Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 24, Problem 23RQ
What are the economic reasons why the AD curve slopes down?
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Before the Civil War, the South traded with the North and with England. The South sold cotton and bought
manufactured goods and food. During the war, one of President Lincoln's first actions was a blockade of the
ports in the South to prevent this trade. The South had to increase its production of munitions and food.
Draw a point to show the South's production point prior to the Civil War. Label it 1.
Draw a point to show the South's consumption point prior to the Civil War. Label it 2.
During the war, the South's factors of production were severely depleted and its production possibilities
decreased. Draw a curve that shows the effects of the Civil War on the South's PPF. Label it PPF₁.
Draw a point to show the South's production point during the Civil War. Label it 3.
During the war, the South did not engage in trade. Draw a point to show the South's consumption point during
the Civil War. Label it 4.
100
80-
60-
Other goods and services (units)
☑
40-
20-
200
400
600
PPF
800
1000…
Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume.
For example, the first unit of boxes increases earnings by $10, the second by $9, the third by $8, and so on, until the tenth unit increases profit by
just $1.
The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $3.50.
Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes
represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0
for the paper mill.
The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill
at various prices.
In the following table, fill in the marginal revenue, total cost, and total…
Planes frequently push back from the gate on time, but then wait 2 feet away from the gate until it is time to queue up for takeoff. This increases fuel
consumption and increases the time that passengers must sit in a cramped plane awaiting takeoff. The following table shows the pay schedule for the
flight crew.
Pay
Per diem
Holding pay per hour
Flight Attendant
Captain
First Officer
$3
$3
$3
$20
$20
$20
Hourly wage (after push back)
$38
$184
$50
Per diem pay indicates how much the flight crew earns once it checks into the airport. Holding pay indicates how much the flight crew earns after it
loads the plane. Hourly wage indicates how much the flight crew earns after it pushes back from the gate and turns on the beacon.
In this scenario, who does not have an incentive to push back from the gate as early as possible? Check all that apply.
Captain
Flight attendants
Passengers
First officer
True or False: Allowing the airline to decide when to push back from the gate would reduce…
Chapter 24 Solutions
Principles of Economics 2e
Ch. 24 - Describe the mechanism by which supply creates its...Ch. 24 - Describe the mechanism by which demand creates its...Ch. 24 - The short run aggregate supply curve was...Ch. 24 - In the AD/AS model, what prevents the economy from...Ch. 24 - Suppose the U.S. Congress passes significant...Ch. 24 - Suppose concerns about the size of the federal...Ch. 24 - How would a dramatic increase in the value of the...Ch. 24 - Suppose Mexico, one of our largest trading...Ch. 24 - A policymaker claims that tax cuts led the economy...Ch. 24 - Many financial analysts and economists eagerly...
Ch. 24 - What impact would a decrease in the size of the...Ch. 24 - Suppose, after five years of sluggish growth, the...Ch. 24 - Suppose the Federal Reserve begins to Increase the...Ch. 24 - If the economy is operating in the neoclassical...Ch. 24 - If the economy is operating In the Keynesian zone...Ch. 24 - What is says law?Ch. 24 - What is Keynes; law?Ch. 24 - Do neoclassical economists believe in Keynes law...Ch. 24 - Does Says law apply more accurately in the long...Ch. 24 - What is on the horizontal axis of the AD/AS...Ch. 24 - What is the economic reason why the SRAS curve...Ch. 24 - What are the components of the aggregate demand...Ch. 24 - What are the economic reasons why the AD curve...Ch. 24 - Briefly explain the reason for the near-horizontal...Ch. 24 - Briefly explain the reason for the near-vertical...Ch. 24 - What is potential GDP?Ch. 24 - Name some factors that could cause the SRAS curve...Ch. 24 - Will the shift of SRAS to the right tend to make...Ch. 24 - What is stagflation?Ch. 24 - Name some factors that could cause AD to shift,...Ch. 24 - Would a shift of AD to the right tend to make the...Ch. 24 - How is long-term growth illustrated in an AD/AS...Ch. 24 - How is recession illustrated in an AD/AS model?Ch. 24 - How is cyclical unemployment illustrated in an...Ch. 24 - How is the natural rate of unemployment...Ch. 24 - How is pressure for inflationary price increases...Ch. 24 - What are some of the ways in which exports and...Ch. 24 - What is the Keynesian zone of the SRAS curve? How...Ch. 24 - What is the neoclassical zone of the SRAS curve?...Ch. 24 - What is the intermediate zone of the SRAS curve?...Ch. 24 - Why would an economist choose either the...Ch. 24 - On a microeconomic demand curve, a decrease in...Ch. 24 - Economists expect that as the labor market...Ch. 24 - If new government regulations require firms to use...Ch. 24 - During spring 2016 the Midwestern United States,...Ch. 24 - Hydraulic fracturing (tracking) has the potential...Ch. 24 - Some politicians have suggested tying the minimum...Ch. 24 - If households decide to save a larger portion of...Ch. 24 - If firms become more optimistic about the future...Ch. 24 - If Congress cuts taxes at the same time that...Ch. 24 - Suppose the level of structural unemployment...Ch. 24 - If foreign wealth-holders decide that the United...Ch. 24 - The AD/AS model is static. It shows a snapshot of...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Why might it be important for policymakers to know...Ch. 24 - In your view, is the economy currently operating...Ch. 24 - Are Says law and Keynes law necessarily mutually...Ch. 24 - Review the problem in the Work It Out titled...Ch. 24 - The imaginary country of Harris Island has the...Ch. 24 - Table 24.4 describes Santhers economy. Plot the...
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