曼昆经济学原理复习

1、Q4Why should policy makers think about incentives?Policymakers need to think about incentives so they can understandhow people will respond to the policies they put in place. The texts example of seat belts shows that policy actions can have quite unintended consequences. If incentives matter a lot,

2、 they may leadto a very different type of policy; for example, someeconomists have suggested putting knives in steering columns so that people will drive much more carefully! While this suggestion is silly, it highlights the importance of incentives.Q6what does the invisible hand of the marketplace

3、do?The invisible hand of the marketplace represents the idea that even though individuals and firms are all acting in their ownself-interest, prices and the marketplace guide them to do what is good for society as a whole.2Q1How is economics like a science?Economics is like a science because economi

4、sts use the scientificmethod. They devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories about how the world works. Economists use theory and observation like other scientists, but they are limited in their ability to run controlled experiments.

5、Instead, they must rely on natural experiments.Q5 Use a production possibilities frontier to describe the idea of “ efficiency ” ?The idea of efficiency is that an outcome is efficient if the economy is getting all it can from the scarce resources it has available. In terms of the production possibi

6、lities frontier, an efficient pointis a point on the frontier, such as point A in Figure 4. A point inside the frontier, such as point B, is inefficient since more of one good could be produced without reducing the production of another good.Q7Whatis the difference between a positive and a normative

7、 statement? Give an example of that.Positive statements are descriptive and make a claim about how the world is, while normative statements are prescriptive and makea claim about how the world ought to be. Here is an example. Positive: A rapid growth rate of moneyis the cause of inflation. Normative

8、: The government should keep the growth rate of money low.3Q1 Explain how absolute advantage and comparative advantage differ.Absolute advantage reflects a comparison of the productivity of one person, firm, or nation to that of another, while comparative advantage is based on the relative opportuni

9、ty costs of the persons, firms, or nations. While a person, firm, or nation may have anabsolute advantage in producing every good, they cant have a comparative advantage in every good.Q4Will a nation tend to export or import goods to Question2.A nation will export goods for which it has a comparativ

10、e advantage because it has a smaller opportunity cost of producing those goods. As a result, citizens of all nations are able to consume quantities of goods that are outside their production possibilities frontiers.4Q5Propeye s income declines, and as a result, he buys more spinach.Is spinach an inf

11、erior or a normal goods? What happens to Popeye s demand curve for spinach?Since Popeye buys more spinach when his income falls, spinach is an inferior good for him. Since he buys more spinach, but the price of spinach is unchanged, his demand curve for spinach shifts out as a result of the decrease

12、 in his income.Q8 Dose a change in producers technology lead to a movement along the supply curve? Does a change in price lead to a movementalong the supply curve or a shift in the supply curve?A change in producers technology leads to a shift in the supply curve.A change in price leads to a movemen

13、t along the supply curve.Q9 Define the equilibrium of a market. Describe the forces that move a market towards its equilibrium.The equilibrium of a market is the point at which the quantity demanded is equal to quantity supplied. If the price is above the equilibrium price, sellers want to sell more

14、 than buyers want to buy, so there is a surplus. Sellers try to increase their sales by cutting prices. That continues until they reach the equilibrium price. If the price is below the equilibrium price, buyers want to buy more than sellers want to sell, so there is a shortage. Sellers can raise the

15、ir price without losing customers. That continues until they reach the equilibrium price.Q11 Describe the role of prices in market economies.Prices play a vital role in market economies because they bring markets into equilibrium. If the price is different from its equilibrium level, quantity suppli

16、ed and quantity demandedare not equal. The resulting surplus or shortage leads suppliers to adjust the price until equilibrium is restored. Prices thus serve as signals that guide economic decisions and allocate scarce resources.5Q2 List and explain the four determinants of the price elasticity of d

17、emand discussed in the chapter.The determinants of the price elasticity of demand include how available close substitutes are, whether the good is a necessity or a luxury, how broadly defined the market is, and the time horizon.Luxury goods have greater price elastic ties than necessities, goods wit

18、h close substitutes have greater elastic ties, goods in more narrowly defined markets have greater elastic ties, and the elasticity of demand is higher the longer the time horizon.Q4 On a supply-and-demand diagram, show equilibrium price, equilibrium quantity, and the total revenue received by produ

19、cers.Figure 1 presents a supply-and-demand diagram, showing equilibrium price, equilibrium quantity, and the total revenue received by producers. Total revenue equals the equilibrium price times the equilibrium quantity, which is the area of the rectangle shown in the figure.Q2Whichcauses a shortage

20、 of a gooda price ceiling or a price floor?Which causes a surplus?A shortage of a good arises when there is a binding price ceiling.A surplus of a good arises when there is a binding price floor.Q6How does a tax on a good affect the price paid by buyers, and the quantity sold?A tax on a good raises

