Manual Solution Principles of Economics Mankiw 6th edition PDF

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Manual solution for Principles of Economics by G. Mankiw (6th Edition)Problems and ApplicationChapter 1 a. buying new car means that you will consume less of other goods, for example, less food b. spending more in national parks means less spending on othe area of governmental subject, such as healt...

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Manual solution for Principles of Economics by G. Mankiw (6th Edition)

Problems and Application Chapter 1 1. a. buying new car means that you will consume less of other goods, for example, less food b. spending more in national parks means less spending on othe area of governmental subject, such as health care. c. opening new factory means less budget for another activity such as RnD. d. more preparation time for classes means less time for other things such as sleep. e. going to graduate school means losing chance of fresh graduate wage as long as you study there. 2. We can use marginal change analysis. We need to break down all the cost and benefit into smaller parts, let say hour. Then compare the benefit between adding another hour of leisure with the cost. It will pretty much help. 3. True cost came as the wage that you let go (if you consider part time working is the best option available) plus all the cost of going and staying there. In the second case, it il little bit trickier. The cost is the knowledge that you might get from library, and since it’s a very subjective, it will harder to define. But sure you can feel which one is better for you. 4. 5% interest. 5. Continue, since the benefit still higher than the cost. The highet ni=umber you should pay is any number less than 3 mill. 6. a. it will make people save less, since they know that there is some provision for them, and no need to save for themselves. b. it will discourage people to work 7. a. it will encourage people to work, since they know sooner or later they will lost the benefits b. antipoverty programs is one example of government intention to reduce inequality. Limiting it into only two years shows that government are willing to increase efficiency but trading short run equality. 8. it will take less time since both of us did our speciality. Another example would be trade between USA and indonesia. USA is better at making airplanes and indonesia is better at producing raw material. Trading make both country better. 9. a. efficiency – market power b. equality c. equality d. efficiency – market power e. equality f. efficiency – externality 10. a. the statement encourage more equality in society, since it said everyone. In efficiency stand poinyt, having everyone with same healthcare (the best one) will increase the cost, and since poor people can not afford it, government is the one who will provide it, and it will create inefficiency. b. it also encourage equality. People who get laid off have no income and it creates bigger inequality. Providing them some benefits will increase the equality, but again, decrease efficiency, since people who work, (or in the cae of unemployment benefit) firm to pay. It will increase cost and reduce efficiency.

11. In current time our standard of living is higher because our country are able to produce more thanks to technological advance. 12. Productivity and growth have a direct relationship with the capital (in this case factories). Building new factories increase firm’s ability in producting goods. Higher productivity means higher jobs and earning. In the end, higher productivity will increase our standard of living. 13. a. imposing tax will decrease someone willingness to work or spend, which will lead to less efficiency. But healthcare will increase equality since the main target is the poor. b. it might increase productivity since more healty people means more labor. More labor can be use on producting goods and service c. it might decrease productivity since tax increasing cost of production. 14. All people that have money, since printing more money decrease value of money. It creates inflation that make value of money lower and higher price. Higher price means higher cost of living. 15. The relationship between them. Knowing that, or the exact relationship, will define the tradeoff between inflation and unemployment. 16. Imposing tax will decrease the economic spending which will slow the economy. But in the long run, it will pay off since new airport will enhance productivity. Printing more money will create higher inflation. In short run, it will decrease unemployment, but will decrease value of money and higher price. In long run, inflation have no effect at unemployment, but price will still higher.

Chapter 2 1. *pict (circular flow diagram) a. Flow of gns: quartmilk from store to selena Flow of dollars: $1 from selena to the store b. Flow of fp: stuart as labor on fast food restaurant Flow of dollars: $4.5 wage from restaurant to stuart c. Flow of gns: haircut from barber Flow of dollars: $30 from shanna to barber d. Flow of fp: entrepreneurship from sally Flow of dollars: $10,000 profit from acme industrial to sally 2. a. *pict (PPF) Its bowed out shape because not every factor of production have same skill on producing both goods. Some good at producing gun, and some good at producing butter. The more we produe one good, the more fp we use to produce it. Let say we produce gun. At first, we use fp that have good skill at producing it, so it will be efficient and the opp cost will be low. But the more we produce, we start to use fp that have low skill at producing gun. The efficiency will decrease and the cost increase. Increasing cost make the curve have bowed out shape. b. point outside the ppf will be impossible to achieve. Point inside it is feasible, but not efficient. c. hawks might choose a point where guns is more than butter, and vice versa. d. the dove, because it preference get serve better. 3. Ppf shows tradeoff between two goods along its curve. To produce one good, we must decrease another. To have a cleaner environment, we must decrease industrial output, vice

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versa. But we can produce more of both by expanding our ppf. New way of producing electricity that emit fewer pollutant can help us to expand our ppf. So we can produce more of two goods into some degree. a. A. 40 lawns B. 40 cars washed C. 20 cars and 20 lawn D. 25 cars and 25 lawn b. *pict c. because each fp have different productivity level or skill on different services. d. point * is inefficient because it did not use all the resource, so they did not achieve maximum potential of the output. a. micro b. micro c. macro d. micro e. macro a. positive, because it’s describes economy as it is b. positive, because it’s describes economy as it is c. normative, because it’s about what ought to be d. normative, because it’s about what ought to be e. positive, because it’s describes economy as it is depends on each individu. Positive: more scientific, but only when the assumption used are agreeable Normatife: nased on value, but only when we have same value.

Chapter 3 1. a. *pict b. 40 pages of economics 2. a. Country US Japan b. *Pict c. US car: 10/4 grain grain: 4/10 car japan car: 5/4 grain grain: 4/5 car d. cars – none grain – US e. cars – japan grain – US

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Grain (tons) 10 5

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f. US: 200mill car; 500 mil tons grain japan: 200mill car; 250 mil tons grain g. trade must be between both county’s opportunity cost. Take car, it shoulde be 1 car for 10/4...