Solution Manual for Economics, 13th Edition

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PrefaceiiiPart 1IntroductionChapter 1What is Economics?1AppendixGraphs in Economics9Chapter 2The Economic Problem21Part2How Markets WorkChapter 3Demand and Supply39Chapter 4Elasticity53Chapter 5Efficiency and Equity65Chapter 6Government Actions inMarkets79Chapter 7Global Markets in Action93Part3Households’ ChoicesChapter8Utility and Demand107Chapter9Possibilities, Preferences, and Choices121Part4Firms and MarketsChapter10Organizing Production137Chapter 11Output and Costs151Chapter 12Perfect Competition165Chapter 13Monopoly179Chapter 14Monopolistic Competition197Chapter 15Oligopoly209Part 5Market Failure and GovernmentChapter 16Public Choices,Public Goods, and Healthcare223Chapter 17Externalities237Part6Factor Markets, Inequality, and UncertaintyChapter 18Marketsfor Factors of Production249Chapter 19Economic Inequality261Chapter20Uncertainty and Information275Part 7MonitoringMacroeconomicPerformanceChapter 21Measuring GDP and Economic Growth285Chapter 22Monitoring Jobs and Inflation299T a b l e o f C o n t e n t s

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Part 8Macroeconomic TrendsChapter 23Economic Growth313Chapter 24Finance, Saving, and Investment325Chapter 25Money, the Price Level, and Inflation337Chapter 26The Exchange Rate and the Balance of Payments351Part 9Macroeconomic FluctuationsChapter 27Aggregate Supply and Aggregate Demand365Chapter 28Expenditure Multipliers381Chapter 29The Business Cycle, Inflation, and Deflation397Part 10Macroeconomic PolicyChapter 30Fiscal Policy413Chapter 31Monetary Policy427

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A n s w e r st ot h eR e v i e wQ u i zPage 21.List some examples ofthescarcitythat you face.Examples of scarcitycommon to studentsinclude not enough income to afford both tuition and anice car,not enough learning capacity to study for both an economics exam and a chemistryexam in one night, and not enough time to allowextensivestudyingandextensivesocializing.2.Find examples of scarcity in today’s headlines.A headline inTheBaltimore SunonJune20, 2017was “Davis Says Special Deployment HelpedStall Violence.”The storypresented Police Commissioner Kevin Davis stating that a week-longdeployment of uniformed police officers on the streets of Baltimore helped reduce shootings inthe city. But the story pointed out the role of scarcity when Commissioner Davis said that “thedeployment was not sustainable over the long term” due to its cost.3.Find anexampleof the distinction between microeconomics and macroeconomics intoday’s headlines.Microeconomics:OnJune20, 2017a headline inEast Bay Timeswas “Reality vs Fantasy: FTC toBlock FanDuel-DraftKings Merger.” This story covers a microeconomic topic because it discusseshow twoon-line fantasy sports sites, which were trying to merge, now faced opposition by theFederal Trade Commission (FTC) which announced it would challenge the merger.Macroeconomics:OnJune 20, 2017, a headline inTheWall Street Journalwas “Ryan Talks UpLikelihood of Tax Overhaul.” This story covers a macroeconomic topic because it concernstaxesthat affect every business and individualin the entire economy.Page71.Describe the broad facts aboutwhat,how, andfor whomgoods and services are produced.What gets produced is significantly different today than in the past. Today the U.S. economyproduces more services, such as medical operations, teaching, and hair styling, than goods, suchas pizza, automobiles, and computers. How goods and services are produced is by businessesdetermining how the factors of production, land, labor, capital and entrepreneurship, arecombined to make the goods and services we consume. Land includes all natural resources, bothrenewable natural resources such as wood, and nonrenewable natural resources such as naturalgas. Labor’s quality depends on people’s human capital. In the U.S. economy, human capitalobtained through schooling has increased over the years withfar more people completing highschool and attending college than in past years. Finally, for whom are goods and services to beproduced depends on the way income is distributed to U.S. citizens. This distribution is notequal; the 20 percent of people with the lowest income earn about 5 percent of the nation’s totalincome while the 20 percent of people with the highest incomes earn about 50 percent of totalincome. On the average, men earn more than women, whites more than non-whites, and collegegraduates more than high school graduates.1WHAT ISECONOMICS?C h a p t e r

