曼昆经济学原理课后答案11-15章

Chapter 11Problems and Applications1. a. (1) Police protection is a natural monopoly, because it is excludable(the police may ignore some neighborhoods) and not rival inconsumption. You could make an argument that police protection isrival in consumption, if the police are too busy to respond to all crimes,so that one person's use of the police reduces the amount available forothers. In that case, police protection is a private good.(2) Snow plowing is most likely a common resource. Once a street isplowed, it is not excludable. But it is rival in consumption, especiallyright after a big snowfall, because plowing one street means notplowing another street.(3) Education is a private good (with a positive externality). It isexcludable, because someone who does not pay can be prevented fromtaking classes. It is rival in consumption, because the presence of anadditional student in a class reduces the benefits to others.(4) Rural roads are public goods. They are not excludable and they arenot rival in consumption because they are uncongested.(5) City streets are common resources when congested. They are notexcludable, because anyone can drive on them. But they are rival inconsumption, because congestion means that every additional driverslows down the progress of other drivers. When they are not congested,city streets are public goods, because they are no longer rival inconsumption.b. The government may provide goods that are not public goods, such aseducation, because of the externalities associated with them.2. a. The externalities associated with public goods are positive. Becausethe benefits from the public good received by one person do not reducethe benefits received by anyone else, the social value of public goods issubstantially greater than the private value. Examples include nationaldefense, knowledge, uncongested nontoll roads, and uncongested parks.Because public goods are not excludable, the free-market quantity iszero, so it is less than the efficient quantity.b. The externalities associated with common resources are generallynegative. Because common resources are rival in consumption but notexcludable, the use of the common resources by one person reduces theamount available for others. Because common resources are not priced,people tend to overuse them − their private cost of using the resourcesis less than the social cost. Examples include fish in the ocean, theenvironment, congested nontoll roads, the Town Commons, andcongested parks.3. a. Charlie is a free rider.b. The government could solve the problem by sponsoring the show andpaying for it with tax revenue collected from everyone.c. The private market could also solve the problem by making peoplewatch commercials that are incorporated into the program. Theexistence of cable TV makes the good excludable, so it would nolonger be a public good.4. a. Within the dorm room, the showing of a movie is a public good. Noneof the roommates can be excluded from viewing the movie. Becauseone roommate’s viewing does not affect the ability of anotherroommate to view the movie, the good is also nonrival in consumption.b. The roommates should rent three movies because the value of thefourth film ($6) would be less than the cost ($8).c. The total cost would be $8 ⨯ 3 = $24. If the cost were divided evenlyamong the roommates, each would pay $6. Orson values three moviesat $18 so his surplus would be $12. Alfred values three movies at $12so his surplus would be $6. Woody values three movies at $6, so hissurplus would be $0. Ingmar values three movies at $3 so his surplus is-$3. Total surplus among the three roommates would be $15.d. The costs could be divided up by the roommates based on the benefitsthey receive. Because Orson values the movies the most, he would paythe greatest share. The problem is that this gives each roommate anincentive to understate the value of the movies to him.e. Because they are going to pay equal shares, Orson has an incentive totell the truth about the value he places on movies to ensure that thegroup rents three movies. He values each of the movies more than hiscost per movie ($2).f. The optimal provision of public goods will occur if individuals do nothave an incentive to hide their valuation of a good. This means thateach individual’s cost cannot be related to his valuation.5. a. Because knowledge is a public good, the benefits of basic scientificresearch are available to many people. The private firm doesn't takethis into account when choosing how much research to undertake; itonly takes into account what it will earn.b. The United States has tried to give private firms incentives to providebasic research by subsidizing it through organizations like the NationalInstitute of Health and the National Science Foundation.c. If it is basic research that adds to knowledge, it is not excludable at all,unless people in other countries can be prevented somehow fromsharing that knowledge. So perhaps U.S. firms get a slight advantagebecause they hear about technological advances first, but knowledgetends to diffuse rapidly.6. When a person litters along a highway, others bear the negative externality, sothe private costs are low. Littering in your own yard imposes costs on you, so it has a higher private cost and is thus rare.7. When the system is