Why, in general, do shocks force people to make changes? Give at least two examples from your own experience.

True or False. The term economic investment includes purchasing stocks, bonds, and real estate.

Friday night, a pizza parlor sold 5 large pizzas and some medium pizzas. The pizza parlor made a total of $291. How many medium pizzas were sold?

Medium$9 Large $15

Do prices tend to become more or less flexible as time passes? If there is a trend, how does it affect macroeconomists’ choice of models?

How does investment as defined by economists differ from investment as defined by the general public? What would happen to the amount of economic investment made today if firms expected the future returns to such investment to be very low? What if firms expected future returns to be very high?

Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can't people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other financial institutions play in aiding the growth process?

Refer to the indicated figure and assume that price is fixed at $37,000 and that Buzzer Auto needs 5 workers for every 1 automobile produced. If demand is$D_M$and Buzzer wants to perfectly match its output and sales, how many cars will Buzzer produce and how many workers will it hire? If instead, demand unexpectedly falls from$D_M$to$D_L$, how many fewer cars will Buzzer sell? How many fewer workers will it need if it decides to match production to these lower sales?

When does negative externality or spillover cost (additional social cost) occur?

Because medical records are private, an individual applying for health insurance will know more about his own health conditions than will the insurance companies to which he is applying for coverage. Is this likely to increase or decrease the insurance premium that he will be offered? Why?

Because medical records are private, an individual applying for health insurance will know more about his own health conditions than will the insurance companies to which he is applying for coverage. Is this likely to increase or decrease the insurance premium that he will be offered? Why?

Let’s see whether quadratic voting can avoid the paradox of voting that arose in Table 5.3 when using 1p1v in a series of paired-choice majority votes. To reexamine this situation using quadratic voting, the following table presents the maximum willingness to pay of Garcia, Johnson, and Lee for each of the three public goods. Notice that each person’s numbers for willingness to pay match her or his ordering of preferences (1st choice, 2nd choice, 3rd choice) presented in Table 5.3. Thus, Garcia is willing to spend more on her 1st choice of national defense ($400) than on her second choice of a road ($100) or her third choice of a weather warning system ($0).

a. Assume that voting will be done using a quadratic voting system and that Garcia, Johnson, and Lee are each given$500 that can only be spent on purchasing votes (i.e., any unspent money has to be returned). How many votes will Garcia purchase to support national defense? How many for the road? Place those values into the appropriate blanks in the table below and then do the same for the blanks for Johnson and Lee

b. Across all three voters, how many votes are there in favor of national defense? The road? The weather warning system?

c. If a paired-choice vote is taken of national defense versus the road, which one wins?

d. If a paired-choice vote is taken of the road versus the weather warning system, which one wins?

e. If a paired-choice vote is taken of national defense versus the weather warning system, which one wins?

f. Review your answers to parts c, d, and e. Has quadratic voting eliminated the paradox of voting that we found when using 1p1v?

Because of the free-rider problem,

a) the market demand for public goods is overstated.

b) the market demand for the public good is nonexistent or understated.

c)government has increasingly yielded to the private sector in producing public goods.

d) public goods often create serious negative externalities.

Solve each problem, if possible. If not possible, state whether the problem is infeasible, has alternate optimal solutions, or is unbounded. Shelly is making soap and shampoo for gifts. She has 48 ounces of lye and 76 ounces of coconut oil and an ample supply of the other needed ingredients. She plans to make as many batches of soap and shampoo as possible. A batch of soap requires 12 ounces of lye and 20 ounces of coconut oil. Each batch of shampoo needs 6 ounces of lye and 8 ounces of coconut oil. What is the maximum number of batches of both soap and shampoo possible?

Michael Wittry has been investing in his Roth IRA retirement account for 20 years. Two years ago, his account was worth $\$ 215,658$. After losing $\frac{1}{3}$ of its original value, it then gained $\frac{1}{2}$ of its new value back. What is the current value of his Roth IRA?