ECON 2HH3 Study Guide - Final Guide: Real Wages, Budget Constraint, Competitive Equilibrium

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goldchinchilla614

8 Mar 2014

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6. 3 an increase in total factor productivity (tfp) . This handout explains how to proceed to solve for the general equilibrium of the static model described in chapters 4 and 5 of williamson. In general equilibrium all markets clear (i. e. demand equals supply on all markets). Since the consumers and rms are behaving competitively in the model we are solving, we are solving for the model"s competitive equilibrium. Solving for the equilibrium of the model involves solving for the endogenous variables (vari- ables determined inside the model) as functions of exogenous variables (variables determined outside the model) and parameters. Moreover, the solutions we get for the endogenous vari- ables must satisfy the four conditions of a competitive equilibrium listed on pages 128 and. To simplify, these conditions state that all markets must clear, consumers and rms optimize and the government satis es its budget constraint.

Related Questions

The following table shows the market demand schedule and supply schedule for notebooks.

Price ($/unit)	Quantity Demanded (units)	Quantity Supplied (units)
1	20	4
2	16	6
3	14	10
4	12	12
5	10	14
6	7	17
7	4	20
8	2	22
9	1	25

Refer to the table above. Assume that the market for notebooks is in equilibrium.

1. Which of the following is likely to happen if there is an increase in the school enrollment rate, everything else remaining unchanged?

A. Both the equilibrium price and quantity of notebooks decrease.

B. The equilibrium price and quantity remain unchanged.

C. Both the equilibrium price and quantity of notebooks increase.

D. The equilibrium price increases, but the equilibrium quantity of notebooks decreases.

2. A shortage occurs in a market when:

A.price is lower than the equilibrium price.

B. price is higher than the equilibrium price.

C. supply exceeds demand.

D. the marginal utility of consumption is negligible.

3. A change in the quantity demanded of a good is:

A. the outcome of a change in income.

B. the outcome of a change in tastes and preferences.

C. represented by a shift to a new demand curve.

D. represented by a movement along the demand curve.

4. The following table shows the demand schedules of three consumers of wine. Assume that these three buyers constitute the entire market.

PRICE ($/Bottle)	Sandra's Demand (Bottles)	David's Demand (Bottles)	Mary's Demand (Bottles)
â$8	2		10
â$6	14	15	18
â$4		23	24
â$2	24	27	28

Refer to the table above. If the market price of wine is $8/bottle, and the market demand for wine is 19 bottles, David's consumption of wine is:

A. 12 bottles.

B. 9 bottles.

C. 4 bottles.

D. 7 bottles.

5. Which of the following factors will NOT cause a shift in the demand for a good?

A. A change in the number of consumers

B. A change in the market price of the good

C. A change in tastes and preferences

D. A change in consumer incomes

6. Are all markets perfectly competitive?

A. No, there are other market types where firms have considerable power to control the price.

B. Yes, any economic system with a market structure is by definition perfectly competitive.

C. No, there are also command and control markets that are run by a central government.

D. No, in other types of markets, sellers offer identical goods and simply accept the market price.

7. Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will:

A. increase his profit.

B. lose only a few buyers.

C. increase his sales.

D. lose almost all of his buyers.

8. The willingness to pay for a commodity:

A. increases as the consumption of the commodity increases.

B. is always less than the market price of the commodity.

C. decreases as the consumption of the commodity increases.

D. is always greater than the market price of the commodity.

9. Which of the following is likely to lead to a right shift in the supply curve of cotton?

A. An increase in labor productivity due to training programs

B. A rise in labor costs due to wage demands by labor unions

C. An increase in the price of cotton

D. A decrease in the price of cotton

10. The buyers of a good will want to purchase it as long as their willingness to pay for the good is:

A. equal to zero.

B. greater than or equal to the price.

C. greater than zero.

D. less than the price.

redmammoth450

Section I: Supply & Demand Analysis (Chapter 3) In each of the following 10 questions, show what happens to the Demand, Supply, equilibrium price and equilibrium quantity of copper. Show an increase by use of +, a decrease with a -, and no change with 0 (thatâs a zero, not an O or o). Although in the real world, both supply and demand are constantly changing, in the model we are using here, only one curve shifts per problem. So, if demand goes + or -, supply will be 0, and vice versa. In no case will equilibrium price or equilibrium quantity be 0. You may want to sketch out the supply and demand curve analysis to help in answering the questions. You will also be required to identify which determinant (of demand or supply) has changed, thus causing the shift. Rather than actually writing in the determinant, fill in the blank with the number that corresponds to the relevant determinant, based upon the following list. You may want to refer to the lecture notes entitled Determinants of Demand & Supply in the COURSE CONTENTS section. For questions 1 - 10, refer back to this list. Some you may want to use more than once, some you won't use at all. Copy and paste this list to an MS Word document and then print it out if you don't want to keep scrolling back and forth between this list and the question you're trying to answer. Determinants of Demand: 1. Change in buyer tastes 2. Change in number of buyers 3. Change in income 4. Change in the prices of related goods (on the demand side) 5. Change in consumer expectations Determinants of Supply: 6. Change in resource prices 7. Change in technology 8. Changes in taxes and subsidies 9. Change in prices of related goods (on the supply side) 10. Change in producer expectations 11. Change in the number of suppliers. For example, if a rightward shift in the supply curve for an item were caused by an increase in the number of producers of that item, you would indicate this be entering 11 into the relevant blank. If the demand curve shifted to the left because people didn't like that item anymore (like mimeograph machines), you'd enter 1 into the blank. Q#1 President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged; Which determinant changed?: Q#2 Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged: Which determinant changed?

home / study / business / economics / questions and answers / Question 1 Which Of The Following Is The Best Example ... Question: Question 1 Which of the following is the best exam... Bookmark Question 1 Which of the following is the best example of a positive externality? A car company lays off 10,000 employees in order to cut costs. An individual drives a large SUV, which increases the amount of greenhouse gases in the atmosphere. An individual smokes in a restaurant, which bothers other patrons. A child is vaccinated against a disease, which reduces the probability that other children will catch the disease. 4 points Question 2 As a result of a negative externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. As a result of a positive externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. high; high. low; low. high; low. low; high. 4 points Question 3 Based on the diagram below, the deadweight loss area associated with the market equilibrium equals: Week06_graph1.jpg $10 $50 $80 $1,000 4 points Question 4 A firm's accounting profit is given by total revenue: less implicit costs. less explicit costs. less economic profit. less implicit and explicit costs. 4 points Question 5 Suppose an activity has a private cost equal to $30 and a private benefit equal to $30. The associated social cost equals $35 and the social benefit equals $30. Which of the following statements is true about this activity? There is a negative externality associated with this activity but not a positive externality. There is a positive externality associated with this activity but not a negative externality. There is both a positive and a negative externality associated with this activity. There is neither a positive nor a negative externality associated with this activity. 4 points Question 6 The Coase Theorem implies that: the efficient level of an externality is generally zero. private individuals living in market economies should not be concerned with externalities. government intervention is not always needed to arrive at the efficient level of an externality. government laws are unnecessary. 4 points Question 7 An industry in which a small number of large firms sell products that are either close or perfect substitutes is: perfectly competitive. monopolistically competitive. an oligopoly. a monopoly. 4 points Question 8 When a negative externality is present in a market: a tax can increase the level of economic surplus. the social benefits are greater than the private benefits. there is generally too little of the good produced by private markets. the government should ensure that there are zero external costs associated in all markets. 4 points Question 9 In the presence of a positive externality, the government can arrive at the socially optimal output level by: paying producers a subsidy equal to the amount of social benefits associated with the activity. charging producers a tax equal to the amount of social costs associated with the activity. paying producers a subsidy equal to the amount of external benefits associated with the activity. charging producers a tax equal to the amount of external costs associated with the activity. 4 points Question 10 The tragedy of the commons is that: too few individuals have access to high quality healthcare. common people overconsume public goods. the quality of life for lower income people is generally lower than that of higher income people. a resource with no price tends to be exploited until its marginal benefit falls to zero. 4 points Question 11 One potential remedy to the tragedy of the commons is to: never allow a single individual to consume more than one percent of the common resource. criminalize the usage of common resources. allow individuals to use a common resource as long as they receive some benefit from doing so. place a common resource under private ownership. 4 points Question 12 As a result of a positional externality: contestants have a tendency to invest in a series of mutually offsetting investments in performance enhancement. there is generally an underinvestment in performance enhancement. the market price of performance enhancement materials is too high. the quality of performance in competitive situations is lower than the socially optimal level. 4 points Question 13 Which of the following statements is true regarding health insurance? Economics shows that all health related procedures should be free to individuals because the health of an individual is priceless. Total economic surplus would be larger if individuals faced an incentive to only use services when the benefit exceeds their costs. Health maintenance organizations provide an incentive for doctors to prescribe expensive nonessential services. First dollar insurance coverage has likely had very little to do with rising healthcare expenditures since World War II. 4 points Question 14 A strategy that yields a higher payoff no matter what the other players in the game choose is known as a: prisoner's strategy. dominated strategy. dominant strategy. Nash strategy.

ECON 2HH3 Study Guide - Final Guide: Real Wages, Budget Constraint, Competitive Equilibrium

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