congested, each additional rider imposes costs on otherriders. For example, when all seats are taken, some people must stand. Or if there isn't any room to stand, some people must wait for a train that isn't as crowded. Increasing the fare during rush hour internalizes this externality.8. On privately owned land, the amount of logging is likely to be efficient.Loggers have incentives to do the right amount of logging, because they care that the trees replenish themselves and the forest can be logged in the future.Publicly owned land, however, is a common resource, and is likely to be overlogged, because loggers won't worry about the future value of the land.Because public lands tend to be overlogged, the government can improve things by restricting the quantity of logging to its efficient level. Selling permits to log, or taxing logging, could be used to reach the appropriate quantity by internalizing the externality. Such restrictions are unnecessary on privately owned lands, because there is no externality.9. a. Overfishing is rational for fishermen because they are using a commonresource. They do not bear the costs of reducing the number of fishavailable to others, so it is rational for them to overfish. Thefree-market quantity of fishing exceeds the efficient amount.b. A solution to the problem could come from regulating the amount offishing, taxing fishing to internalize the externality, or auctioning offfishing permits. But these solutions would not be easy to implement,because many nations have access to oceans, so internationalcooperation would be necessary, and enforcement would be difficult,because the sea is so large that it is hard to police.c. By giving property rights to countries, the scope of the problem isreduced, because each country has a greater incentive to find a solution.Each country can impose a tax or issue permits, and monitor a smallarea for compliance.d. Because government agencies (like the Coast Guard in the UnitedStates) protect fishermen and rescue them when they need help, thefishermen aren't bearing the full costs of their fishing. Thus, they fishmore than they should.e. The statement, "Only when fishermen believe they are assured along-term and exclusive right to a fishery are they likely to manage itin the same far-sighted way as good farmers manage they land," issensible. If fishermen owned the fishery, they would be sure not tooverfish, because they alone would bear the costs of overfishing. Thisis a case in which property rights help prevent the overuse of acommon resource.f. Alternatives include regulating the amount of fishing, taxing fishermen,auctioning off fishing permits, or taxing fish sold in stores. All wouldtend to reduce the amount of fishing from the free-market amounttoward the efficient amount.10. The information is nonexcludable, because it is provided to the public freeof charge. In addition, the receipt of the information by one individual does not preclude the receipt of the information by another. Thus, the good is nonrival in consumption. Because the good is both nonexcludable and nonrival in consumption, it is a public good.11. Recognizing that there are opportunity costs that are relevant for cost–benefitanalysis is the key to answering this question. A richer community can afford to place a higher value on life and safety. So the richer community is willing to pay more for a traffic light, and that should be considered in cost–benefit analysis.Chapter 12Problems and Applications1. The federal government had a budget deficit in 2004. As of 2005,policymakers expected budget deficits over the next decade.2. a. The increase in revenue of the total government is attributable more toincreases in state and local government revenue than to federalgovernment revenue. In 1960, state and local government revenue was33% of total government revenue; by 2003, it had risen to almost 52%.b. Personal income taxes account for a bit less of the total revenue offederal and state and local governments now (34% in 1960, 32% in2003); social insurance taxes account for a substantially greaterproportion (12% in 1960, 26% in 2003); and corporate taxes accountfor a lower proportion (17% in 1960, 7% in 2003).c. Transfer payments now account for a much greater proportion of thetotal expenditures of federal and state and local governments (23% in1960, 40% in 2003), while purchases account for a much smallerproportion (68% in 1960, 50% in 2003).3. a. If the number of retirees is rising and total expenditures are frozen,then benefits per retiree will decline over time. Because the number ofworkers is rising, albeit slowly, tax payments per worker would declineslowly over time.b. If benefits per retiree were frozen, total expenditures would risequickly, along with the number of retirees. To pay for the increasedexpenditures, tax payments per worker would rise, because the numberof workers isn't growing as rapidly as the number of retirees.c. If tax payments per worker were frozen, total expenditures would riseslowly, at the same rate as the growth rate of the number of workers.Because the number of retirees is rising more rapidly, benefits perretiree would decline over time.d. The answers to Parts (a), (b), and (c) suggest there is no easy solution.Either workers will pay more per person or retirees will get fewerbenefits