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2C H A P T E R12.Use headlines from the recent news to illustrate the potential for conflict between self-interest and the social interest.One example of an issue concernstheuse of a school board’s credit card to make personalpurchases.AJune 20, 2017headline fromStar Tribunewas“Shakopee Board ApprovesSuperintendent’s Resignation Will Pay Him $50,000.”This story discussesthe superintendent’suse of a school board credit card to buy items such as a television and trip to Nashville.Thesuperintendent was following his self-interest because hemay not have repaid the purchaseshad they not been uncovered.The school board chair said “In light of the current issues facingthe school district, the school board feel (sic) that a change in leadership is warranted.” The chairbelieves that the social interest is served by havinga new superintendent without the issue ofmisuse of a credit card hanging over his or her head.Page101.Explain the idea of a tradeoff and think of three tradeoffs that you have made today.A tradeoff reflects the point thatwhensomeone gets one thing, something else must be given up.What is given up is the opportunity cost of whatever is obtained.Three examplesof tradeoffsthat are common to students include: a) When a student sleeps in rather than going to his or herearly morning economics class, the student trades off additional sleep for study time. Theopportunity cost of the decision is a lower grade on the exam. b) When a student running late forclass parks his or her car illegally, the student trades off saving time for the risk of a ticket. Thepotential opportunity cost of the decision is the goods and services that cannot be purchased ifthe student receives an expensive parking ticket. c) A student trades off higher income byspending time during the day working ata part-time job for lesstime spent atleisure time andstudy. The opportunity costfor the higher incomeis less leisure and lower grades in classes.2.Explain what economists mean by rational choice and think of three choices that you’vemade today that are rational.A rational choice is one that compares the costsand benefits of the different actions and thenchooses the action that has the greatest benefit over cost for the person making the choice.Threerational choices made by students include: a) The choice toskip breakfast togo to class. In thiscase the benefit is the higher grade in the class and the cost is the breakfast forgone. b) Thechoice to stop talking with a friend on the phone and start studying for an impending exam. Inthis case the benefit is the resulting higher grade in the class and the cost is the conversationforgone. c) The choice to do laundry today rather than watch television. In this case the benefit isthe fact the student will have clean clothes to wear and the cost is the loss of the entertainmentthe television show would have provided.3.Explain why opportunity cost is the best forgone alternative and provide examples of someopportunity costs that you have faced today.When a decision to undertake one activity is made, often many alternative activities are nolonger possible. Often these activities are mutually exclusive so only the highest valuedalternative is actually forgone. For instance, the decision to go to a student’s 8:30 AM classeliminates the possibility of sleeping in during the hour and of jogging during the hour. But inthis case, it is impossible tobothsleep in and to jog during the hour, so the opportunity costcannot be both activities. What is lost isonlythe activity that otherwise would have beenchosen—eithersleeping inorjogging—which is whatever activity would have been chosen, thatis, the most highly valued of the forgone alternatives. For students, attending class, doinghomework, studying for a test are all activities with opportunity costs.4.Explain what it means to choose at the margin and illustrate with three choices at themargin that you have made today.

