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M3 Discussion Topic and multiple choice
Active discussion participation is a requirement for this course, which means you need to be posting at
least two contributions per week and those can either be original threads or responses to other
postings.
Listed below are possible discussion topics for this module, but if you have personal experiences or
examples that relate to the topics presented in the assigned readings, please feel free to add those to
this discussion as well. In developing your thoughts and opinions here, please look to incorporate
citations and statistics both from the textbook and other outside sources. Lastly, let’s always remember
to keep these discussions civilized and respectful, even when we disagree on certain topics.
Module 3:
Respond to this question on your first post, the first week of the discussion:
Recently the EpiPen, a life saving allergy treatment, has been in the news because of a five-fold price
rise since 2010 by Mylan, the pharmaceutical company who bought the patent rights.
Explain the price rise in terms of elasticity of demand. How does the market structure affect the ability
of Mylan to raise the prices in the U.S.? How does this compare to prices in other countries?
How do the rules of the market (i.e. laws such as patents) affect pharmaceutical companies ability to
charge high prices? Who should bear the burden of these price rises, consumers, the government
(taxpayers)?
Should the government set price controls or change the rules of the market (laws) in some other way?
Here is one article on this topic, please research and share the articles you have found in your post.
http://www.nytimes.com/2016/09/16/business/epipen-maker-mylan-preventative-drugcampaign.html?_r=0
Respond to this question on your second post, the first week of the discussion and respond to your
classmates:
FICA (social security and medicare) payroll taxes are usually paid by labor in terms of lower wages.
Explain this in terms of elasticity of demand and elasticity of supply. Would a minimum wage change
this tax burden?
Should the income cap on social security be lifted? Discuss this in terms of ability to pay and benefits
principle.
Respond to this question on your third post, the second week of the discussion and respond to your
classmates:
NAFTA currently has come under criticism. What are the criticisms of NAFTA? Has NAFTA been a
benefit to its member countries? Should NAFTA be ended?
Please do research and share your sources in your posts.
Respond to this question on your fourth post, the second week of the discussion and respond to your
classmates:
In what ways do implicit costs actually understate the value of economic profits, and what are some
examples of implicit costs that business owners might have to consider?
Respond to this question on your fifth post, the third week of the discussion and respond to your
classmates:
Can anyone think of jobs around the house where you would see diminishing marginal returns?
Are there certain jobs/chores where you wouldn’t experience this? Take a moment here and explain
some of these possible different scenarios and the different factors of production needed to complete
these jobs.
Are there any examples you can think of where you, personally, would not experience diminishing
marginal utility.
Respond to this question on your sixth post, the third week of the discussion and respond to your
classmates:
Do you really think that producers take the time to calculate AFC, AVC, ATC, MC or any of the other
concepts presented in this module?
Why are businesses that operate in a perfectly competitive market considered “price takers” and can
you think of any examples of these “price takers”?
Respond to this question on your seventh post, the third week of the discussion and respond to your
classmates:
What makes someone a successful entrepreneur? What characteristics are needed? In recent years who
have been some of the most influential and profitable entrepreneurs?
One more question, respond to this question the third week of the discussion (see my post in the
discussion stream) and respond to your classmates
If medication and ambulance service have inelastic demand, I want the class to consider whether
medical care should be a commodity, open to market pressure or whether the U.S. should join the rest
of the industrialized world and offer a single payer system. As always, cite your sources.
Here are some interesting information of health care in the US, by Freakenomics that you might want to
consider. Bad Medicine Part 1: http://freakonomics.com/podcast/bad-medicine-part-1-story-98-6/
Part 2: http://freakonomics.com/podcast/bad-medicine-part-2-drug-trials-and-tribulations/
Part 3: http://freakonomics.com/podcast/bad-medicine-part-3-death-diagnosis/
Chapt 9
1.You own a small deli that sells sandwiches, salads, and soup. Which of the following is an implicit cost
of the business?
your monthly utility bill
bread, meat, and vegetables used to produce the items on your menu
wages paid to part-time employees
the job offer you did not accept at a local catering service
2.
