ECON-1102 Lecture Notes - Lecture 5: Deadweight Loss, Shortage, Abc Me

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magentaspider14

4 Nov 2017

School

University of Winnipeg

Department

ECONOMICS

Course

ECON-1102

Professor

N/ A- T B A

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Document Summary

Outline: market equilibrium, optimal allocation from perfect market, comparative statics, market equilibrium. At p1: excess supply market forces put downward pressure on price. At p2: excess demand market forces put upward pressure on price. No excess d or excess s forces to generate change: optimal allocation from perfect market. If demand curve truly reflects society"s valuation (willingness to pay); and supply curve truly reflects society"s opportunity cost (of resource use), then competitive market provides efficient (optimum) allocation. Price a (value of marginal unit to consumers) Case 1: if a floor price of p1 is enforced, only q1 is bought. Case 2: if a ceiling price of p2 is enforced, only q2 is supplied. In case 1 deadweight loss from enforced floor price is abc: comparative statics. A fall in the price of an input (e. g fall in wages) A rise in the price of a substitute commodity.

Related Questions

1. G-Force is competing with three other firms for a military contract to remove land mines. Which of the following would not be a part of their competition strategy?

a. comparative advantage

b. zero-sum game

c. discrete strategy

d. dynamic game

2. The discoverers of imperfect markets focused on what economic process to criticize the competitive model?

a. comparative advantage

b. opportunity cost

c. discrete strategy

d. economies of scale

3. If the price discounting by two firms in the same market was a sequential process where each firm has perfect knowledge and knows what each payoff is:

a. neither firm lowers its price.

b. both firms lower their price.

c. one firm lowers its price, while the other firm does not.

d. one firm exits the market.

4. A predatory pricing strategy:

a. rewards cooperation between rival firms.

b. is typically used by small firms to gain market share from larger firms.

c. can result in higher consumer prices in the short run, but more competition in the future.

d. can result in lower consumer prices in the short run, but higher prices in the long run.

azurearmadillo867

Chose the correct option for the following

1. If a firm charges a price of $5 for a product with a cost of $3, the markup on price equals:

a. 60% b. 150% c. 250% d. 40%

2. If the optimal markup on price is 50%, the optimal markup on cost:

a. 100% b. 75% c. 50% d. 25%

3. If the optimal markup on cost is 25%, the optimal markup on price:

a. 20% b. 25% c. 50% d. 100%

4. The competitive market pricing rule-of-thumb for profit maximization is to set:

a. MR > MC b. MR = MC c. P = MC/[1 + (1/EP)] d. MC = MR/[1 + (1/EP)]

greyzebra447

1. A leftward shift in the labor supply curve would result if:

A) people value leisure less highly.
B) people have more nonlabor income.
C) transit costs to and from work decline.
D) the population increases.

2. In perfect competition:

A) the supply curve of labor to the firm is a horizontal line.
B) MFC_L is greater than the price of labor.
C) MFC_L is less than the price of labor.
D) MRP_L equals the price of the good.

3. The marginal factor cost in a perfectly competitive market:

A) is equal to the market price of the factor.
B) is less than the market price of the factor.
C) is greater than the market price of the factor.
D) increases with the quantity of input demanded.

ECON-1102 Lecture Notes - Lecture 5: Deadweight Loss, Shortage, Abc Me

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