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W H A TI SE C O N O M I C S ?3Choosing at the margin means choosing to do a little more or a little less of some activity.Threecommonexamplesstudents encounterare: a) When a student faces a chemistry and aneconomics final exam in one day, the student must determine whether spending the last hourstudying a little more chemistry or a little more economics will yield a better contribution(marginal benefit) to his or her overall GPA. b) A college student buying a computer must decidewhether the marginal benefit of adding 1 GB of additional memory is worth the marginal cost ofthe additional memory. c) A student football fan with a choice of a cheap seat in the studentbleachers located at the far end of the playing field or a more expensive seat located on the 30yard line must determine whether the marginal benefit of watching the game from a better seatis worth the marginal cost of the higher ticket price.5.Explain why choices respond to incentives and think of three incentives to which you haveresponded today.People making rational decisions compare the marginal benefits of different actions to theirmarginal costs.Therefore people’s choices change when their incentives, that is the marginalbenefit and/or marginal cost, of the choice changes.Just as everyone else, students respond toincentives; a) A student studies because of the incentives offered by grades. b) A student is morelikely to attend a class if attendance is factored into the grade. c) A student might attend ameeting of a club if the student’s significant other is eager to attend the meeting.Page 111.Distinguish between a positive statement and a normative statement and provideexamples.Apositivestatement is a description of how the worldis.It is testable. Anormativestatement is adescription of how the worldought to be. It is, by its very nature, not testable because there is nouniversally approved criterion by which the statement can be judged. “I will receive an A for thiscourse,” is a positive statement made by an economics student—it might not be true, but it istestable. “I will receive a good grade for this course,” is a normative statement. Whether someoneagrees with it depends on his or her interpretation of what makes for a “good” grade.2.What is a model? Can you think of a model that you might use in your everyday life?Amodelis a description of some aspect of the economic world. It includes only those featuresthat are necessary to understand the issue under study. An economic model is designed to reflectthose aspects of the world that are relevant to the user of the model and ignore the aspects thatare irrelevant. A typical model is a GPS map. It reflects only those aspects of the real world thatare relevant in assisting the user in reaching his or her destination and avoids using informationirrelevant to travel.3.How do economists try to disentangle cause and effect?Economists use models to understand some aspect of the economic world. Testing thepredictions of models makes it necessary to disentangle cause and effect. To overcome thisproblem, economists have three methods of testing their models: Using a natural experiment,using a statistical investigation, and using economic experiments. A natural experiment is asituation that arises in the ordinary course of life in which one factor being studied varies andthe other factors are the same. This method allows the economist to focus on the effect from thefactor that differs between the two situations. A statistical investigation looks for correlationsbetween variables but then determining whether the correlation actually reflects causation canbe difficult. An economic experiment puts people into decision making situations and then variesthe relevant factors one at a time to determine each factor’s effect.4.How is economics used as a policy tool?

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4C H A P T E R1Individuals, businesses, and governments use economics as a policy tool. Individuals use theeconomic ideas of marginal benefit and marginal cost when making decisions for such topics asattending college, paying cash or credit for a purchase, and working. Businesses also use theconcepts of marginal benefit and marginal cost when making decisions about what to produce,how to produce, and even how many hours to stay open. Finally governments also use marginalbenefit and marginal cost when deciding issues such as the level of property taxes, the amount tofund higher education, or the level of a tariff on Brazilian ethanol.Page 131.What types of jobs do economists do?Economists are found in a large variety of jobs. Many of these jobs are analysts of various sorts.Some economists are market research analysts—they work with data on sales and try topredicta product’s success and the price that should be set for it. Other economists are financialanalysts—they work with data on interest rates, stock and bond pricesto try to forecast the costof borrowing the returns that can be expected on investments. Still other economists work asbudget analysts—they use data on an organization’s cash inflows (its receipts) and its outflows(its payments) in order to prepare plans forecasting future cash flows.2.What is the range and median level of economists’ pay?Economists’ pay ranges from $41,226 to $124,177 and has a median salary of $72,279.Studentswho earn a PhD in economics typically earn about $100,000 by mid-career. Economists whowork as analysts have incomes that range from an average of $62,000 for market researchanalysts to $80,000 for financial analysts.3.What are the skills needed for an economics job?Economistsneed five important skills:Critical-thinking skills: Economists need theability to use logical thinking to clarify and thensolve real-world problems.Analytical skills: Economists must be able to use economic ideas and tools to analyze data inorder to determine important patterns and reach logical conclusions.Math skills: Economistsneed to be able to use mathematical and statistical tools to explore andanalyze data in order to reach valid conclusions.Writing skills: Economists must be able to clearly writereports presenting ideas, conclusionsfrom any analysis and reasons why the conclusions are valid.Oral communication skills: Economists need the ability to orally explain ideas, conclusions, andthe reasons why the conclusions are correct to a variety of people, including those withlittle knowledge of economics.