Suppose Eastland College does not have a summer program and could rent out the campus to various
summer sports camps for $100,000. The potential revenue of the summer camps represents:
an implicit cost of capital.
a sunk cost.
an explicit cost.
a total cost.
3.
Which of the following is a “how much” decision?
Andrea is trying to decide whether to go to graduate school in economics or go to law school.
Mary is trying to decide whether to go to work or go to college after she graduates from high school
next month.
Andy is trying to decide whether to take a prep course for the Law School Admissions Test.
Tim is trying to decide the amount of money to save each month to buy a new car next year.
4.
Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,
Tommy Wang quit his job, which paid $60,000 per year, and started Wang’s Wicker Furniture Store. He
rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs
of $40,000 for sales help and advertising. Instead of using the capital for his own business, he could rent
it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000.
Reference: Ref 9-1
(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The
economic profit of Wang’s Wicker Furniture Store is:
$0.
$67,000.
–$35,000.
–$20,000.
5.
Figure: The Marginal Cost Curve
Reference: Ref 9-2
(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. The total cost of mowing
five lawns is approximately:
$50.
$68.
$10.
$100.
6.
Reference: Ref 9-5
(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal
benefit of producing the second sweatshirt is:
$31.
$16.
$14.
$15.
7.
If the marginal benefit received from consuming a good is equal to the marginal cost of production:
society’s well-being can be improved if production increases.
society’s well-being cannot be improved by changing production.
the market is producing too much of the good.
society’s well-being can be improved if production decreases.
8.
Reference: Ref 9-7
(Table: Marginal Analysis of Sweatshirt Production II) Look at the table Marginal Analysis of Sweatshirt
Production II. The profit at the optimal quantity of sweatshirts is:
$16.
$15.
$80.
$48.
9.
You plan to attend a movie on Saturday night. You buy a ticket for $7 and then lose it. According to
marginal analysis, you should:
buy another ticket and attend the movie.
go home.
look for the lost ticket.
buy another ticket and attend the movie only if your marginal benefit of seeing the movie is more than
$14.
10.
After three years at an expensive college, Pierre realizes that he doesn’t want to finish school but really
wants to be a chef. When Pierre suggests that he leave college for culinary school, his parents insist that
he stay for one more year to get his degree. Which of the following is TRUE?
Pierre’s parents are wrong: the marginal benefit to Pierre of another year of college is greater than the
marginal cost of college.
Pierre’s parents are wrong: the marginal benefit to Pierre of another year of college is less than the
marginal cost of college.
Pierre’s parents are correct: if he leaves college, it is as though he has wasted three years of tuition.
It is impossible to tell who is correct.
11.
People are willing to buy insurance because of:
risk aversion.
the miscalculation of opportunity costs.
the status quo.
bounded rationality.
12.
Cindy just graduated from college and started working at a large accounting firm. Although the firm will
match her contributions to a retirement account, Cindy wants to wait several years before participating,
since there are so many things she needs to buy right now. What type of behavior does this represent?
mental accounting
loss aversion
risk aversion
unrealistic expectations about the future
13.
Scenario: Betty’s Cookie Shop
Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom
worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw
materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay
Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000.
The bank in town pays an annual interest rate of 3% on all funds deposited with it.
Reference: Ref 9-18
(Scenario: Betty’s Cookie Shop) Betty’s implicit and explicit costs are equal to:
$204,500.
$184,500.
$100,000.
$80,000.
14.
Scenario: Betty’s Cookie Shop
Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom
worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw
materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay
Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000.
The bank in town pays an annual interest rate of 3% on all funds deposited with it.
Reference: Ref 9-18
(Scenario: Betty’s Cookie Shop) Betty is trying to decide at what point she should stop selling cookies,
and she knows she cannot change the price of a cookie. She should stop selling cookies if:
her economic profit is positive.
her economic profit is equal to her accounting profit.
her explicit and implicit costs are less than her revenues.
her implicit costs are greater than her accounting profits.
