, SOLUTION MANUAL FOR Principles of
Macroeconomics , 9th Edition N. Gregory Mankiw
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
, Chapter 1
Ten Principles of Economics
SOLUTIONS TO TEXTBOOK PROBLEMS
Questions for Review
1. What is a tradeoff? Give two examples of tradeoffs that you face in your life.
A tradeoff is what you give up in order to get something else. Examples of tradeoffs include time
tradeoffs (such as studying one subject over another, or studying at all compared to engaging in
social activities), and spending tradeoffs (such as whether to use your last $15 to purchase a
pizza or to buy an online study guide for that tough economics course).
2. What is the opportunity cost of seeing a movie?
The opportunity cost of seeing a movie includes the monetary cost of admission plus the time
cost of going to the theatre and attending the show. The time cost depends on what else you
might do with that time; if it’s staying home and watching TV, the time cost may be small, but if it’s
working an extra three hours at your job, the time cost is the money you could have earned.
3. Water is necessary for life. Is the marginal benefit of a glass of water large or small?
The marginal benefit of a glass of water depends on your circumstances. If you’ve just run a
marathon, or you’ve been walking in the desert sun for three hours, the marginal benefit is very
high. But if you’ve been drinking a lot of liquids recently, the marginal benefit is quite low. The
point is that even the necessities of life, like water, don’t always have large marginal benefits.
4. Why should policymakers think about incentives?
Policymakers need to think about incentives so they can understand how people will respond to
the policies they put in place. The text’s examples of seat belts and crosswalk countdown signals
show that policy actions can have quite unintended consequences. If incentives matter a lot, they
may lead to a very different type of policy; for example, some economists have suggested putting
knives in steering columns so that people will drive much more carefully! While this suggestion is
silly, it highlights the importance of incentives.
5. Why isn’t trade among countries like a game, with some winners and some losers?
Trade among countries isn’t a game with some losers and some winners because trade can
make everyone better off. By allowing specialization, trade between people and trade between
countries can improve everyone’s welfare.
Copyright © 2024 Cengage Learning Canada, Inc.
, 6. What does the “invisible hand” of the marketplace do?
The “invisible hand” of the marketplace represents the idea that even though individuals and firms
are all acting in their own self-interest, prices and the marketplace guide them to do what is good
for society as a whole.
7. Explain the two main causes of market failure and give an example of each.
The two main causes of market failure are externalities and market power. An externality is the
impact of one person’s actions on the well-being of a bystander, such as from pollution or the
creation of knowledge. Market power refers to the ability of a single person (or small group of
people) to unduly influence market prices, such as in a town with only one well or only one cable
television company.
8. Why is productivity important?
Productivity is important because a country’s standard of living depends on its ability to produce
goods and services. The greater a country’s productivity (the amount of goods and services
produced from each hour of a worker’s time), the greater will be its standard of living.
9. What is inflation, and what causes it?
Inflation is an increase in the overall level of prices in the economy. Inflation is caused by
increases in the quantity of a nation’s money.
10. How are inflation and unemployment related in the short run?
Inflation and unemployment are negatively related in the short run. Reducing inflation entails
costs to society in the form of higher unemployment in the short run.
Problems and Applications
1. Describe some of the tradeoffs faced by each of the following.
a. a family deciding whether to buy a new car
b. a member of Parliament deciding how much to spend on national parks
c. a company president deciding whether to open a new factory
d. a professor deciding how much to prepare for class
a. A family deciding whether to buy a new car faces a tradeoff between the cost of the car
and other things they might want to buy. For example, buying the car might mean they
must give up going on vacation for the next two years. So the real cost of the car is the
family’s opportunity cost in terms of what they must give up.
b. For a member of Parliament deciding whether to increase spending on national parks,
the tradeoff is between parks and other spending items or tax cuts. If more money goes
into the park system, that may mean less spending on national defence or on the police
force. Or, instead of spending more money on the park system, taxes could be reduced.
c. When a company president decides whether to open a new factory, the decision is based
on whether the new factory will increase the firm’s profits compared to other alternatives.
For example, the company could upgrade existing equipment or expand existing
factories. The bottom line is: Which method of expanding production will increase profit
the most?
d. In deciding how much to prepare for class, a professor faces a tradeoff between the
value of improving the quality of the lecture compared to other things she could do with
Copyright © 2024 Cengage Learning Canada, Inc.
