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Macro Practice Q&amp;A 1

# Macro Practice Q&amp;A 1 - Problems Chapter 1 4 Use the...

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Problems: Chapter 1: 4.) Use the concept of opportunity cost to explain the following: a.) More people choose to get graduate degrees when the job market is poor. b.) More people choose to do their own home repairs when the economy is slow and hourly wages are down. c.) There are more parks in suburban than urban areas d.) Convenience stores, which have higher prices than supermarkets, cater to busy people. e.) Fewer students enroll in classes that meet before 10:00 a.m. 8.) Which of the following situations describes and equilibrium? Which does not? If the situation does not describe an equilibrium, what would an equilibrium look like? a.) Many people regularly commute from the suburbs to downtown Pleasantville. Due to traffic congestion, the trip takes 30 minutes when you travel by highway but only 15 minutes when when you go by side streets. b.) At the intersection ofMAin and Broadway are two gas stations. One station charges \$3.00 per gallon for regular gas and the other charges \$2.85 per gallon. Customers can get service immediately at the first station but must wait in a long line at the second. c.) Every student enrolled in Economics 101 must also attend a weekly tutorial. This year there are two sections offered: section A and section B, which meet at the same time in adjoining classrooms and are taught by equally competent instructors. Section A is overcrowded, with people witting on the floor and often unable to see the chalkboard. Section B has many empty seats. 11.) Governments often adopt certain policies in order to promote desired behavior among their citizens. Fore each of the following policies, determine what the incentive is and what behavior the government wishes to promote. In each case, why do you think that the government might wish to change people’s behavior, rather than allow their actions to be solely determined by individual choice? a.) A tax of \$5 per pack is imposed on cigarettes b.) The government pays parents \$100 when their child is vaccinated for measles. c.) The government pays college students to tutor children from low-income families d.) The government imposes a tax on the amount of air pollution that a company discharges

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12.) In each of the following situations, explain how government intervention could improve society’s welfare by changing people’s incentives. In what sense is the market going wrong? a.) Pollution from auto emissions has reached unhealthy levels b.) Everyone in Woodville would be better off if streetlights were installed in the town. But no individual resident is willing to pay for installation of a streetlight in front of his or her house because it is impossible to recoup the cost by charging other residents for the benefit they receive from it.
Problems: Chapter 1: 4.) Use the concept of opportunity cost to explain the following: a.) More people choose to get graduate degrees when the job market is poor.

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