15.
As George ate pizza during one recent outing, he found that he enjoyed each additional slice less and
less. This implies that his marginal benefit was:
constant.
increasing.
decreasing.
vertical.
16.
If marginal costs of production are greater than marginal benefits of production:
costs will eventually decrease.
more of the good should be produced.
too much of the good is being produced.
not all costs are being considered.
17.
Reference: Ref 9-19
(Table: TC’s Pizza Parlor) Look at the table TC’s Pizza Parlor and assume that marginal cost is constant in
the intervals of production. If 10 slices are being produced, the marginal cost of producing one more
slice of pizza is:
$40.
$10.
$70.
$2.
18.
Reference: Ref 9-19
(Table: TC’s Pizza Parlor) Look at the table TC’s Pizza Parlor. What is the optimal level of production?
20 slices
5 slices
10 slices
15 slices
19.
A soda machine dispenses cans of soda at a price of $1 each. Consider Katrina’s decision to purchase 1, 2
or 3 sodas. For each part that follows, make sure to plot a point for each quantity of sodas considered (Q
= 1, 2, 3).
Part 1: Use the multi-point line tool to construct Katrina’s total cost curve (TC) for the cans of soda
purchased. Label it accordingly.
Part 2: Use the multi-point line tool to construct Katrina’s marginal cost curve (MC) for the cans of soda
purchased. Label it accordingly. Remember when plotting the MC of each unit, plot the value at the
midpoint of the quantities purchased. For instance, plotting the MC of the first soda should be plotted at
the X axis value 0.5. The MC of the second soda should be plotted at X = 1.5 and so on.
20.
A vending machine sells bags of chips at $0.75 each, and you observe your roommate purchasing 1 bag
per day. The following curve shows the marginal benefit (MB) of chip consumption for your friend.
Part 1: Use the infinite line tool to draw a marginal cost curve (MC), and label it accordingly. Add a
vertical drop line to represent your roommate’s consumption decision. Label this drop line A.
Part 2: Now suppose that the vending machine price increases to $1.50 for a bag of chips and your
roommate stops eating chips. Show in your graph how the higher price has decreased this person’s
consumption of chips by drawing a new marginal cost curve (MC2).
Chapt 10
1.
To say that you can’t have too much of a good thing means that for any good that you enjoy (for
example, pizza):
higher consumption will always lead to higher utility.
it is valid to measure utility in utils.
higher consumption will cause utility to decrease at an increasing rate.
higher consumption will increase utility, but only up to a point; after that utility will start to decrease.
2.
On a sparsely populated island, high-speed Internet service would have a _____ marginal utility than in
New York City, while in New York City quiet evenings would carry a _____ marginal utility than on a
deserted island.
lower; higher
lower; lower
higher; lower
higher; higher
3.
Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125,
respectively. The total utility for the first unit is:
150.
200.
125.
350.
4.
If total utility is rising as more salsa is consumed, we can definitely say that marginal utility is:
constant.
falling.
greater than zero.
rising.
5.
Reference: Ref 10-3
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese.
Carmen loves macaroni and cheese for Thanksgiving. Carmen’s marginal utility from eating macaroni
becomes negative at the _____ serving.
second
fifth
first
sixth
6.
Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and
the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The
horizontal intercept for Faruq’s budget line is _____ tacos.
5
50
100
10
7.
Scenario: Tom’s Budget Constraint
Tom is trying to decide how to allocate his $50 budget for music downloads and online movie streaming
when the price of a music download is $1 and the price of a movie is $5.
Reference: Ref 10-6
(Scenario: Tom’s Budget Constraint) Read the scenario Tom’s Budget Constraint. The combination _____
music downloads and _____ movies lies ON Tom’s budget line.
50; no
50; 10
100; 5
no; 5
8.