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W H A TI SE C O N O M I C S ?5A n s w e r s t o t h eS t u d y P l a nP r o b l e m s a n d A p p l i c a t i o n s1.Apple Inc. decides to make iTunes freely available in unlimited quantities.a.Does Apple’s decision change the incentives that people face?Apple’s decision changes people’s incentives. For example, it increases people’s incentives to buyan iPod to take advantage of the newly “free” music available on iTunes.b.Is Apple’s decision an example of a microeconomic or a macroeconomic issue?Apple’s decision is a microeconomic decision because it affects a single company and a singlemarket.2.Which of thefollowing pairs does not match?a.Labor and wagesLabor earns wages, so this pair matches.b.Land and rentLand earns rent, so this pair matches.c.Entrepreneurship and profitEntrepreneurship earns profit, so this pair matches.d.Capital and profitCapital earns interest, so this pair doesnotmatch.3.Explain how the following news headlines concern self-interest and the social interest.a.StarbucksExpands inChinaStarbucks’expansion is a decision made byStarbucksto furtherStarbucks’interest. Thus thedecision is directly inSrarbucks’self interest. The social interestis affected because Starbucks’expansion will have an effect in China. For instance, more Chinese citizens might drink coffeerather than tea and fewer coffee shops run by Chinese firms might open.b.McDonald’s Moves intoGourmet CoffeeMcDonald’s decision to servegourmet coffeeis a decision made by McDonald’s to furtherMcDonald’s interest. Thus the decision is directly in McDonald’s self interest. The social interestisaffected because more people willdrink coffeerather than otherdrinks such as sodas.c.Food Must Be Labeled with NutritionDataThe decision to require that food must be labeled with nutrition information is made in the socialinterest. This decision is not made by any one single firm and so does not (necessarily) reflectanyone’s self interest.4.The night before an economics test, you decide to go to the movies instead of staying homeand working your MyEconLab Study Plan. Your grade on the test was50 percent, lowerthan your usual70 percent score.a.Did you face a tradeoff?Yes, you faced a tradeoff. The tradeoff was between a higher test score and an evening with yourfriends at the movies.b.What was the opportunity cost of your evening at the movies?The opportunity cost of going to the movies is the fall in your grade. That is the 20 points forgonefrom choosing to see the movie rather than study.

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6C H A P T E R15.Cost ofRioOlympicsBrazilian federal, state, and local governments spent R$2.8 billion and private sponsorsspent R$4.2 billion on 17 new Olympic facilities, 10 of which will be used for sportingevents after the Olympics.Source:Financial Times,August 6, 2016Was the opportunity cost of theRioOlympicsR$2.8orR$7billion? Explain your answer.TheR$7 billion spent onthe 17 newOlympic facilities is an opportunity cost of the Olympicsifthe funds would not have spent otherwise. However, if there were already plans underway tobuild the 10 facilities that will be used after the Olympics, thentheircost is not an opportunitycost of the Olympics because the cost would have been paid even ifRiodid not host theOlympics..The cost of the 7 facilities that willnotbe used afterwards, however, is definitely anopportunity cost of the Rio Olympics.6.Which of the following statements is positive, which is normative, and which can be tested?a.The UnitedStatesshould cut its imports.The statement is normative and cannot be tested.b.China is the largest trading partnerof the United States.The statement is positive and can be tested.c.If the price ofgasoline rises, people will drive less and use less gasoline.The statement is positive and can be tested.

