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Economics 2301 Assignment 9. Tony Lima. Chapter 1 Q. 11a. A video poker game machine is capital because it lasts more than a year. It is tangible capital because you can touch it. Chapter 1 Q. 11b.
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Economics 2301Assignment 9 Tony Lima
Chapter 1 Q. 11a A video poker game machine is capital because it lasts more than a year. It is tangible capital because you can touch it.
Chapter 1 Q. 11b A Honda plant is capital because it lasts more than a year. It is tangible capital because you can touch it. The correct answer is D (despite what it says on the answer sheet, namely E).
Chapter 1 Q. 11c A $10 bill is not capital because it is not used in production over a period longer than one year. The correct answer is E (not B as it says on the answer key).
Ch. 11 Question 1 note • It’s obvious why so many of you had problems with this question: the answer key is wrong. • I may let Pearson know about this problem. • I apologize for this error.
Chapter 1 Q. 5 Investment is additions to the capital stock. That includes non-residential structures, inventory, human capital, and equipment and software.
Ch. 11 Q. 13 note • My guess is that most people had trouble with the graph. • If that was your issue, please don’t worry about it.
Chapter 12 Q. 1 answer • Given current U.S. law, oil and corn ethanol are substitutes. Therefore, an increase in the price of oil will increase the demand for ethanol. This, in turn, increases the demand for corn, as well as the land on which corn grows. • But oil is an input to wheat growing since most tractors and other farm equipment are powered by gasoline or diesel. An increase in oil prices will shift the supply curve for wheat to the left (a decrease in supply). The price of wheat will increase.
Ch. 12, Q. 1 answer • Note: Oil is also an input into corn production. Technically both the demand and supply curves for corn should shift. Given the ethanol subsidy, the increase in demand is likely to dominate the decrease in supply. • But I agree that this question is a little confusing.
Chapter 12 Q. 2 answer • Unstated assumption: the economy is perfectly competitive and begins in long-run equilibrium. • An increase in demand for services will cause both their price and quantity to increase. Firms in the industry will begin to earn economic profits.
Chapter 12 Q. 2 answer • A decrease in demand for goods will cause both their price and quantity to decrease. Firms in the industry will begin to earn economic losses.
Chapter 12 Q. 2 answer • Some firms in the goods industry will shift to the services industry. • This decreases the supply of goods and increases the supply of services. • Since the economy began in long-run equilibrium, the two markets will eventually return to their original equilibrium prices. • However, the equilibrium quantity of services will rise while the quantity of goods will fall.
Chapter 12 Q. 7 answer • Pbread = SKK 11,wage = SKK 66
Chapter 12 Q. 7 answer • Pbread = SKK 22,wage = SKK 66
Chapter 12 Q. 7 answer • Pbread = SKK 22,wage = SKK 132
Chapter 12 Q. 17a answer • This is imperfect (asymmetric) information. The mechanic knows what your car needs but you do not.
Chapter 12 Q. 17b answer • The park would be a public good because it would be open to everyone. • Technically, the park doesn’t have to meet the criterion of nonexcludability because the residents could put up a fence and charge admission. • However, the public good answer is the best of the five. • If one of the answers had been “positive externality” that would have been a better answer.
Chapter 12 Q. 17c answer • This is a negative externality (assuming you don’t enjoy staying up until 4 am). • The reference to a “CD” in part A is obviously another mistake in MyEconLab.
Chapter 12 Q. 17d answer • Price fixing leads to imperfect competition. • Remember, the objective of collusion is to raise the price to the monopoly price. • That means the price of output is no longer equal to marginal cost, implying imperfect competition.