An increase in a consumer’s income will do all of the following EXCEPT:
shift the budget line away from the origin.
increase the horizontal intercept.
change the slope of the budget line.
increase the vertical intercept.
9.
Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The price of a book is
$5 and the price of a pencil is $0.50. Which of the following bundles of books and pencils is
UNAFFORDABLE?
4 books and no pencils
2 books and 20 pencils
2 books and 30 pencils
1 book and 20 pencils
10.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You have $10 to spend
on both goods. The maximum number of bags of peanuts that you can purchase is:
10.
40.
20.
5.
11.
Reference: Ref 10-9
(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The
price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal’s income is $16. If he spends all of
his income on honey, the most he can buy is _____ jars, and his total utility will be _____.
4; 22
6; 204
4; 152
8; 240
12.
Which of the following best describes the amount of utility that is gained by spending an additional
dollar on yogurt?
the total utility of a tub of yogurt divided by the price of yogurt
the average utility of yogurt divided by the price of yogurt
the marginal utility of one tub of yogurt divided by the price of yogurt
the value equal to the price of a related good.
13.
Sasha buys a warm soda and a slice of cold pizza. The marginal utility from a soda is 40, and the price of
the soda is $1. The marginal utility from a slice of pizza is 80. Since Sasha always chooses the utilitymaximizing choice, we know the price of a slice of pizza must be:
$0.50.
$2.
$20.
$1.
14.
Antonio derives more utility from spending an additional dollar on boots than on gloves. We can assume
that:
the marginal utility per dollar spent on boots is equal to the marginal utility per dollar spent on gloves.
the marginal utility per dollar spent on boots is greater than the marginal utility per dollar spent on
gloves.
the marginal utility per dollar spent on boots is less than the marginal utility per dollar spent on gloves.
boots cost less than gloves.
15.
Reference: Ref 10-15
(Table: Marginal Utility per Dollar II) Look at the table Marginal Utility per Dollar II. If Manuel has $18 to
spend on potatoes and clams, then the utility-maximizing combination is _____ pounds of clams and
_____ pounds of potatoes.
3; 9
1; 6
4; 6
5; 3
16.
If the price of coffee cups falls and the consumer decides to buy more coffee cups solely because they
are less expensive, this describes the:
marginal-maximizing rule.
income effect.
substitution effect.
consumer surplus effect.
17.
According to the substitution effect, which of the following best describes why a decrease in the price of
LED light bulbs leads to an increase in the quantity of LED light bulbs demanded?
Buyers have more real income.
Buyers tend to purchase more of the now less expensive LED light bulbs.
Buyers tend to purchase more complementary goods to LED light bulbs.
Buyers always purchase fewer substitute goods for LED light bulbs.
18.
If, because of a price change, both the income and substitution effects are strong for a normal good, this
segment of the demand curve must be:
relatively price-elastic.
unit-elastic.
horizontal.
vertical.
19.
Kramer really enjoys pretzels without ever getting thirsty. In fact, every time he has another pretzel, his
total utility increases by 10 utils.
Draw Kramer’s total utility (TU) and marginal utility (MU) functions using the infinite line tool, and label
accordingly.
20.
Suppose an economist discovers that Top Ramen is a Giffen good. Use the line drawing tool to sketch
the demand curve for Top Ramen after this discovery. Assume the curve is linear.
Chapt 11
1.
The total product curve:
shows the relation between output and the quantity of a variable input for varying levels of the fixed
input.
will be downward-sloping if there are diminishing returns to the variable input.
will become flatter as output increases if there are diminishing returns to the variable input.
will become horizontal when the marginal product of the variable input is constant.
2.
Reference: Ref 11-2
(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product
of labor for eight workers is _____ bushels.
96
75
35
40
3.
Reference: Ref 11-3
(Table: Total Product and Marginal Product) Look at the table Total Product and Marginal Product. The
marginal product of the second worker is:
30.
10.
20.
15.
4.
You own a deli. Which of the following is most likely a fixed input at your deli?
the dining room
the tomato …
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