Scarcity and choice are the two essential ingredients of economic analysis. A good is scarce when the human desire or need for it exceeds the amount freely available.
Scarcity and choice are the two essential ingredients of economic analysis. A good is scarce when the human desire or need for it exceeds the amount freely available. As a result, society must choose the most efficient manner of allocation of those scarce resources.
Based upon scarcity and choice, why is it not possible for governments to efficiently provide everyone with free healthcare and free higher education without there being negative effects to the aggregate economy?
Think about society’s need to choose amongst competing resources and goals. How does personal gain affect choices by individuals and government? Opportunity costs. While we want to do one thing, we can’t do others based upon scarcity and opportunity costs. Resources are finite. What about incentives as opposed to free offerings?
ECN201 Microeconomics
Week 2 Discussion
Markets seek equilibrium, and the demand for goods and services will come to an equilibrium with supply of goods and services. When markets are not in equilibrium, surpluses and shortages, as well as underground markets, can exist. Sometimes, the government may want to intervene in markets to try to help reduce economic hardships.
Analyze the impact of an increase in the minimum wage from the current level to $15 per hour. How would the following be affected?
a. employment of people previously earning less than $15 per hour
b. the unemployment rate of teenagers
c. the availability of on-the-job training for low-skilled workers
d. the demand for high-skilled workers who are good substitutes for low-skilled workers
Review the mechanics of price floors and price ceilings. Why does a price floor lead to surpluses? Why does a price ceiling lead to shortages? Review consumer and producer surplus. A price floor will lead to a transfer of consumer surplus to producer surplus; a price ceiling will lead to a transfer of producer surplus to consumer surplus; both price regulations lead to deadweight losses, which is a loss of surplus to society. Why?
ECN201 Microeconomics
Week 3 Discussion
Politicians have a strong incentive to follow a strategy that will enhance their chances of getting elected and re-elected. Political competition more or less forces them to focus on how their actions influence their support among voters and political contributors.
What is market failure, and what kinds of things can lead to market failure? What is government failure? Can government failure lead to market failure? Review concepts like shortsightedness and rent seeking. What are the effects of government intervention in markets with some of the price regulations like price floors and price ceilings we discussed in chapter 4?
ECN201 Microeconomics
Week 4 Discussion
Recent research confirms that the demand for cigarettes is not only price inelastic, but it also indicates smokers with incomes in the lower half of all incomes respond to a given price increase by reducing their purchases by amounts that are more than four times as large as the purchase reductions made by smokers in the upper half of all incomes.
How can the income and substitution effects of a price change help explain this?
Review price elasticity of demand and supply. Price elasticity describes the sensitivity between quantity demanded/supplied and price when a change in price occurs. A relatively lower change in quantity versus a change in price means the product is more price inelastic; a higher relative change in quantity versus a price change indicates more price elastic. Review the substitution effect and income effect dynamics.
ECN201 Microeconomics
Week 5 Discussion
To maximize profit, a price taker will expand its output as long as the sale of additional units adds more to revenues (marginal revenues) than to costs (marginal costs). Therefore, the profit-maximizing price taker will produce the output level at which marginal revenue (and price) equals marginal cost.
In a price-taker market, if a business produces efficiently (i.e., that is, where marginal revenues = marginal costs), the firm will be able to make at least a normal profit. True of False. Explain.
All firms produce where MR=MC. Price takers produce and price where P=ATC=MC=MR. That is the “normal profit” level. Profits above that level are considered “economic profits.” Review economic profits, normal profits, explicit costs, and implicit costs.
ECN201 Microeconomics
Week 6 Discussion
A profit-maximizing price searcher will expand output as long as marginal revenue either exceeds or is equal to marginal cost, lowering its price or raising its price until the midpoint of their demand curve and highest total revenues are achieved.
Why are oligopolies able to earn both short-run economic profits and long-run economic profits, while price taking firms like perfect competitors can only earn short-run economic profits?
Review the characteristics of perfect competition and imperfect competition (monopolistic competition, oligopoly, and monopoly). Barriers to entry don’t exist for perfect competition, but barriers to entry exist for imperfect competition. What are the implications of barriers to entry to the firm and competition? Review consumer surplus and producer surplus; what happens to consumer surplus is price is above equilibrium, or in this case above normal profits?
ECN201 Microeconomics
Week 7 Discussion
Profit-maximizing firms will hire additional units of a resource up to the point at which the marginal revenue product (MRP) of the resource equals its price. With multiple inputs, firms will expand their use of each until the marginal product divided by the price (MP/P) is equal across all inputs
What is the link between marginal revenue product and wages? Due to there being discrepancies between the productivity and resource offerings (i.e., education, skills, experience) in labor markets, is it justified for one employee with a higher marginal revenue product to earn a higher wage than an employee with a lower marginal revenue product? Does this notion of marginal revenue product and wages conflict with minimum wage laws?
Review the mechanics of demand and supply. How does marginality work in economics?
ECN201 Microeconomics
Week 8 Discussion
Imports increase the domestic supply and lead to lower prices for consumers. Exports reduce the domestic supply and push price upward. The net effect of international trade is an expansion in total output and higher income levels for both trading partners (law of comparative advantages).
