Download 1- Apple Inc. decides to make iTunes freely available in unlimited

1- Apple Inc. decides to make iTunes freely available in unlimited
quantities.
A . Does Apple's decision change the incentives that people face? .
Ans. Yes, the Apple's decision changes the incentives that people face.
B. Is Apple's decision an Example of a microeconomic or a
macroeconomic issue?
Ans. It is microeconomic.
2-
Which of the following pairs does not Match ?
Ans. C. Entrepreneurship and profit.
3-
Explain how the following news headlines concerns self-interest
and the social interest of Starbucks expands in china .
a- Ans. Starbucks concerns self-interest and the social interest have
ambitious expansion plans in China, but like any big new
emerging market there are teething problems, not least of which is
that customers love it so much they stay for hours and hours and
sometimes don't even buy a drink.
b- You can see for yourself in their nutrition facts. A hamburger at
McDonald's has 9 grams of fat. A cheeseburger has 12 grams of
fat. The Premium Caesar salad with crispy chicken has 17 grams
of fat.
c- The "Nutrition Facts" section on the back of the food label allows
you to make comparisons between the nutrient contents of similar
foods and to see how the foods fit into your overall diet.
4- Did you face a tradeoff?
a- No , I didn't face a tradeoff because I was simple sitting with my
friends .
b- It was nothing of any opportunity cost .
5- No it was no an opportunity because it was fixed by the games
committee.
6- - B- China is the largest trading partner of the united states.
1- a-
b- it achieves production efficiency if it also produces 3 tons of food
per day.
c- Brazil faces a tradeoff on its PPF because Brazil‘s resources and
technology are limited.
2- a- it must decrease its production of food crops from 3 tons per
day to 2tons per day. Hence the opportunity cost of the additional
ethanol is 1 ton of food per day for the entire 14 barrels of ethanol
or1/14 of a ton of food per barrel of ethanol.
b- it must decrease its production of ethanol from 54 barrels per
day to 40barrels per day. Hence the opportunity cost of the
additional 1ton of food crops is 14 barrels of ethanol.
c-The opportunity costs are reciprocals of each other. That is, the
opportunity cost of 1 ton of food crops is 14 barrels of ethanol and
the opportunity cost of 1 barrel of ethanol is 1/14 of a ton of food
crops.
3- Brazil faces an increasing opportunity cost of ethanol production. For
instance, when increasing ethanol production from 0 barrels per day
to 22 barrels the opportunity cost of a barrel of ethanol is 1/22 of a ton
of food while increasing ethanol production another 18 barrels per
day.
4- ton of food when the quantity produced is 2.5 tons per day.
5- The opportunity cost of increasing food production is the decrease in
ethanol product, so the opportunity cost of producing a ton of food
when 2.5 tons of food per day are produced is 14 barrels of ethanol
per day.
6- The marginal benefit of a good or service is measured by the most people are
willing to pay for one more unit of it. The data in the table do not provide
information on how much people are willing to pay for an additional unit of food.
7- Production efficiency occurs when goods and services are produced at the lowest
cost.
8- What is Harry‘s marginal cost of tennis if he plays for
(i) 3 hours a week;
(ii)
(ii) 5 hours a week;
(iii)
and (iii) 7 hours a week.
(i) His opportunity cost of these 2additional hours of tennis is 3
percentage points, so his marginal cost of playing tennis for the
third hour per week is1.5 percentage points.
(ii) His opportunity cost of these 2 additional hours of tennis is 5
percentage points. So his marginal cost of playing tennis for the
fifth hour per week is 2.5 percentage points.
(iii)
His opportunity cost of these 2 additional hours of tennis is
10percentage points. So his marginal cost of playing tennis for
the seventh hour per week is 5 percentage points.
b. If Harry uses his time to achieve AL locative efficiency,
what is his economics grade and how many hours of tennis
does he play?
