PRINCIPLES OF MICROECONOMICS (OER)
2nd Edition
ISBN: 9781947172340
Author: Timothy Taylor, Steven A. Greenlaw
Publisher: OpenStax
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Textbook Question
Chapter 7, Problem 11RQ
What is die difference between accounting and economic profit?
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1. After the reopening of borders with mainland China following the COVID-19 lockdown, residents
living near the border now have the option to shop for food on either side. In Hong Kong, the cost
of food is at its listed price, while across the border in mainland China, the price is only half that
of Hong Kong's. A recent report indicates a decline in food sales in Hong Kong post-reopening.
**
Diagrams need not be to scale; Focus on accurately representing the relevant concepts
and relationships rather than the exact proportions.
(a) Using a diagram, explain why Hong Kong's food sales might have dropped after the border
reopening. Assume that consumers are indifferent between purchasing food in Hong Kong or
mainland China, and therefore, their indifference curves have a slope of one like below.
Additionally, consider that there are no transport costs and the daily food budget for consumers
is identical whether they shop in Hong Kong or mainland China. I
3.
14
(b) In response to the…
Chapter 7 Solutions
PRINCIPLES OF MICROECONOMICS (OER)
Ch. 7 - A firm had sales revenue of 1 million last year....Ch. 7 - Continuing from Exercise 7.1, the films factory...Ch. 7 - The WipeOut Ski Company manufactures skis for...Ch. 7 - Based on your answers to the WipeOut Ski Company...Ch. 7 - If two painters can paint 200 square feet of wall...Ch. 7 - Return to the problem explained in Table 7.13 and...Ch. 7 - Suppose the cost of machines increases to 55,...Ch. 7 - Automobile manufacturing is an industry subject to...Ch. 7 - What are explicit and implicit costs?Ch. 7 - Would you consider an interest payment on a loan...
Ch. 7 - What is die difference between accounting and...Ch. 7 - What is a production function?Ch. 7 - What is the difference between a fixed input and a...Ch. 7 - How do we calculate marginal product?Ch. 7 - What shapes would you generally expect a total...Ch. 7 - What are the factor payments for land, labor, and...Ch. 7 - What is the difference between fixed costs and...Ch. 7 - How do we calculate each of the following:...Ch. 7 - What shapes would you generally expect each of the...Ch. 7 - Are there fixed costs in the lung-run? Explain...Ch. 7 - Are fixed costs also sunk costs? Explain.Ch. 7 - What are diminishing marginal returns as they...Ch. 7 - Which costs are measured on per-unit basis: fixed...Ch. 7 - What is a production technology?Ch. 7 - In choosing a production technology, how will...Ch. 7 - What is a long-run average cost curve?Ch. 7 - What is the difference between economies of scale,...Ch. 7 - What shape of a long-run average cost curve...Ch. 7 - Why will firms in most markets be located at or...Ch. 7 - Small Mom and Pop firms, like inner city grocery...Ch. 7 - A common name for fixed cost is overhead. If you...Ch. 7 - How does fixed cost affect marginal cost? Why is...Ch. 7 - Average cost curves (except for avenge fixed cost)...Ch. 7 - What is the relationship between marginal product...Ch. 7 - It is clear that businesses operate in the short...Ch. 7 - Retune to Table 7.2. In the top half of the table,...Ch. 7 - How would an improvement in technology, like the...Ch. 7 - Do you think that the taxicab industry in large...Ch. 7 - A firm is considering an investment that will earn...Ch. 7 - Return to Figure 7.7. What is the marginal gain in...Ch. 7 - Compute the average total cost, average variable...Ch. 7 - A small company that shovels sidewalks and...
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- 2. Health Food Company is a well-known global brand that specializes in healthy and organic food products. One of their main products is organic chicken, which they source from small farmers in the area. Health Food Company is the sole buyer of organic chicken in the market. (a) In the context of the organic chicken industry, what type of market structure is Health Food Company operating in? (b) Using a diagram, explain how the identified market structure affects the input pricing and output decisions of Health Food Company. Specifically, include the relevant curves and any key points such as the profit-maximizing price and quantity. () (c) How can encouraging small chicken farmers to form bargaining associations help improve their trade terms? Explain how this works by drawing on the graph in answer (b) to illustrate your answer.arrow_forward2. Suppose that a farmer has two ways to produce his crop. He can use a low-polluting technology with the marginal cost curve MCL or a high polluting technology with the marginal cost curve MCH. If the farmer uses the high-polluting technology, for each unit of quantity produced, one unit of pollution is also produced. Pollution causes pollution damages that are valued at $E per unit. The good produced can be sold in the market for $P per unit. P 1 MCH 0 Q₁ MCL Q2 E a. b. C. If there are no restrictions on the firm's choices, which technology will the farmer use and what quantity will he produce? Explain, referring to the area identified in the figure Given your response in part a, is it socially efficient for there to be no restriction on production? Explain, referring to the area identified in the figure If the government restricts production to Q1, what technology would the farmer choose? Would a socially efficient outcome be achieved? Explain, referring to the area identified in…arrow_forwardI need help in seeing how these are the answers. If you could please write down your steps so I can see how it's done please.arrow_forward
- Suppose that a random sample of 216 twenty-year-old men is selected from a population and that their heights and weights are recorded. A regression of weight on height yields Weight = (-107.3628) + 4.2552 x Height, R2 = 0.875, SER = 11.0160 (2.3220) (0.3348) where Weight is measured in pounds and Height is measured in inches. A man has a late growth spurt and grows 1.6200 inches over the course of a year. Construct a confidence interval of 90% for the person's weight gain. The 90% confidence interval for the person's weight gain is ( ☐ ☐) (in pounds). (Round your responses to two decimal places.)arrow_forwardSuppose that (Y, X) satisfy the assumptions specified here. A random sample of n = 498 is drawn and yields Ŷ= 6.47 + 5.66X, R2 = 0.83, SER = 5.3 (3.7) (3.4) Where the numbers in parentheses are the standard errors of the estimated coefficients B₁ = 6.47 and B₁ = 5.66 respectively. Suppose you wanted to test that B₁ is zero at the 5% level. That is, Ho: B₁ = 0 vs. H₁: B₁ #0 Report the t-statistic and p-value for this test. Definition The t-statistic is (Round your response to two decimal places) ☑ The Least Squares Assumptions Y=Bo+B₁X+u, i = 1,..., n, where 1. The error term u; has conditional mean zero given X;: E (u;|X;) = 0; 2. (Y;, X¡), i = 1,..., n, are independent and identically distributed (i.i.d.) draws from i their joint distribution; and 3. Large outliers are unlikely: X; and Y, have nonzero finite fourth moments.arrow_forwardAsap pleasearrow_forward
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