per person. Policymakers may eventually be forced tocompromise, both reducing benefits per retiree and increasing taxpayments per worker.4. If you earn $20,000 a year, then you pay federal income taxes in two parts:10% on the first $7,150 of income and 15% on the amount above $7,150. Thus, your federal income taxes are ($7, 150 x 0.10) + ($12,850 ⨯ 0.15) = $715 + $1,927.50 = $2,642.50. You also pay $20,000 x 0.153 = $3,060 in federal payroll taxes and $20,000 x 0.04 = $800 in state income taxes, for a total tax bill of $6,502.50. Your average tax rate is $6,502.50/$20,000 = 0.325 = 32.5%.Your marginal tax rate is 0.15 + 0.153 + 0.04 = 0.343 = 34.3%.If you earn $40,000 a year, then you pay federal income taxes in three parts: 10% on the first $7,150 of income, 15% for additional income up to $29,050, and 25% for the remaining $10,950 of income. Thus, your federal income taxes are ($7,150 x 0.10) + ($21,900 x 0.15) + ($10,950) ⨯0.25) = $715 + $3,285 + $2,737.50 = $6.737.50. You also pay $40,000 x 0.153 = $6,120 in federal payroll taxes, and $40,000 x 0.04 = $1,600 in state income taxes. Your total tax bill is $14,457.50. Your average tax rate is $14,457.50/$40,000 =0.361 = 36.1%. Your marginal tax rate is 0.25 + 0.153 + 0.04 = 0.443 = 44.3%.5. Excluding food and clothing from the sales tax is justified on equity groundsbecause poor people spend a greater proportion of their income on those items.By exempting them from taxation, the system makes the rich bear a greater burden of taxation than the poor. From the point of view of efficiency, however, excluding food and clothing from the sales tax is inefficient, because the incentives to purchase food and clothing rather than other items are likely affected by this tax exemption. This leads to an inefficient allocation of resources. In addition, because the demand for food and clothing is likely to be relatively inelastic, the deadweight loss from a tax on these goods would be relatively small (when compared with a tax on a good whose demand is relatively elastic).6. a. An individual must pay taxes on the asset only when he or she sells it.Thus, this tax law affects the individual’s decision of whether to keepor sell the asset. Tax revenues on accrued capital gainsare onlyreceived by the government when an individual actually sells the asset.Lowering the tax rate on capital gains may induce individuals to sellassets that they have been holding to avoid paying the taxes on theaccrued capital gains.b. It is inefficient to tax only realized capital gains because it distorts theincentives an individual faces with regard to keeping or selling aparticular asset. However, it may be difficult to estimate the rise in thevalue of an asset prior to its sale.7. If the state raises its sales tax from 5% to 6%, it is not plausible that sales taxrevenue will increase 20%. The increase in the tax rate is 20%, so the only way tax revenue could increase 20% would be if total spending didn't fall in response to the tax increase, which is unlikely. Instead, the higher tax would raise the price of goods, so people would spend less. Thus, tax revenue might go up, because the tax rate is higher, but by less than 20%. There is a possibility that tax revenues will fall.8. The effect of the Tax Reform Act of 1986 on interest payments was to reduceconsumer debt and increase home equity debt. People started financing general expenditures through home equity loans and paid down their mortgages less quickly.9. a. The fact that visitors to many national parks pay an entrance fee is anexample of the benefits principle, because people are paying for thebenefits they receive.b. The fact that local property taxes support elementary and secondaryschools is an example of the ability-to-pay principle, because if youown more expensive property, you must pay more tax.c. The setup of airport trust funds is an example of the benefits principle,because use of the airport generates tax revenue that pays for upkeep ofthe airport.10. a. For the proportional tax system, the average tax rate is 25% whether aperson earns income of $50,000, $100,000, or $200,000.For the regressive tax system, the average tax rate is 30% for someoneearning $50,000, 25% for someone earning $100,000, and 20% forsomeone earning $200,000.For the progressive tax system, the average tax rate is 20% forsomeone earning $50,000, 25% for someone earning $100,000, and30% for someone earning $200,000.b. For the proportional tax system, the marginal tax rate as income risesfrom $50,000 to $100,000 is the increase in taxes ($12,500) divided bythe increase in income ($50,000) = 25%. The marginal tax rate asincome rises from $100,000 to $200,000 is the increase in taxes($25,000) divided by the increase in income ($100,000) = 25%.For the regressive tax system, the marginal tax rate as income risesfrom $50,000 to $100,000 is the increase in taxes ($10,000) divided bythe increase in income ($50,000) = 20%. The marginal tax rate asincome rises from $100,000 to $200,000 is the increase in taxes($15,000) divided by the increase in income ($100,000) = 15%.For the progressive tax system, the marginal tax rate as income risesfrom $50,000 to $100,000 is the increase in taxes ($15,000) divided bythe increase in income ($50,000) = 30%. The marginal tax rate asincome rises from $100,000 