Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 7, Problem 23RQ
Which costs are measured on per-unit basis: fixed
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Difference-in-Difference
In the beginning of 2001, North Dakota legalized fireworks. Suppose you are interested in
studying the effect of the legalizing of fireworks on the number of house fires in North
Dakota. Unlike North Dakota, South Dakota did not legalize fireworks and continued to ban
them. You decide to use a Difference-in-difference (DID) Model. The numbers of house fires
in each state at the end of 2000 and 2001 are as follows:
Number of house fires in Number of house fires in
Year
North Dakota
2000
2001
35
50
South Dakota
54
64
a. What is the change in the outcome for the treatment group between 2000 and 2001?
Show your working for full credit. (10 points)
b. Can we interpret the change in the outcome for the treatment group between 2000
and 2001 as the causal effect of legalizing fireworks on number of house fires?
Explain your answer. (10 points)
C.
Regression Discontinuity
Birth weight is used as a common sign for a newborn's health. In the United States, if a baby
has a birthweight below 1500 grams, the newborn is classified as having “very low birth
weight". Suppose you want to study the effect of having very low birth weight on the number
of hospital visits made before the baby's first birthday. You decide to use Regression
Discontinuity to answer this question. The graph below shows the RD model:
Number of hospital visits made before baby's first birthday
5
1400
1450
1500
1550
1600
Birthweight (in grams)
a. What is the running variable? (5 points)
b. What is the cutoff? (5 points)
T
What is the discontinuity in the graph and how do you interpret it? (10 points)
C.
Regression Discontinuity
Birth weight is used as a common sign for a newborn's health. In the United States, if a baby
has a birthweight below 1500 grams, the newborn is classified as having “very low birth
weight". Suppose you want to study the effect of having very low birth weight on the number
of hospital visits made before the baby's first birthday. You decide to use Regression
Discontinuity to answer this question. The graph below shows the RD model:
Number of hospital visits made before baby's first birthday
5
1400
1450
1500
1550
1600
Birthweight (in grams)
a. What is the running variable? (5 points)
b. What is the cutoff? (5 points)
T
What is the discontinuity in the graph and how do you interpret it? (10 points)
Chapter 7 Solutions
Principles of Economics 2e
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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