“Imports destroy jobs; exports create them. The average American is hurt by imports and helped by exports.” Do you agree or disagree with this statement? Explain and support.
Review absolute and comparative advantages. Personal private property protection allows for greater entrepreneurial ventures, and thus an expanding economy and job growth; can import tariffs and quotas reduce the benefits of trade? Review the mechanics of import tariffs and quotas and world price.
ECN201 Microeconomics
Week 1 Assignment
Democracy and Taxes
After reading Special Topic 1 and Special Topic 2, write a 2-page paper answering and describing: Can democracy survive if a majority of the citizenry pay little or nothing in taxes while benefiting directly from a higher level of government spending? Why or why not? Discuss.
ECN201 Microeconomics
Week 2 Assignment
Changes to Supply, Quantity Supplied, Demand, and Quantity Demanded
Using the table, for each line item and its associated column, describe how the market for each specific product will be affected by the associated event indicating whether it will rise, fall, or no change. For example, in the first line item for the market of corn, based upon the event of a severe drought, the price will either rise or fall or no change, demand curve will shift left (fall) or right (rise) or no change, supply curve will shift left (fall) or shift right (rise) or no change, quantity demanded will rise, fall, or no change, and quantity supplied will either rise, fall, or no change.
Event
Market for:
Price
Demand Curve
Supply Curve
Quantity Demanded
Quantity Supplied
A severe drought hits the Midwest corn growers
Corn
The U.S. government reduces taxes on imported lumber
New Home Building
The federal government raises the minimum wage from $7.25 per hour to $11.00 per hour
Minimum wage jobs
Technology improves for automobile assembly
Autos
ECN201 Microeconomics
Week 3 Assignment
Housing Collapse Paper
After reading Special Topic 5, write a 2-page paper answering the following:
Why did housing prices rise rapidly during 2002 – 2005?
Why did the mortgage default rate increase so sharply during 2006 and 2007 even before the 2008 – 2009 recession began?
What did the Community Reinvestment Act have to do with the housing bubble and collapse?
Cite your sources as needed. Use APA formatting.
ECN201 Microeconomics
Week 4 Assignment
Causes of the Great Depression
After reading Chapter 7 and Special Topic 6, write a 2-page paper answering the following question:
Contrary to a popular view, the Great Depression was not caused by the 1929 stock market crash. We have had similar reductions in stock prices to those in 1929 before and after the Great Depression. What historical events took place that directly led to the prolonged depressed conditions like those of the 1930s?
Cite your sources as needed. Use APA formatting.
ECN201 Microeconomics
Week 5 Assignment
Costs Table
Directions: Fill in the table.
Units of Output
Total Costs
Total Fixed Costs
Total Variable Costs
Average Total Costs
Average Fixed Costs
Average Variable Costs
Marginal Costs
0
$1,000
$1,000
$0
1
1,200
2
1,350
3
1,550
4
1,900
5
2,300
6
2,750
7
3,250
8
3,800
9
4,400
ECN201 Microeconomics
Week 1 Quiz
Question 1 What do economists mean when they state that a good is scarce?
Question 2 Economic analysis assumes that
Question 3 Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is
Question 4 While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be
Question 5 Which one of the following is a positive economic statement?
Question 6 Which of the following sayings best reflects the concept of opportunity cost?
Question 7 Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than
Question 8 “Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both.” This statement most clearly reflects
Question 9 With voluntary exchange,
Question 10 Three basic decisions must be made by all economies. What are they?
ECN201 Microeconomics
Week 2 Quiz
Question 1 Which of the following would most likely increase the demand for peanut butter?
Question 2 If DeShawn only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that
Question 3 The number of people willing to buy tickets to the Super Bowl is invariably greater than the number of tickets (and seats) available. This is evidence that the price of the tickets is
Question 4 A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation?
Question 5 The invisible hand principle indicates that competitive markets can help promote the efficient use of resources
Question 6 When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because
Question 7 Rent control applies to about two-thirds of the private rental housing in New York City. Economic theory suggests that the below-equilibrium prices established by rent controls would
Question 8 Which of the following is the most likely result of an increase in the minimum wage?
Question 9 If the demand for a good is highly inelastic, a tax on the good
Question 10 The Laffer curve illustrates the concept that
ECN201 Microeconomics
Week 3 Quiz
Question 1 Competitive markets generally give consumers and producers correct incentives when
Question 2 When production of a good generates external costs, the
Question 3 Which of the following correctly describes the external benefit resulting from an individual’s purchase of a winter flu shot?
Question 4 Markets may have difficulty providing the proper quantity of a public good because
Question 5 Suppose paper pulp mills are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency?
Question 6 The rational-ignorance effect is a result of
Question 7 When voters pay taxes in proportion to the benefits they receive from government projects,
Question 8 Most voters will likely be concerned with
Question 9 Which of the following explains why managers of government agencies have little incentive to achieve operational efficiency?
Question 10 When goods are produced privately, but the cost of their purchase is paid for by the taxpayer or some other third party,
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