Week 1 Homework Problems Chapter 1

18) You rent a car for $29.95. The first 150 miles are free, but each mile thereafter costs 15 cents. You drive it 200 miles. What is the marginal cost of driving the car?
A) A marginal cost is the additional cost to you over and above the costs you have already incurred. Hence here the marginal cost is $7.50

26) State whether the following are microeconomic or macroeconomic policy issues:

a. Should U.S. interest rate be lowered to decrease the amount of unemployment? macroeconomics

b. Will the fact that more and more doctors are selling their practices to managed care networks increase the efficiency of medical providers? Macroeconomics

c. Should the current federal income tax be
For example; the Liberal ideology was reform and transformed by John Stuart Mill. Initially, many supported Adam smith's Lassez-faire capitalism. However, as the abuses of Industrialization multiplied and as the Industrialists showed little concern for the plight of their workers, a new period emerge known as the enlightenment era. In this period, philosophers of the time such as Mill gradually came to believe that government should play a role in the economy. The ideas of Mill and his fellow philosophers influenced the passage of several factory acts and spread the ideas of market oriented economy. The market oriented economy allows private enterprises while removing the worst abuses of capitalism. For example, Health and safety controls ensure that safety standards are met while fairness laws prevent false advertising and discriminatory hiring practices. The implementation of progressive taxes by government agencies also created equality and eliminated the negative aspects of pure capitalism.

b. Discuss the concepts of market failure and government failure in relation to the goods you listed.

A) Government failure (or non-market failure) is the public sector analogy to market failure and occurs when government intervention causes a more inefficient allocation of goods and resources than would occur without that intervention. In not comparing realized inadequacies of market outcomes against those of potential