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W H A TI SE C O N O M I C S ?7Answers toAdditionalProblemsandApplications7.Kanye WestOffers Free ConcertTicketsKanye West has teamed with Los Angeles inner-city schools to offer free passes for students.Source:consequenceofsound.net, November 27, 2016WhenKanye Westgave away tickets, what was free and what was scarce? Explain youranswer.The seats in thearenasare scarce—there are only a limited number.The time of schooladminstrators used to distribute the tickets is also not free.In addition, if thestudentswhoaregiventhe “free”ticket attended the concert rather than sell their free tickets, they incurred theopportunity cost of the foregone ticket price. So the concert was far from “free” for the concert-goers. The publicity thatKanye Westreceives is free to him but the publicity used reporters’scarce time to report on the tickets rather than reporting on other news worthy events.8.How does the creation of a successful movie influencewhat,how, andforwhomgoods andservices are produced?The “what” question is affected in two ways. First, one good or service that is produced is thesuccessful movie. Second, spinoffs (Iron Man II) and/or similar films likely will be created in thefuture. The “how” question is affected to the extent that movies use different productionmethods. Some movies, for instance, have a lot of special effects while other movies have few ornone. The “for whom” question is influenced because those people who, as the result of theblockbuster movie, have higher incomes so that more goods and services are produced for them.9.How does a successful movie illustrate self-interested choices that are also in the socialinterest?The a successful movie increases the income of the people involved with the movie. Hence thesepeople’s choices are driven largely by self interest. However the creation of a successful moviealso increases the quantity of widely enjoyed entertainment. The amount of entertainmentavailable in the economy increases which benefits society. So the choices the people made intheir self interest also reflected choices made in the social interest.10.Before starring inGuardians of the Galaxy,Chris Pratthad appeared in11movies thatgrossed an average of $7million on the opening weekend.Guardiansof the Galaxygrossed$94million.a.Howwillthe success ofGuardians of the Galaxyinfluence the opportunity cost of hiringChris Pratt?The salary that must be paid toChris Prattto appear in future movies increased because some ofthe success ofGuardians of the Galaxywas attributed to Mr.Pratt. As a result the opportunitycost to movie producers of hiring Mr.Prattincreased.b.How have the incentives for a movie producer to hireChris Prattchanged?There are two effects on the incentives of producers to hire Mr.Pratt. First, because theopportunity cost of hiring Mr.Prattincreased, the incentive to hire him decreased. Howeverbecause part of the success ofGuardians of the Galaxywas attributed to Mr.Prattacting in theleadingrole, producers expect that his acting will lead to increased success for future movies.This belief increases producers’ incentives to hire Mr.Pratt.11.What might be an incentive for you to take a class in summer school?Listsome of thebenefits and costs involved in your decision.Would your choice be rational?Early graduation,smaller class sizes, and/or retaining eligibility for a scholarshipareexamplesof incentives that encourage taking summer classes. The benefits of taking summer classes might

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8C H A P T E R1include early graduation, more personal attention from the instructor, retained eligibility for ascholarship, and increased knowledge about some aspect of the world. Costs potentially includeforgone summer jobs or internships, less time to spend with friends, and additional tuition andother class-related expenses if the class I not one that would be taken otherwise. The choice isrational as long as the student determines that taking summer classes offers the highest benefitover cost for the use of his or time and efforts.12.Look at today’sWall Street Journal.What is the leading economic news story? With bigeconomicquestionsand tradeoffs does it discuss or imply?OnJune 20, 2017, the top economic news story discussedthe Senates plan to vote on legislationrepealing large parts of the Affordable Care Act.One option under consideration would cap theamount the federal government would pay toward the cost of Medicaid, the program that paysfor healthcare for poor and disabled people.This storyclearlydiscusses the “for whom” question:If Medicaid spending is reduced, fewerpoor and disabled people will receive certain types of healthcare.It also discusses the “what”question:If fewer Americans have health insurance, lessgoods and servicesrelated to healthcare will be produced.Thestory implicitly illustrates a tradeoff:Ifchoices are taken tolimitthe amount of healthcarepoor and disabled people receive, their health will generally be worse than otherwise.13.Provide two microeconomic statementsand two macroeconomic statements.Classifyyourstatements aspositive or normative, and explainyour classifications.Microeconomic statements are: Fewer deep water oil wells should be drilled in the Gulf ofMexico. If less oil is produced, the price of oil will rise. The first statement is normative because itrelies on what the person thinks “should” be done. The second statement is positive because it ispossible to test the effect of less oil being produced.Macroeconomic statements are: The currently unemployment rate is too high. The currentunemployment rate is higher for blacks than for whites. The first statement is normative becauseit depends on what is deemed “too high.” The second statement is positive because it can bechecked to determine its validity.