21、the price buyers pay, lowers the price sellers receive, and reduces the quantity sold.Q7What determines how the burden of a tax is divided between buyers and sellers? Why?The burden of a tax is divided between buyers and sellers depending on the elasticity of demand and supply. Elasticity represents

22、 the willingness of buyers or sellers to leave the market, which in turns depends on their alternatives. When a good is taxed, the side of the market with fewer good alternatives cannot easily leave the market and thus bears more of the burden of the tax.7Q1Explain how buyer s willingness to pay, co

23、nsumer surplus, and the demand curve are related.Buyers willingness to pay, consumer surplus, and the demand curve are all closely related. The height of the demand curve represents the willingness to pay of the buyers. Consumer surplus is the area below the demandcurve and above the price, which eq

24、uals each buyers willingness to pay less the price of the good.Q2 Explain how seller s costs, producer s surplus, and the supply curve are related.Sellers costs, producer surplus, and the supply curve are all closely related. The height of the supply curve represents the costs of the sellers. Produc

25、er surplus is the area below the price and above the supply curve, which equals the price minus each sellers costs.13Q2 Give an example of an opportunity cost that accountant might not count as a cost. Why would the accountant ignore the cost?An accountant would not count the owner s opportunity cos

26、t of alternative employment as an accounting cost. An example is given in the text in which Helen runs a cookie business, but she could instead work as a computer programmer. Because shes working in her cookie factory, she gives up the opportunity to earn $100 per hour as a computer programmer. The

27、accountant ignores this opportunity cost because no money flow occurs. But the cost is relevant to Helens decision to run the cookie factory.Q3What is marginal product, and what does it means if it is diminishing?Marginal product is the increase in output that arises from an additional unit of input

28、. Diminishing marginal product means thatthe marginal product of an input declines as the quantity of the input increases.Q8Defind economies of scale and explain why they might arise. Define diseconomies of scale and explain why then might arise.Economies of scale exist when long-run average total c

29、ost falls asthe quantity of output increases, which occurs because of specialization among workers. Diseconomies of scale exist when long-run average total cost rises as the quantity of output increases, which occurs because of coordination problems inherent in a large organization.14Q2Drawthe cost

30、curves for a typical firm. For a given price, explain how the firm chooses the level of output that maximizes profit. Figure 2 shows the cost curves for a typical firm. For a given price (such *as P), the level of output that maximizes profit is the output where marginal cost equals price (Q*), as l

31、ong as price is greater thanaverage variable cost at that point (in the short run), or greater than average total cost (in the long run).Q6 Does a firm s price equal marginal cost in the short run, in the long run, or both? Explain.The firms price equals the minimumof average total cost only in the

32、long run. In the short run, price may be greater than average total cost, in which case the firm is making profits, or price may be less than average total cost, in which case the firm is making losses. But the situation is different in the long run. If firms are making profits, other firms will ent

33、er the industry, which will lower the price of the good. If firms are making losses, they will exit the industry, which will raise the price of the good. Entry or exit continues until firms are making neither profits nor losses. At that point, price equals average total cost.15Q3Why is monopolist s

34、marginal revenue less than the price of its goods? Can marginal revenue be negative? Explain.A monopolists marginal revenue is less than the price of its product because: (1) its demand curve is the market demand curve, so (2) to increase the amount sold, the monopolist must lower the price of its g

35、ood for every unit it sells. (3) This cut in prices reduces revenue on the units it was already selling.A monopolists marginal revenue can be negative because to get purchasers to buy an additional unit of the good, the firm must reduce its price on all units of the good. The fact that it sells a gr

36、eater quantity increases revenue, but the decline in price decreases revenue. The overall effect depends on the elasticity of the demandcurve. If the demand curve is inelastic, marginal revenue will be negative.Q4 Draw the demand, marginal-revenue, and marginal-cost curve for a monopolist. Show the

37、profit-maximizing level of output. Show the profit-maximizing price.Figure 1 shows the demand, marginal-revenue, and marginal-cost curves for a monopolist. The intersection of the marginal-revenue and marginal-cost curves determines the profit-maximizing level of output, Q. The demand curve then sho

38、ws the profit-maximizing price,Pm.Figure 1nuMwH wbu gzd16Q1If a group of sellers could form a cartel, what quantity and price would they try to set?If a group of sellers could form a cartel, they would try to set quantity and price like a monopolist. They would set quantity at the point where margin

39、al revenue equals marginal cost, and set price at the corresponding point on the demand curve.Q5What is the prisoners dilemma and what does it have to do with oligopoly?The prisoners dilemma is a game between two people or firms that illustrateswhy it is difficult for opponents to cooperate even whe

40、ncooperation would makethem all better off. Each person or firm has a great incentive to cheat on any cooperative agreement to makehimself or itself better off.17Q2 Draw a diagram of the long-run equilibrium in a monopolistically competitive market. How is price related to average total cost? How is