Harry‘s grade in economics is 66 percent and he plays tennis
for 7hours per week. From the answer to part
(a), Hurry's marginal cost of playing the third hour a week of tennis is 1.5
percentage points, his marginal cost of playing tennis the fifth hour a week is 2.5
percentage points and his marginal cost of playing tennis
a- What is the relative price of butter in terms of wool?
ANSWER - the relative price of butter in terms of wool was 1/2 pound of wool per
pound of butter.
b- If the money price of bacon was 20¢ a pound, what do you
predict was the money price of butter?
ANSWER.- the money price of 1 pound of butter was 40¢.
c- If the money price of bacon was 20¢ a pound and the money
price of salt was $2.00 a bushel, do you think anyone would
accept Mr. Gregg’s offer of cloth for salt?
ANSWER- YES because it enables them to obtain salt at a money price of only $1.60 a
bushel.
2- The price of food increased during the past year.
a- Explain why the law of demand applies to food just as it does
to all other goods and services.
ANSWER- The law of demand applies to food because there is both a substitution
and an income effect that reinforce each other. When the price rises, people substitute to
different foods.
a- Explain how the substitution effect influences food purchases
and provide some examples of substitutions that people might
make when the price of food rises and other things remain the
same.
ANSWER- People substitute in two ways: They substitute cheaper foods for more
expensive foods and also substitute diets for food.
b- Explain how the income effect influences food purchases and
provide some examples of the income effect that might occur
when the price of food rises and other things remain the same.
ANSWER- Food is a normal good so a rise in the price, which decreases people’s real
incomes, decreases the quantity of food demanded. In the United States, restaurants suffer
as the negative income effect from a higher price of food leads people to cut back their trips
to restaurants. In poor countries, people literally eat less when the price of food rises and in
extremely poor countries starvation increases.
4- a- The demand for beef? Explain your answer.
ANSWER - Beef is a normal good. The increase in income increases the demand for beef.
b- The demand for rice? Explain your answer.
ANSWER - Rice is probably an inferior good. The increase in income decreases the demand for
rice.
5- Explain the effect of each event on the demand for cell phones.
ANSWER - A fall in the price of a cell phone increases the quantity of cell phones
demanded but has no effect on the demand for cell phones.
-
An expected fall in the price of a cell phone next month decreases the demand for cell
phones today as people wait for the lower price.
-
A fall in the price of a call from a cell phone increases the demand for cell phones because a
cell phone call and a cell phone are complements.
-
A rise in the price of a call from a land-line phone increases the demand for cell phones
because a landline phone and a cell phone are substitutes.
-
An increase in the popularity of a cell phone increases the demand for cell phones.
a- The demand for gasoline?
-
ANSWER - The rise in the price of gasoline does not change the demand for gasoline. The demand
for gasoline changes only when some influence other than the price of the good changes.
b- The quantity of gasoline demanded?
-
ANSWER - The rise in the price of gasoline decreases the quantity of gasoline demanded. A rise in
the price of a good or service decreases the quantity of that good or service demanded.
6-a- Does this fact illustrate the law of Demand or Supply?
-
ANSWER- a- rise in the price of a timber beam, other things remaining the same, illustrates the law
of
supply. The other events change supply and do not illustrate the law of supply.
7- Explain the effect of each event on the supply of low-fat milk
-
ANSWER- Low-fat milk and cream are complements in production.
8-Use a graph to illustrate the effect of each event.
-
Answer - Figure 3.1 illustrates the effect of a fall in the price of a cell phone as a movement along
the demand curve D. Figure 3.2 illustrates the effect of an increase in the demand for cell phones as
the shift of the demand curve from D0 to D1. It also illustrates the effect of a decrease in the demand
for cell phones as the shift of the demand curve from D0 to D2.
9- Does any event (or events) illustrate the law of supply?
-
ANSWER - A rise in the price of a timber beam, other things remaining the same, (Figure 3.4)
illustrates the law of supply. The other events change supply and do not illustrate the law of supply.