to $200,000 is the increase in taxes($35,000) divided by the increase in income ($100,000) = 35%.c. In the proportional tax system, the average tax rate equals the marginaltax rate. In the regressive tax system, the marginal tax rate is less thanthe average tax rate and both tax rates decline as income rises. In theprogressive tax system, the marginal tax rate is greater than the averagetax rate and both tax rates rise as income rises. The marginal tax rate isrelevant to someone deciding whether to accept a job that pays slightlymore than her current job, because it tells her how much of the extraincome she will be able to keep after taxes. For judging the verticalequity of the tax system, the average tax rate is relevant, becausevertical equity suggests that people with a greater ability to pay shouldpay a larger amount.11. a.b. From the lowest quintile to the second quintile, the change in income is$19,300 andthe change in taxes is $3,284.50.From the second quintile to the middle quintile, the change in income is $17,300 andthe change in taxes is $3,930.From the middle quintile to the fourth quintile, the change in income is $24,100 andthe change in taxes is $6,783.60.From the fourth quintile to the highest quintile, the change in income is $107,100 andthe change in taxes is $33,232.50.c. From the lowest quintile to the second quintile, the marginal tax rate is$3,284.50/$19,360 = 0.170 = 17.0%.From the second quintile to the middle quintile, the marginal tax rate is$3,930/$17,300 = 0.227 = 22.7%.From the middle quintile to the fourth quintile, the marginal tax rate is$6,783.60/$24,100 = 0.281 = 28.1%.From the fourth quintile to the highest quintile, the marginal tax rate is$33,232.50/$107,100 = 0.31 = 31.0%.d. The marginal tax rate is greater than the average tax rate for all incomequintiles.e. The average tax rate and the marginal tax rate both rise as income rises.At lower levels of income, the tax rate rises more quickly than theaverage tax rate. At higher levels of income, the rate of increase in theaverage tax rate is greater.12. a. If the deduction for mortgage interest were eliminated, fewer peoplewould desire to hold mortgages or purchase homes. This would impacthousing markets and housing values. The removal of this deductionwill likely improve vertical equity because higher income householdstend to hold larger mortgages and thus currently get larger deductions.It would also improve horizontal equity because homeowners would betreated equally. Efficiency would improve for two reasons: lessdistortion in incentives and a smaller amount of paperwork in filingtaxes.b. If the deduction for state and local taxes was eliminated, the marginaltax rate on income will rise and this reduces the incentive to work. Thiswould lead to inefficiency. Vertical equity would be improved, whilehorizontal equity would be unaffected.c. If the deduction for charitable contributions were eliminated, fewerdollars would be donated to charities. This would reduce the provisionof some public goods (such as public television). Vertical equity wouldbe improved, assuming that charitable contributions are positivelyrelated to income. Horizontal equity would also be improved becauseindividuals in similar circumstances would pay the same level of taxes,whether or not they donated to charities.Chapter 13Problems and Applications1. a. opportunity cost; b. average total cost; c. fixed cost; d. variable cost; e. totalcost;f. marginal cost.2. a. The opportunity cost of something is what must be given up to acquireit.b. The opportunity cost of running the hardware store is $550,000,consisting of $500,000 to rent the store and buy the stock and a$50,000 opportunity cost, because your aunt would quit her job as anaccountant to run the store. Because the total opportunity cost of$550,000 exceeds revenue of $510,000, your aunt should not open thestore, as her profit would be negative.3. a. Because you would have to pay for room and board whether you wentto college or not, that portion of your college payment is not anopportunity cost.b. The explicit opportunity cost of attending college is the cost of tuitionand books.c. An implicit opportunity cost of attending college is the cost of yourtime. You could work at a job for pay rather than attend college. Thewages you give up represent an opportunity cost of attending college.4. a. The following table shows the marginal product of each hour spentfishing:b. Figure 7 graphs the fisherman's production function. The productionfunction becomes flatter as the number of hours spent fishing increases,illustrating diminishing marginal product.Figure 7c. The table shows the fixed cost, variable cost, and total cost of fishing.Figure 8 shows the fisherman's total-cost curve. It has an upward slope because catching additional fish takes additional time. The curve is convex because there are diminishing returns to fishing time because each additional hour spent fishing yields fewer additional fish.Figure 85. Here is the table of costs:a. See the table for marginal product. Marginal product rises at first, thendeclines because of diminishing marginal product.b. See the table for total cost.c. See the table for average total cost. Average total cost is U-shaped.When quantity is low, average total cost declines as quantity rises;when quantity