41、 price related to marginal cost?In Figure 2, a firm has demandcurve D1 and marginal-revenue curve MR1.The firm is making profits because at quantity Q1, price ( P1) is above average total cost ( ATC). Those profits induce other firms to enter the industry, causing the demand curve to shift to D2 and

42、 the marginal-revenue curve to shift toMR2. The result is a decline inquantity to Q, at which point the price (P2) equals average total cost(AT(J so profits are now zero.QuAntiry23Figure 2Q1 Explain why an economy s income must equal its expenditure.An economys income must equal its expenditure, sin

43、ce every transaction has a buyer and a seller. Thus, expenditure by buyers must equal income by sellers.24Q2 Describe the three problems that makethe consumer price index an imperfect measure of the cost of living.The three problems in the consumer price index as a measure of thecost of living are:

44、(1) substitution bias, which arises because people substitute toward goods that have become relatively less expensive; (2) the introduction of new goods, which are not reflected quickly in the CPI; and (3) unmeasured quality change.25Q2List and describe four determinants of productivity.The four det

45、erminants of productivity are: (1) physical capital, which is the stock of equipment and structures that are used to produce goods and services; (2) humancapital, which consists of the knowledge and skills that workers acquire through education, training, and experience; (3) natural resources, which

46、 are inputs into production that are provided by nature; and (4) technological knowledge, which is society s understanding of the best ways to produce goods and services.Questions are chosen from problems and applications.Q9By specializing in each task, you and your roommate can finish the chores mo

47、re quickly. If you divided each task equally, it would take you more time to cook than it would take your roommate, and it would take him more time to clean than it would take you. By specializing, you reduce the total time spent on chores.Similarly, countries can specialize and trade, making both b

48、etter off. For example, suppose it takes Spanish workers less time to makeclothes than French workers, and French workers can makewine more efficiently than Spanish workers. Then Spain and France can both benefit if Spanish workers produce all the clothes and French workers produce all the wine, and

49、 they exchange some wine for some clothes.Q2a.gure 6 shows a production possibilities frontier between gunsand butter. It is bowed out because when most of the economysresources are being used to produce butter, the frontier is steep and when most of the economy s resources are being used to produce

50、 guns, the frontier is very flat. When the economy is producing a lot of guns, workers and machines best suited to making butter are being used to make guns, so each unit of guns given up yields a large increase in the production of butter. Thus, the production possibilities frontier is flat. When t

51、he economy is producing a lot of butter, workers and machines best suited to making guns are being used to make butter, so each unit of guns given up yields a small increase in the production of butter. Thus, the production possibilities frontier is steep.Point A is impossible for the economyto achi

52、eve; it is outside the production possibilities frontier. Point B is feasible but inefficient because it s inside the production possibilities frontier.The Hawks might choose a point like H, with many guns and notmuch butter. The Doves might choose a point like D, with a lot of butter and few guns.I

53、f both Hawks and Doves reduced their desired quantity of gunsby the sameamount, the Hawkswould get a bigger peace dividend because the production possibilities frontier is muchsteeper at point H than at point D. As a result, the reduction of a given number of guns, starting at point H, leads to a mu

54、ch larger increase in the quantityof butter produced than when starting at point D.Q4Since a Canadian worker can makeeither two cars a year or 30 bushels of wheat, the opportunity cost of a car is 15 bushels of wheat.Similarly, the opportunity cost of a bushel of wheat is 1/15 of a car. The opportun

55、ity costs are the reciprocals of each other.See Figure 4. If all 10 million workers produce two cars each,they produce a total of 20 million cars, which is the vertical intercept of the production possibilities frontier. If all 10 million workers produce 30 bushels of wheat each, they produce a tota

56、l of 300 million bushels, which is the horizontal intercept of theproduction possibilities frontier. Since the tradeoff between cars and wheat is always the same, the production possibilities frontier is a straight line.If Canada chooses to consume 10 million cars, it will need 5 million workers dev

57、oted to car production. That leaves 5 million workers to produce wheat, who will produce a total of 150 million bushels (5million workers times 30 bushels per worker). This is shown as point A on Figure 4.If the United States buys 10 million cars from Canada and Canadacontinues to consume10 million

58、cars, then Canadawill need to producea total of 20 million cars. So Canada will be producing at thevertical intercept of the production possibilities frontier. But ifCanada gets 20 bushels of wheat per car, it will be able to consume200 million bushels of wheat, along with the 10 million cars. Thisi

59、s shown as point B in the figure. Canada should accept the deal because it gets the same number of cars and 50 million more bushes of wheat.Q1Cold weather damages the orange crop, reducing the supply oforanges. This can be seen in Figure 6 as a shift to the left in thesupply curve for oranges. The n

60、ew equilibrium price is higher than the old equilibrium price.People often travel to the Caribbean from New England to escapecold weather, so demandfor Caribbean hotel rooms is high in the winter. In the summer, fewer people travel to the Caribbean, since northernclimes are more pleasant. The result