Question

ap macro which mankiws principles apply to the following examples. 1. after a local coffee shop opens, a nearby bakery sees a decrease in its morning sales. the bakery owner decides to start offering fresh pastries and a small breakfast menu to compete. 2. a country has a high literacy rate and a highly skilled workforce, leading to the creation of advanced technology and efficient manufacturing processes. as a result, its citizens have access to a wide variety of high - quality goods and services. 3. to combat a recession, a government increases its spending on infrastructure projects and sends out stimulus checks to citizens. the result is a sharp rise in the prices of consumer goods and services across the country. 4. a student is deciding whether to buy the new, top - of - the - line smartphone or a used, older model. they weigh the extra features and prestige of the new phone against its significantly higher price. 5. a government passes a law that requires all factories to install expensive pollution - control technology. this addresses a negative externality that creates a larger social cost. 6. an advertising firm offers its employees a bonus for every new client they bring in. the number of new clients acquired by the firm increases significantly over the next quarter. 7. a governments central bank prints a massive amount of new currency to finance its public debt. over the next year, the value of the currency drops sharply, and the price of a loaf of bread more than doubles. 8. an invisible hand guides buyers and sellers to a desirable outcome and promotes the common good. 9. a software company allows its engineers to work from home two days a week. the engineers find they are more focused and productive when they work from home, and the company saves money on office space and utilities.

Explanation:

1. The bakery owner's response to competition shows people respond to incentives.
2. High literacy and skilled workforce leading to good access relates to a country's standard of living depending on its ability to produce goods and services.
3. Government actions to combat recession and resulting price - rise show short - run tradeoff between inflation and unemployment (as stimulus may cause inflation).
4. Student weighing benefits and costs of different smartphones is people face trade - offs.
5. Government law to address negative externality shows government can sometimes improve market outcomes.
6. Advertising firm's bonus leading to more clients shows people respond to incentives.
7. Central bank printing currency and resulting price rise shows when the government prints too much money, prices rise (inflation).
8. Invisible hand concept shows markets are usually a good way to organize economic activity.
9. Company allowing work - from - home and benefits shows people face trade - offs (company saves costs, employees are more productive).

Answer:

1. People respond to incentives.
2. A country's standard of living depends on its ability to produce goods and services.
3. There is a short - run tradeoff between inflation and unemployment.
4. People face trade - offs.
5. Government can sometimes improve market outcomes.
6. People respond to incentives.
7. When the government prints too much money, prices rise.
8. Markets are usually a good way to organize economic activity.
9. People face trade - offs.