is high, average total cost rises as quantity rises.d. See the table for marginal cost. Marginal cost is also U-shaped, butrises steeply as output increases. This is due to diminishing marginalproduct.e. When marginal product is rising, marginal cost is falling, and vice versa.f. When marginal cost is less than average total cost, average total cost isfalling; the cost of the last unit produced pulls the average down. Whenmarginal cost is greater than average total cost, average total cost isrising; the cost of the last unit produced pushes the average up.6. a. The fixed cost is $300, because fixed cost equals total cost minusvariable cost.b.Marginal cost equals the change in total cost for each additional unit ofoutput. It is also equal to the change in variable cost for each additionalunit of output. This occurs because total cost equals the sum ofvariable cost and fixed cost and fixed cost does not change as thequantity changes. Thus, as quantity increases, the increase in total costequals the increase in variable cost.7. a. The fixed cost of setting up the lemonade stand is $200. The variablecost per cup is $0.50.Figure 9b. The following table shows total cost, average total cost, and marginalcost. These are plotted in Figure 9.8. The following table illustrates average fixed cost (AFC), average variable cost(AVC), and average total cost (ATC) for each quantity. The efficient scale is four houses per month, because that minimizes average total cost.9 a. The following table shows average variable cost (AVC), average totalcost (ATC), and marginal cost (MC) for each quantity.b. Figure 10 shows the three curves. The marginal-cost curve is below theaverage-total-cost curve when output is less than four and average totalcost is declining. The marginal-cost curve is above theaverage-total-cost curve when output is above four and average totalcost is rising. The marginal-cost curve lies above theaverage-variable-cost curve.Figure 1010. a. The following table shows the firm’s fixed cost (FC),variable cost(VC), and total cost (TC):b. The following table shows the firm’s marginal cost (MC) and average totalcost (ATC):The marginal-cost and average-total-cost curves are shown in Figure 11.Figure 11c. The firm’s marginal cost is $5 for every unit produced. This impliesthat the production function does not face diminishing marginalreturns.11. The following table shows quantity (Q), total cost (TC), and average total cost(ATC) for the three firms:Firm A has economies of scale because average total cost declines as output increases. Firm B has diseconomies of scale because average total cost rises as output rises. Firm C has economies of scale for output from one to three and diseconomies of scale for levels of output beyond three units.Chapter 14Problems and Applications1. Because a new customer is offering to pay $300 for one dose, the marginalrevenue of the 201st dose is $300. Now we must find out if marginal cost is greater than or less than $300. To do this, we need to calculate total cost for 200 doses and 201 doses, and then calculate the increase in total cost.Multiplying quantity by average total cost, we find that total cost rises from $40,000 to $40,401, so marginal cost is $401. Therefore, your roommate should not make the additional dose.2. The rise in the price of crude oil increases production costs for individualfirms and thus shifts the industry supply curve up, as shown in Figure 3. The typical firm's initial marginal-cost curve is MC1and its average-total-cost curve is ATC1. In the initial equilibrium, the industry supply curve, S1, intersects the demand curve at price P1, which is equal to the minimum average total cost of the typical firm. Thus, the typical firm earns no economic profit.Figure 3The increase in the price of oil shifts the typical firm's cost curves up to MC2 and ATC2, and shifts the industry supply curve up to S2. The equilibrium price rises from P1 to P2, but the price does not increase by as much as the increase in marginal cost for the firm. As a result, price is less than average total cost for the firm, so profits are negative.In the long run, the negative profits lead some firms to exit the industry. As they do so, the industry-supply curve shifts to the left. This continues until the price rises to equal the minimum point on the firm's average-total-cost curve.The long-run equilibrium occurs with supply curve S3, equilibrium price P3, industry output Q3, and firm's output q3. Thus, in the long run, profits are zero again and there are fewer firms in the industry.3. Once you have ordered the dinner, its cost is sunk, so it does not represent anopportunity cost. As a result, the cost of the dinner should not influence your decision about whether to finish it or not.4. Because Bob’s average total cost is $280/10 = $28, which is greater than theprice, he will exit the industry in the long run. Because fixed cost is $30, average variable cost is ($280 − $30)/10 = $25, which is less than price, so Bob will not shut down in the short run.5. Here is the table showing costs, revenues, and profits:a. The firm should produce five or six units to maximize profit.b. Marginal revenue and marginal cost are graphed in Figure 4. Thecurves cross at a quantity between five and six units, yielding the sameanswer as in Part (a).。