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A n s w e r st ot h eR e v i e wQ u i zPage301.Explain how we “read” the three graphs in Figs.A1.1 and A1.2.Thepoints in the graphs relate the quantity of the variable measured on the one axis to thequantity of the variable measured on the other axis. The quantity of the variable measured onthe horizontal axis (thex-axis) is measured by the horizontal distance from the origin to thepoint. Similarly, the quantity of the variable measured on the vertical axis (they-axis) ismeasured by the vertical distance from the origin to thepoint. The point relates these twoquantities. For instance, in Figure A1.2, pointAshows that at a price of$8.43perticket,1.3billiontickets are sold.2.Explain what scatter diagrams show and why we use them.Scatter diagrams plot the value of one economic variable against the value of another variable fora number of different values of each variable.We use scatter diagrams because they quicklyreveal if a relationship exists between the two variables. Moreover, if a relationship exists,scatter diagrams show whether increases in one variable are associated with increases ordecreases in the other variable.3.Explain how we “read” the three scatter diagrams in Figs.A1.3 and A1.4.The scatter diagram in Figure A1.3 shows the relationship betweena film’s worldwidebox officeticket sales andthe film’sproductionbudget. The figure shows that higher box office sales areassociated with a higherproduction budget.The scatter diagram in FigureA1.4ashows the relationship between income, in thousands ofdollars per year, andexpenditure, also in thousands of dollars per year, for the years 2001to2016. The scatter diagram shows that higher income leads to higher expenditure. The figure alsoshows that the relationshipis relatively strong.The scatter diagram in Figure A1.4b shows the relationship between the inflation rate and theunemployment rate for the years 2001to 2016. The figure shows that for most of the years,there wasa weakrelationship between these variables, with perhaps higher inflation beingassociated with lower unemployment.1GRAPHS INECONOMICSA p p e n d i x

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1 0A P P E N D I X14.Draw a graph to show the relationship between two variables that move in the samedirection.A graph that shows the relationship betweentwo variables thatmove in the same directionis shown by a line that slopes upward. FigureA1.1 illustrates such a relationship.5.Draw a graph to show the relationship betweentwo variables that move in oppositedirections.A graph that shows the relationship betweentwo variables thatmove in theoppositedirectionsis shown by a line that slopesdownward. Figure A1.2illustrates such arelationship.