Macroeconomics , 9th Edition N. Gregory Mankiw
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
, Chapter 1
Ten Principles of Economics
SOLUTIONS TO TEXTBOOK PROBLEMS
Questions for Review
1. What is a tradeoff? Give two examples of tradeoffs that you face in your life.
A tradeoff is what you give up in order to get something else. Examples of tradeoffs include time
tradeoffs (such as studying one subject over another, or studying at all compared to engaging in
social activities), and spending tradeoffs (such as whether to use your last $15 to purchase a
pizza or to buy an online study guide for that tough economics course).
2. What is the opportunity cost of seeing a movie?
The opportunity cost of seeing a movie includes the monetary cost of admission plus the time
cost of going to the theatre and attending the show. The time cost depends on what else you
might do with that time; if it’s staying home and watching TV, the time cost may be small, but if it’s
working an extra three hours at your job, the time cost is the money you could have earned.
3. Water is necessary for life. Is the marginal benefit of a glass of water large or small?
The marginal benefit of a glass of water depends on your circumstances. If you’ve just run a
marathon, or you’ve been walking in the desert sun for three hours, the marginal benefit is very
high. But if you’ve been drinking a lot of liquids recently, the marginal benefit is quite low. The
point is that even the necessities of life, like water, don’t always have large marginal benefits.
4. Why should policymakers think about incentives?
Policymakers need to think about incentives so they can understand how people will respond to
the policies they put in place. The text’s examples of seat belts and crosswalk countdown signals
show that policy actions can have quite unintended consequences. If incentives matter a lot, they
may lead to a very different type of policy; for example, some economists have suggested putting
knives in steering columns so that people will drive much more carefully! While this suggestion is
silly, it highlights the importance of incentives.
5. Why isn’t trade among countries like a game, with some winners and some losers?
Trade among countries isn’t a game with some losers and some winners because trade can
make everyone better off. By allowing specialization, trade between people and trade between
countries can improve everyone’s welfare.
Copyright © 2024 Cengage Learning Canada, Inc.
, 6. What does the “invisible hand” of the marketplace do?
The “invisible hand” of the marketplace represents the idea that even though individuals and firms
are all acting in their own self-interest, prices and the marketplace guide them to do what is good
for society as a whole.
7. Explain the two main causes of market failure and give an example of each.
The two main causes of market failure are externalities and market power. An externality is the
impact of one person’s actions on the well-being of a bystander, such as from pollution or the
creation of knowledge. Market power refers to the ability of a single person (or small group of
people) to unduly influence market prices, such as in a town with only one well or only one cable
television company.
8. Why is productivity important?
Productivity is important because a country’s standard of living depends on its ability to produce
goods and services. The greater a country’s productivity (the amount of goods and services
produced from each hour of a worker’s time), the greater will be its standard of living.
9. What is inflation, and what causes it?
Inflation is an increase in the overall level of prices in the economy. Inflation is caused by
increases in the quantity of a nation’s money.
10. How are inflation and unemployment related in the short run?
Inflation and unemployment are negatively related in the short run. Reducing inflation entails
costs to society in the form of higher unemployment in the short run.
Problems and Applications
1. Describe some of the tradeoffs faced by each of the following.
a. a family deciding whether to buy a new car
b. a member of Parliament deciding how much to spend on national parks
c. a company president deciding whether to open a new factory
d. a professor deciding how much to prepare for class
a. A family deciding whether to buy a new car faces a tradeoff between the cost of the car
and other things they might want to buy. For example, buying the car might mean they
must give up going on vacation for the next two years. So the real cost of the car is the
family’s opportunity cost in terms of what they must give up.
b. For a member of Parliament deciding whether to increase spending on national parks,
the tradeoff is between parks and other spending items or tax cuts. If more money goes
into the park system, that may mean less spending on national defence or on the police
force. Or, instead of spending more money on the park system, taxes could be reduced.
c. When a company president decides whether to open a new factory, the decision is based
on whether the new factory will increase the firm’s profits compared to other alternatives.
For example, the company could upgrade existing equipment or expand existing
factories. The bottom line is: Which method of expanding production will increase profit
the most?
d. In deciding how much to prepare for class, a professor faces a tradeoff between the
value of improving the quality of the lecture compared to other things she could do with
Copyright © 2024 Cengage Learning Canada, Inc.
