Category Archives for Economics

Market failure arises if ______. A. there is overproduction of the good but not if there is…

Market failure arises if ______. A. there is overproduction of the good but not if there is underproduction B. the deadweight loss is zero C. producer surplus exceeds consumer surplus D. total surplus is not maximized
What is the cause of market failure? Overproduction, but not underproduction of a good A zero deadweight loss Producer surplus is higher than consumer surplus Total surplus is not maximized By definition, market failure occurs when the market delivers an inefficient outcome. This can occur when the market operates at a point where marginal benefit exceeds marginal cost, leading to underproduction or where marginal cost exceeds marginal benefit leading to overproduction. Deadweight loss is the decrease in surplus caused by market failure

The real interest rate on this loan is than expected.The lender from this unexpectedly high…

The real interest rate on this loan is than expected.The lender from this unexpectedly high inflation, and the borrower under these circumstances.Inflation during the 1970s was much higher than most people had expected when the decade began.Homeowners who obtained fixed-rate mortgages during the 1960s the unexpected inflation, and the banks that made the mortgage loans were .
1. The real interest rate on this loan is LOWER than expected. 2. The lender LOSES from this unexpectedly high inflation. 3. The borrower GAINS under these circumstances. 4

WhAt components of GDP (if any) would each of the following transactions affect? Explain. A…

WhAt components of GDP (if any) would each of the following transactions affect? Explain. A family that buys a new refrigerator. Aunt Jane buys a new house. Ford sells a mustang from its inventory. You buy a pizza. California repaves Highway 101. Your parents buy a bottle of French wine. Honda expands its factory in Marysville, Ohio.
a. A family that buys a new refrigerator: Since,a refrigerator is a good purchased by a household, it results inIncrease in Consumption b.Aunt Jane buys a new house: Since, a house is considered as an investment goodGDP increases c.Ford sells a mustang from its inventory: Since,the car in Ford’s inventory had been counted as an investment good a sale of car results in decrease inInvestment d.You buy a pizza:Since, pizza is a good purchased by a household, it results in increase inConsumption. e

Consider two countries (Home and Foreign) that produce goods 1 (with labor and capi- tal) and 2…

Consider two countries (Home and Foreign) that produce goods 1 (with labor and capi- tal) and 2 (with labor and land) according to the production functions described in prob- lems 2 and 3. Initially, both countries have the same supply of labor (100 units each), capital, and land. The capital stock in Home then grows. This change shifts out both the production curve for good 1 as a function of labor employed (described in problem 2) and the associated marginal product of labor curve (described in problem 3). Nothing happens to the production and marginal product curves for good 2. a. Show how the increase in the supply of capital for Home affects its production possibility frontier. b. On the same graph, draw the relative supply curve for both the Home and the Foreign economy. c. If those two economies open up to trade, what will be the pattern of trade (i.e., which country exports which good)? d. Describe how opening up to trade affects all three factors (labor, capital, land) in both countries.

The relationship between the MPC and the MPS

If consumption increases by $12 billion when real disposable income increases by $15 billion, what is the value of the MPC? What is the relationship between the MPC and the MPS? If the MPC increases, what must happen to the MPS? How is the MPC related to the consumption function?
MPC = Consumption/Income
MPS = Income/Consumption (reciprocal of MPC) MPC = $12billion/$15billion = 0.8 MPS = 1/0.8 or$15billion/$12billion = 1.25 The relationship between consumption and disposable income issuch that an inverse and stable relationship exists betweenconsumption and income. If MPC…

e, then MPS must decrease, because the numerator would remain 1 while the denominator is increasing. The MPC is related to the consumption function such that theslope of the consumption function is the MPC.

An insurance company offers doctors malpractice insurance. Assume that malpractice claims against…

An insurance company offers doctors malpractice insurance. Assume that malpractice claims against careful doctors cost $5,000 on average over the term of the policy and settling malpractice claims against reckless doctors costs $30,000. Doctors know whether they are reckless or careful, but the insurance company only knows that 10% of doctors are reckless. How much do insurance companies have to charge for malpractice insurance to break even? a. $5,000 b. $7,500 c. $27,500 d. $30,000

1. What would not be included in the GDP of the US? a) the haircut I got this morning at the…

1. What would not be included in the GDP of the US? a) the haircut I got this morning at the hairdressers on the commons b) the bag of wheat used by the bakery to make the bread I bought this morning c) the tomatoes which I ate at lunch today, picked by Mexican workers in California d) the wine of yesterday, produced in the Fingerlakes region 2. The production output of Coca-Colas company in China is part of ____. The profits of the company which are repatriated to the US on the other hand are part of US ____ but not US ____ a) Chinas GDP; GNP; GDP b) Chinas GDP; GDP; GNP c) US GDP; GNP; GDP d) US GNP; GNP; GDP 3. The vegetables grown and eaten by farmers on their farms in Kenya are included in: a) Kenyan GDP b) Kenyan GNP c) Nominal GDP d) None of the above
1. What would not be included in the GDP of the US? a) the haircut I got this morning at the hairdressers on the commons b) the bag of wheat used by the bakery to make the bread I bought this morning c) the tomatoes which I ate at lunch today, picked by Mexican workers in California d) the wine of yesterday, produced in the Fingerlakes region The correct option is b)the bag of wheat used by the bakery to make the bread I bought this morning 2. The production output of Coca-Colas company in China is part of ____

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