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G R A P H SI NE C O N O M I C S1 16.Draw a graphoftwo variableswhose relationship shows (i)a maximum and(ii)aminimum.A graph that shows the relationshipbetween two variables thathave amaximum is shown by a line that startsout sloping upward, reaches a maximum,and then slopes downward. Figure A1.3illustrates such a relationship with curveB.A graph that shows the relationshipbetween two variables thathave aminimum is shown by a line that startsout sloping downward, reaches aminimum, and then slopes upward.Figure A1.3 illustrates such a relationshipwith curveA.7.Which of the relationships in Questions 4and 5 is a positive relationship andwhich is a negativerelationship?The relationship in Question 4 betweenthe two variables that move in the same direction is a positive relationship. The relationship inQuestion 5 between the two variables that move in the opposite directionsis a negativerelationship.8.What are the two ways of calculating the slope of a curved line?To calculate the slope of a curved line we can calculate the slope at a point or across anarc.The slope of a curved line at a point on the line is defined as the slope of the straight linetangent to the curved line at that point. The slope of a curved line across an arc—between twopoints on the curved line—equals the slope of the straight line between the two points.9.How do we graph a relationship among more than two variables?To graph a relationship among more than two variables, hold constant the values of all thevariables except two. Then plot the value of one of the variables against the other variable.10.Explain what change will bring amovement alonga curve.A movement along a curve occurs when the value of a variable on one of the axes changes whileallof the other relevant variables not graphed ontheaxes do not change.The movement alongthe curve shows the effect of the variable thatchanges,ceteris paribus(holding all of the othernon-graphed variables constant).11.Explain what change will bring ashiftof a curve.A curve shifts when there is a change in the value of a relevant variable that is not graphed on theaxes. In this case the entire curve shifts.

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1 2A P P E N D I X1A n s w e r s t o t h e S t u d y P l a n P r o b l e m s a n d A p p l i c a t i o n sUse the spreadsheet to work Problems1to 3.The spreadsheet provides data onthe U.S. economy: Column A is the year,column B is the inflation rate, column Cis the interest rate, column D is thegrowth rate, and column E is theunemployment rate.1.Draw a scatter diagram of the inflation rate and the interest rate. Describe the relationship.To make a scatter diagram of the inflation rate and the interest rate, plot the inflation rate on thex-axis and the interest rate on they-axis. The graph will be a set of dots and is shown in FigureA1.4. The pattern made by the dots tells us that as the inflation rate increases, the interest rateusually increases so there is a(weak)positive relationship.2.Draw a scatter diagram of the growth rate and the unemployment rate. Describe therelationship.To make a scatter diagram of the growth rate and the unemployment rate, plot the growth rateon thex-axis and the unemployment rate on they-axis. The graph will be a set of dots and isshown in Figure A1.5. The pattern made by the dots tells us that when the growth rate increases,the unemployment rate usually decreases so there is a negative relationship.ABCDE120062.54.92.74.6220074.14.51.84.6320080.11.4−0.35.8420092.70.2−2.89.3520101.50.12.59.6620113.00.11.68.9720121.70.12.28.1820131.50.11.77.4920140.80.02.46.21020150.70.12.65.31120162.10.31.64.9

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G R A P H SI NE C O N O M I C S1 33.Draw a scatter diagram of the interet rate and the unemployment rate. Describe therelationship.To make a scatter diagram of theinterestrateand the unemployment rate, plot theinterestrate on thex-axis and the unemployment rateon they-axis. The graph will be a set of dotsand is shown in Figure A1.6. The patternmade by the dots tells us that when theinterestrate increases, the unemploymentrate usually decreases so there is a negativerelationship.Use the following news clip to work Problems 4 to 6.LegoShatters More Records:Source: Boxofficemojo.com,Data for weekend ofMarch10-12, 20174.Draw a graph of the relationshipbetween the revenue per theateron they-axis and the number oftheaters on thex-axis. Describethe relationship.Figure A1.7 shows therelationship. As the figure shows,there is apositiverelationship.5.Calculate the slope of the relationshipinProblem 4between3,846and4,071theaters.The slope equals the change in revenue pertheater divided by the change in the numberof theaters. The slope equals ($15,867$9,362)/(3,8464,071) which equals−$28.91per theater.6.Calculate the slope of the relationshipinProblem 4between4,071and3,143theaters.The slope equals the change in revenue pertheater divided by the change in the numberof theaters. The slope equals ($9,362$6,600)/(4,0713,143which equals $2.98per theater.MovieTheaters(number)Revenue(dollars pertheater)Kong: Skull Island3,846$15,867Logan4,071$9,362Get Out3,143$6,600TheShack2,888$3,465

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