Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Question
Chapter 4, Problem 6CQ
(a)
To determine
Impact of an increase in minimum wage on the employment.
(b)
To determine
Impact of an increase in minimum wage on the
(c)
To determine
Impact of an increase in minimum wage on the availability of low-skilled workers.
(d)
To determine
Impact of an increase in minimum wage on the
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The figure shows the private and social marginal costs
and the marginal benefit of producing paper. The
marginal social net benefit derived from the production of
paper is
OA. maximized at an output level of 35 because that
is where MCp equals MB.
OB. maximized at an output level of 25 because that
is where MCs equal MB.
OC. zero at an output level of 25 because that is
where MCs equals MB.
OD. zero at an output level of 35 because that is
where MCp equals MB
Dollars per Unit
25 35
Quantity of Paper
-6°C Mostly clear
D=MB
Next
MCS
MC
Refer to the given figure. MB and MC represent the social
marginal benefit and social marginal cost of pollution
abatement. The total net benefit from the optimal level of
pollution abatement is $
(Enter your response rounded to the nearest
whole number.)
D
Dollars per Unit
0
MC
18
810
Pollution Abatement
-6°C Mostly clear
Next
MB
Suppose that each firm pollutes 100 units and is given
70 pollution permits (i.e., each firm must reduce
pollution by 30 units if they do not trade their permits).
If firms are allowed to trade their permits, then the
equilibrium price of permits will be
and
permits.
and
as a result of being able to trade their
OA. $10; firm A buys 20 permits from firm B
profits fall by $200 for A and rise by $200 for
B
OB. $10; firm A buys 20 permits from firm B
profits rise by $40 for A and rise by $40 for B
OC. $12; firm A sells 10 permits to firm B; profits
rise by $40 for A and rise by $40 for B
OD. $12, firm A buys 10 permits from firm B
profits fall by $120 for A and rise by $120 for
B
E. None of the above
Marginal Abatement Cost ($)
18
16-
4
12-
10-
8-
MCA
0
10 20
30 40 50 60 70 80
Pollution Abatement
90
-6°C Mostly clear
Next
M
40
Chapter 4 Solutions
Macroeconomics: Private and Public Choice
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- Consider an economy in which there are two polluters: A and B. The marginal cost of pollution abatement curves are given in the diagram to the right. The total cost of reducing pollution by 60 units if it is done efficiently or $ equals $ if it is done by forcing each firm to reduce pollution by 30 units. OA. 925; 1125 OB. 900; 1100 OC. 850, 1050 OD. 800, 1000 OE. None of the above The efficient levels of pollution reduction can be achieved by using a pollution tax equal to $ unit A. 25 0 per MC 45 40 35 30- 25 20- 15 10- 5- Marginal Abatement Cost ($) 10 20 30 40 50 60 70 80 Pollution Abatement -6°C Mostly clear Next 90arrow_forwardis initially abating Q units of pollution. Suppose that a system of tradeable pollution permits is introduced into this market and the equilibrium permit price is P* Firm B will sell permits to Firm A because OA. Firm A has lower costs of pollution abatement than Firm B. OB. Firm B's total cost of abating more pollution (area 1) is less than the revenue it earns from selling the permits (areas 5+3). OC. Firm B's total cost of abating more pollution (areas 3+1) is less than the revenue it earns from selling the permits (areas 5+3+1). OD. Firm B can buy the permits at a lower price than Firm A OE. the revenue Firm B earns from selling permits (areas 3+1) is greater than the cost it incurs from abating more pollution (area 1). Dollars per unit Q₁ Qo Q2 Pollution Abatement ил Next -6°C Mostly clear MCA MCBarrow_forwardThe accompanying diagrams show the marginal costs of pollution abatement for two firms, Firm 1 and Firm 2. If the government requires each firm to abate Q units of pollution, the social costs of this abatement OA. could be reduced further if Firm 2 increased abatement and Firm 1 reduced its abatement by the same amount OB. could be reduced further if each firm was required to abate more. OC. could be reduced further if each firm was allowed to pollute more. OD. would be minimized. WOE could be reduced further if Firm 1 increased abatement and Firm 2 reduced its abatement by the same amount. Dollars 5 Firm 1 MC1 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Abatement Q Firm 2 6- MC2 E 屈 Dollars -6°C Mostly clear Nextarrow_forward
- The diagram to the right illustrates a competitive industry in which there is a negative production externality. If a tax equal to $20/unit (i.e., a tax equal to the marginal external cost) is imposed, then the net social benefit will OA. fall by area A+ C. OB. rise by area B+C. OC. fall by area C. OD. rise by area B. OE. None of the above. W Marginal Benefit, Marginal Cost ($) 50 MCS MCp 45 35 30- 25 20 15 10- 5 0- 0 B D 10 20 30 40 50 60 70 80 90 100 110 Quantity -6°C Mostly clear Nextarrow_forwardNot use ai pleasearrow_forwardProblem 3 Simple Bivariate Regression Consider the following bivariate regression model: NAMEUIN Page 1 of 2 = Hourly Wages, Bo+B₁Education; + & where Education measures the years of experience at the job for an individual and Hourly Wage is the hourly wage in dollars. The subscript i indexes various people. You run a bivariate OLS regression to estimate Bo and B₁. Suppose you estimate B = 10 and B a. 0 = 2 How do you interpret the estimates ßo and ß₁ in this context? (3 points) 1 b. Define the terms "predicted/fitted value" and "residual”. (3 points) c. Suppose that for some individual, the predicted value of Hourly Wage is $20, and the residual is 2. What is the actual Hourly wage for the individual? Show your work. (4 points) d. Suppose that some individual has 10 years of Education, and his actual hourly wage is $35. What is the predicted outcome and residual for this individual? Show your work. (5 points)arrow_forward
- Problem 1 The Core Model Suppose you are interested in studying the effect of workers' training (measured by the number of training hours) on employee productivity (measured by output per hour). a. What is the dependent and independent variable in this setting? (2 points) b. How would you write this relationship using the Core Model? (3 points) C. Do you expect the slope coefficient ẞ₁, (which shows relation between teacher's experience and test scores) to be positive or negative? Explain your reasoning. (5 points) d. Name any two factors that are likely included in the error term of your model? (5 points)arrow_forwardProblem 2 Endogeneity Suppose you are interested in how social media usage affects students' academic performance. Consider the following model: GPA; = ßo + ß₁Social Media Hours; + ɛ; where GPA, is the grade point average of a student and Social Media Hours; measures how many hours the student spends on social media every week. Each student is denoted by the subscript i. a. What is the dependent variable Y in this setting? What is the independent variable X in this setting? (4 points) b. What does Bo C. What does ẞ1 = 3 mean? (2 points) = 0.2 mean? (3 points) d. What is the condition for the independent variable Social Media Hours; to be endogenous? (5 points) e. Is the independent variable likely to be endogenous? Why or why not? (3 points) f. If yes, describe a scenario where the independent variable is endogenous. (3 points)arrow_forwardNot use ai pleasearrow_forward
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