Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 2CQQ
To determine
The example of moral hazard.
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- Q1 Explain what economic catch 22 is. Q2 What are the consequences of declining houses pricing? Q3 What is the argument about necessary evil? Q4 Explain the idea of irrational exhuberance? Q5 Explain what was the economic paradox?arrow_forward< Files 9:10 Fri Mar 21 Chapter+11-Public+Goods+and+Common+Res... The Economic Catch-22 By Robert J. Samuelson We are now in the "blame phase" of the economic cycle. As the housing slump deepens and financial markets swing erratically, we've embarked on the usual search for culprits. Who got us into this mess? Our investigations will doubtlessly reveal, as they already have, much wishful thinking and miscalculation. They will also find incompetence, predatory behavior and probably some criminality. But let me suggest that, though inevitable and necessary, this exercise is also simplistic and deceptive. -- business It assumes that, absent mistakes and misdeeds, we might remain in a permanent paradise of powerful income and wealth growth. The reality, I think, is that the economy follows its own Catch-22: By taking prosperity for granted, people perversely subvert prosperity. The more we managers, investors, consumers - think that economic growth is guaranteed and that risk and…arrow_forward2.) Using the line drawing tool, plot and label the isocost line. Carefully follow the instructions above, and only draw the required objects. FILL IN BLANK d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on ▼ The samedifferently slopedparallel isocost line. The firm will use ▼ moresameless labour and ▼ less the same amount of more capital and produce on ▼ a higher point on the same a lower point on the same a lower a higher isoquant curve.arrow_forward
- QK Using the graph on the right, determine how the firm should change the quantity of the production factors in order to reduce the costs. The firm that is producing at point A can reduce its costs for producing 2000 units by employing A. same capital and more labour. B. less capital and more labour. ○ C. less capital and the same labour. D. more capital and more labour. OE. more capital and less labour. C A B Q =4000 Q = 2000 C Isocost line QLarrow_forwardPL Suppose the price ratio is the same along isocost PK lines A and B. In the figure at right, the difference between isocost line A and isocost line B is that A. the total cost is larger along B. B. the total cost is larger along A. OC. labour is relatively more expensive along A. ○ D. the level of output is lower along A. OE. both capital and labour are relatively cheaper along A. Capital B Labourarrow_forwardUsing the graph on the right, determine the per unit prices of capital and labour. 20- Given the information provided about the isocost lines, we know that the per unit price of capital is TC=$100 and the per unit price of labour is 16- TC $80 ○ A. $50; $20 ○ B. $2; $5 ○ C. $5; $2 ○ D. $20; $50 E. not determinable; not determinable Quantity of K 12 TC $60 TC $40 0 10 20 30 Quantity of L 40arrow_forward
- The diagram to the right contains isocost lines A and B. If the price of capital is the same for both lines, then the difference between isocost line A and isocost line B is that OA. the total cost is larger along B. B. the level of output is lower along A. C. both capital and labour are cheaper along A. OD. labour is more expensive along A. ○ E. labour is more expensive along B. Capital Labourarrow_forwardFor the firm whose cost curves are shown at right, the minimum efficient scale is ○ A. between 60 and 140 units of production. OB. about 20 units of production. OC. about 60 units of production. OD. about 100 units of production. OE. the level of fixed cost corresponding to SRATC2. SRATC₁ LRAC SRATC4 SRATC₂ SRATC3 เนด เad iso C 20 20 40 60 80 100 120 140 160 180 200 Output per Periodarrow_forwardSRATC₂ SRATC3 In the figure, increasing long-run average total costs for the firm are confined to the output range OA. where the LRAC curve is downward sloping. B. above 80 units of output. O C. above 50 units of output. OD. between 50 and 80 units of output. SRATC₁ OE. between 10 and 100 units of output. ---- SRATC LRAC 10 20 30 40 50 60 70 80 90 100 Output per Periodarrow_forward
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