Tag: Economics

A. To act on your beliefs, should you buy or should you sell December corn futures? (Futures are contracts to
buy or sell at a future date at a price established now.)
B. If a substantial number of knowledgeable people come to share your opinion about the size of this summer’s
crop, what will happen to the price of December corn futures?
C. What information will this change in the price of corn futures convey to current holders and users of corn?
D. How will this information affect their decisions about holding corn for future sale or use?
E. How will these decisions, based on the information provided by the change in the price of December corn
futures, affect June consumption?
F. Can speculators carry a bumper crop backward in time from a period of lesser to a period of greater
scarcity?
2. The text argues that if an activity is known to be profitable, more people will go into that activity and the
profits will disappear. Does that apply to the selling of cocaine?
A. The costs of selling cocaine include the risk of being arrested and imprisoned. Why is a ten-year sentence
not twice as strong a deterrent as a five-year sentence? Why does one chance in five of being imprisoned for
10 years translate into less than two years’ imprisonment? Is a cocaine seller likely to use a high or a low
discount rate in deciding on the subjective cost of possible imprisonment? Why is the threat of imprisonment
more effective in deterring some people than others?
B. Another cost of selling is the risk of being killed by competitors. This cost will be much lower for some
people than for others. Characterize a person for whom this cost will be relatively low.
C. For whom is the selling of cocaine profitable?
3. Use Figure 8-7 on page 199 of the textbook for this question.
Have you ever wondered why otherwise identical books usually sell for so much more in hardcover than in
softcover editions? Surely it doesn’t cost that much more to attach a hard cover when it’s all being done on an
assembly-line basis! This question tries to construct a plausible explanation, and to give you practice in
working with the concepts of marginal cost and marginal revenue. Some potential purchasers of a new book
will be eager to obtain it as soon as it’s published and will be willing to pay a high price to do so.
Those who want to give the book as a present may be willing to pay a high price to demonstrate their
generosity, and may appreciate having a hard cover on the book as a sign of its quality. Still other potential
purchasers—libraries are the clearest example—want hardcover books because they stand up better to heavy
use; these purchasers are willing to pay a substantially higher price for a book to avoid the considerable
expense of having to bind it themselves between hard covers. Libraries also will want to purchase a popular
book right after it has been published in order to satisfy their eager patrons. There are also many potential
purchasers, however, who want to read the book, would be willing to buy a copy if the price isn’t too high, and
who don’t very much care whether it is in hard-cover or soft. The demand curve on the left-hand graph in
Figure 8–7 portrays the kind of demand for the book that might emerge in such circumstances. The top
segment of the demand curve is created by those willing to pay a premium to obtain the book quickly, or to get
it between hard covers. Once the price falls below $20, “general readers” also become willing to purchase a 
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copy. (The demand curve would not have such a sharp kink, but straight lines are easier to work with than
curves.) Assume throughout that the marginal cost to the publisher of printing and shipping one more book is
$4.
A. What would be the most profitable price for the publisher to set for the book? The marginal-revenue curves
that correspond to each segment of the demand curve have been drawn for you, using the gimmick explained
in Figure 8–3.
B. The most profitable price is the price that enables the publisher to sell all those copies, but only those copies
for which marginal revenue is greater than marginal cost. The problem in this case is that in order to sell the
units from 16,000 to 24,000, for which marginal revenue exceeds marginal cost, the publisher must also sell
the units between 12,000 and 16,000, for which marginal revenue is less than marginal cost. Which is the more
profitable place to stop? Should the publisher set the price at $28 and sell 12,000, or set the price at $16 and
sell 24,000?
C. Suppose the publisher puts a hard cover on the book when it’s first published, then waits six or eight months
before bringing the book out in a paperback edition at a lower price. What prices should it set for each edition?
A reasonable approach would be to assume that all prospective purchasers at prices above $20 either are not
willing to wait or want the hardcover edition, while those below $20 are willing to wait and to accept the
paperback edition. To calculate the prices to set for each edition, you must first separate the two demand
curves. Cut the lower section of the demand curve from the upper section and drag it to the left so that it begins
at the price axis; it will then show the quantity of softcover books that will be demanded at various prices when
the paperback edition is published. This has been done for you on the right-hand graph in Figure 8–7. Draw the
marginal-revenue curve for each demand curve, find out where marginal revenue crosses marginal cost in
each market, and set the appropriate prices.
