity? Illustrate with a diagram.b. Assume that the government imposes an excise tax of \ 3,000$ per imported truck. Illustrate the effect of this excise tax in your diagram from part a. How many imported trucks are now purchased and at what price? How much does the foreign automaker receive per truck?c. Calculate the government revenue raised by the excise tax in part b. Illustrate it on your diagram.d. How does the excise tax on imported trucks benefit American automakers? Whom does it hurt? How does inefficiency arise from this government policy?

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Economics

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Question 19

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1990,

the United States began to levy a tax on sales of luxury cars. For simplicity, assume that the tax was an excise tax of 6,000$ per car. The accompanying fig ure shows hypothetical demand and supply curves for luxury cars.a. Under the tax, what is the price paid by consumers? What is the price received by producers? What is the government tax revenue from the excise tax? Over time, the tax on luxury automobiles was slowly phased out (and completely eliminated in 2002). Suppose that the excise tax falls from 6,000

p erc a r t o

4, 500

per car.b. After the reduction in the excise tax from \\\ 6,000

t o

4, 500

per car, what is the price paid by consumers? What is the price received by producers? What is tax revenue now?c. Compare the tax revenue created by the taxes in parts a and b. What accounts for the change in tax revenue from the reduction in the excise tax?

Topic:

Economics

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Question 20

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All states impose excise taxes on gasoline. According to data from the Federal Highway Administration, the state of California imposes an excise tax of \ 0.40$ per gallon of gasoline. In 2013, gasoline sales in California totaled 18.4 billion gallons. What was California's tax revenue from the gasoline excise tax? If California doubled the excise tax, would tax revenue double? Why or why not?

Topic:

Economics

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