The changes in the government’s macroeconomic objectives depends on where we are on the AS curve as shown below. If we are on the horizontal part of the AS curve, we will experience economic growth (from Y1 to Y2) without an increase in inflation so our competitiveness in the global market will remain the same so our trade deficit could improve. However, if we are on the curved part of the AS curve, we will have an increase in economic growth and there will be a demand pull inflation from P1 to P2. If we are at the vertical part of the AS curve, inflation will get higher but our economic growth remains the same as we have reached full productive
a bolt needed has increase in price for smaller qty needed to complete total production run. 1. Explain its relationship with total cost. The relationship between marginal cost and total cost is that both are the total cost in producing a unit of goods. C. Define profit.
Large firms tend to benefit more due to several factors from economies of scale; this means that the firm can benefit from falling average costs in the long run – however small firms cannot achieve such benefits. For example purchasing benefits whereby large firms are able to bulk buy raw materials as they are producing on a larger scale thus are able to receive discounts and therefore reducing production costs. Or they may experience technical economies whereby investment in more advanced machinery or larger premises will allow firms to experience increasing returns to scale where output is greater than input thus improving productive efficiency through division of labour and specialisation resulting again in lower costs. Economies of scale can be illustrated in diagram 1, whereby when output increases (Q to Q1), cost decreases (C to C1). Minimum efficient scale is illustrated at the constant part of the LRAC labeled QA firms are operating at the optimum point experiencing constant long run average costs where economies of scales are exhausted; the firm therefore is operating at long-run productive efficiency.
Furthermore, the cost of the formerly unemployed, i.e. job seekers allowance, could now be redistributed through government spending, further increasing AD, to be spent on education in order to cure structural unemployment (decline in certain industry), and increase long term economic growth. However, the extent to which an increase in exports may reduce unemployment is dependant upon the current rates of unemployment. For example, if employment rates are already very high, an increase in exports would have little to no effect, as frictional unemployment,
As the time horizon increases, variable costs rely less on existing factors and restrictions and therefore will begin behaving differently which will in turn affect the cost of production (Wright, 2007). The second way a firm that’s into profit maximization can decide its greatest level of output is by way of the marginal revenue -- marginal cost method. This is done by subtracting the marginal cost from the marginal revenue that a product generates. Using marginal cost and marginal revenue as the bases, profit maximization will be obtained at the point when marginal revenue is equal to marginal cost. If the marginal revenue is greater than marginal cost this would be when a profit maximizing firm would need to increase production until marginal revenue is equal to marginal cost.
An increase in wages will increase the average variable cost. The more people required to produce additional units of output will be more expensive due to an increase in wages. A lower material cost will result in a lower average variable cost because more units can produced at a lower cost. If the firm produces the same amount of units the cost will fall. The fixed tax will not change the average variable cost.
The government wants low unemployment and high economic growth which are generally linear; however this can cause difficulties in maintaining a stable rate of inflation which is another economic objective. The government wants the unemployment rate to be as low as possible, and often say they try to reach “full employment.” Full employment does not mean that there is nobody left unemployed in the country in a literal sense, it factors out hardcore, frictional, and seasonal unemployment. They do this by stimulating the economy to increase aggregate demand, causing firms to increase their employment in order to increase their supply to meet demand and increase their profit margins. However if unemployment falls below the full employment margin and breaches the NAIRU (non accelerating inflation rate of unemployment” then the economy grows at an unsustainable rate, inflation quickly increases, and this causes problems for the economy such as a reduction of purchasing power for consumers and a vast reduction of real income for individuals on nominal wages. Poor price stability reflects poorly on the government’s economic management.
Undermine the self-initiative that defines the American spirit. Lack solid stances and clear direction since liberalists believe society is in a constant state of growth and flunctuation. According to Marx, workers produce more than what they get as their wages from their employers. The capitalist employers get the services of labour cheap but they sell the goods, produced by labour, at a rate higher than the amount spent on wages and upkeep of the factory. They appropriate this excess or surplus value by exploiting the labour as profit.
Unemployment reduces the level of production in an economy as it is operating inefficiently, thus less goods and services are produced which in turn causes less wants to be satisfied. An economy can only operate on the production possibility frontier when it is at maximum efficiency: to do this all resources must be fully utilized.
Even though union members—those who keep their jobs--- get their wages increased and enjoy improved working conditions and benefits, the economic issues that most unions brings to the United States outbalance the positive effects. As the United States competes with the rest of the world, firms struggle when one of their highest costs is directly related to labor. In the article Labor Unions by Morgan Reynolds, the author accurately explains this phenomenon: while higher wages are successfully achieved, they simultaneously reduce the number of jobs available in unionized firms. This occurs because of the basic law of demand: once prices of labor rise, then employers will purchase less of it. Hence such members’ benefits are achieved at the expense of consumers, nonunion workers, already unemployed people, taxpayers, and corporation owners (Reynolds,