4. How should NASA, (manufacturing a new supersonic commercial airliner), take account of the plane’s
development costs in determining the prices to charge airline companies? Should they suspend production if
they can’t obtain a price that will cover d

Research Paper • Topic summary and proposed outline of idea due in Module 3 • Draft of the paper due in Module 6 • Final paper due in Module 9 During the course, you are required to complete a formal written assignment highlighting published current economic events or issues and explain how they relate to theories learned in this course. The paper provides you an opportunity to realize, reflect, and explain the economics that exist all around us. The paper must include a graph used as an explanatory tool of the economic principle presented. Early submissions of written assignments are always accepted, but use the links provided in the respective modules to submit your topic, draft, and final paper. Make use of the feedback you receive on your draft paper to improve your final paper before submitting it in Module 9. Instructions for preparing this assignment are as follows: 1. Each paper is to be an analysis on the recent economic events or economic reports from the supplemental resources or references. The focus of this assignment is to relate and analyze current events to basic principles of macroeconomics covered in this course. It is not acceptable to just regurgitate statistics. The paper should indicate that you have a clear understanding of theory learned in class and its application/operation in the ‘outside world.’ 2. Option – If you come upon an interesting subject relating to your work or any other noneconomic publication that can be explained in light of the theories learned in this class, you may be able to substitute this as the basis article. Discuss the article and ideas with your instructor prior to embarking on this option. 3. Use standard file format (.doc or .docx) for all deliverables (topic, draft, and final paper). Standard margins apply. Papers should contain proper documentation of the article(s) or other references used. If direct quotes are used (not contained in the article), appropriate footnotes, endnotes, or parenthetical citations must accompany the quotes. Since a part of your paper will come from published sources, Internet references, etc., there should be sufficient evidence of where the information for your paper originated. Paper length should be a few pages – short enough to qualify as a commentary but long enough to adequately address the subject. Typically, six to eight double spaced pages are sufficient. Papers are graded on quality of content, not quantity. Standard APA style rules apply and clarity is important to your grade. Refer to the Research Paper Rubric in the course for grading criteria. The final assignment is only submitted once for credit. There is not an option for revising the final assignment and resubmitting for a higher grade. Note: All papers submitted for grading in this course will be submitted to Turnitin, a plagiarism detection service, to check for originality so be sure to appropriately cite sources. Please review rules on self-plagiarism. The submission of what is essentially the same paper in more than one Page 6 of 9 class without any indication that the paper has been published elsewhere (i.e., redundant and duplicate publication) and the practice of text recycling is considered plagiarism. (APA guide, 6th edition, principle 6.02, page 170.) ECON 211 Research Paper Checklist Your topic summary and proposed outline of your idea for the paper is due in Module 3, a draft of the paper is due in Module 6, and the final paper is due in Module 9. Here is a checklist that you may find helpful. ? The objective of the assignment is to demonstrate the application of macroeconomic theory as presented in Arnold to a current topic you have chosen. It is the application of the theory that is important; this is not just a research paper which describes a current situation with some economic features. ? The selected topic must be one that relates to macroeconomics; that is, any of the subjects listed in the Arnold table of contents under macroeconomics, for example, monetary policy. Microeconomic topics and analysis are not acceptable for a macro class. ? The paper should not be long. Provide enough information and detail on your chosen topic to serve as the basis for economic analysis. The topic must be relatively current; an analysis of some past event is not acceptable. ? Show how the theory you’ve learned from the course and presented in Arnold applies to or explains the current situation. The analysis need not be complex, but must include a written explanation and a graphical analysis similar to those used throughout Arnold. Basically, you are just selecting the appropriate tools from Arnold and showing how they apply to a specific situation. ? Write a short conclusion. This might include some predictions for the future. The paper should include the following: ? Title page ? Insert page numbers. A Running Head is fine but not necessary. ? Abstract – not required but OK if desired ? Table of Contents – not required ? Section Headings – strongly encouraged ? Citations – cite all references in the body of the text and in the Reference list. ? Plagiarism – Do not copy text from another author or Web source unless it is quoted. ? Appendices – Not necessary but may be appropriate for raw data. Resources on APA Style ? American Psychological Association: Learning APA Style (see The Basics of APA Style tutorial) ? Purdue OWL: General APA Guidelines (General format of APA research papers, in-text citations, and reference page)