Market failure refers to a situation in which the market does not allocate resources efficiently. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxii]. Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society’s resources. ANSWER: F TYPE: T KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxiii]. A monopolist has market power.
Define scarcity. Provide examples of goods that are not scarce. Answer: Scarcity is defined as the limited nature of society’s resources. Examples of goods that are not scarce – air, grass, water, rocks 2. How does Adam Smith's concept of the invisible hand explain why markets move toward equilibrium?
Above shows a monopoly diagram. The economic inefficiency is highlighted especially by the welfare loss to the consumer this is because between q0 and q1 the extra benefit of the unit (shown by the price) exceeds the extra cost. Therefore welfare
This view indicates supply will never change to adjust to meet consumer spending. The demand can move by changes and the produced items change in price to match consumer spending. The Keynesian economics looks at the problem of supply and demand separately. Basically, supply generates income. What people make other people buy, and so the value of supply is always equal to the value of income.
The price does not signal true cost. B. Monopolists typically force customers to purchase more than they want to. C. A monopolist may not produce at the lowest point of its average cost curve. D. The quantity produced is typically less than in pure competition. 11.
The project’s Internal Rate of Return (IRR): In this case, something truly wondrous IS happening at the discount rate at which the NPV line cuts the discount-rate axis: it is the discount rate at which the NPV of the project would be exactly equal to zero. In finance, this rate is called the project’s “internal rate of return” or IRR. It is a much-used concept in the real world of business. The IRR has its name because that rate is determined strictly by the cash flow of the project—is “internal” to it—and is not at all related to the firm’s cost of financing (k) at all. For normal projects in which one or several cash outflows are followed by a series of only cash inflows, we can offer you the following decision rule concerning the IRR of a project 2
The greater the inequality, gap between the rich and poor, the worse developed the country is. However, income inequality doesn’t give the actual amount of money in the country, so economic development is not clearly
If other things change, then one cannot directly apply supply/demand analysis. Sometimes supply and demand are interconnected, making it impossible to hold other things constant (Colander, The Limitation of Supply/Demand Analysis, 2010). “In supply/demand analysis, you would look at the effect that fall would have on workers’ decisions to supply labor, and on business’s decision to hire workers. However, there are also other effects (Colander, The Limitation of Supply/Demand Analysis, 2010). “For instance, the fall in the wage lowers people’s income and thereby reduces demand.
Market Equilibration Process Paper Nancy Holly ECO/561 Economics June 14, 2012 Arnella Trent, Facilitator Abstract Market equilibrium is the balance between supply and demand in economics. The market is considered equal when there is no excess supply or demand within the market. The laws of supply and demand affect the market such that equilibrium is achieved within a competitive market when all other things are considered equal. A real-world example of market equilibrium is the cost of gas. Changes of Demand and the Effect on Gas Prices Law of Demand The law of demand states that the cost of an item is related to the demand for the item.