Introduction to Economics 1

Yanıt Açıklaması: Perfectly competitive market equilibrium: the market equilibrium in a perfectly competitive market in which the economic profit of each individual seller is zero, and there is no incentive for entry or exit. Therefore, the correct option is D.

Yanıt Açıklaması: The basic assumptions of consumer's preferences are preferences are complete: this means that the consumer is able to compare and rank all possible baskets, consumers always prefer more of a commodity to less, diminishing marginal rate of substitution, consumer’s preferences are transitive. The true answer is D.

Yanıt Açıklaması: Monopoly is a market structure with only one producer/seller of a good and it does not act as a price taker but as a price setter. A firm is a monopoly if it is the only producer of a good or service and this good or service does not have close substitutes.

Yanıt Açıklaması: Preferences are complete: this means that the consumer is able to compare and rank all possible baskets. Suppose the consumer confronts with any two market baskets, each containing various quantities of commodities or goods.

Yanıt Açıklaması: Oligopoly is a market structure in which a few large firms compete. Computers, aircraft manufacturing, the automobile industry and agro-businesses are examples of oligopolistic markets. Therefore, the correct option is A.

Yanıt Açıklaması: Marginal Revenue is the additional revenue that a firm earns when it increases production by one more unit. In other words, it is the ratio of change in total revenue to a small change in quantity (MR = ΔTR / ΔQ). The correct answer is B.

Yanıt Açıklaması: Marginal Product of Labor If a firm keeps increasing the amount of labor it uses, ceteris paribus, the total output will increase, as mentioned above. However, if the additional labor is more productive than the previous one, the total output will increase more; if not, it will increase less. Suppose that two workers can work effectively with one machine. If you employ only one worker, she can still produce some output, but because she is the only worker, she has to divide her time in between using the machine and doing other work necessary for production. So, employing another worker can increase production greatly. If the firm employs more labor, the output would still increase, but, given the single machine to work with, the higher the number of workers, the more difficult it will be for all of them to use the same machine effectively. Hence, as more and more labor is used, given that everything else is the same, the increase in the total output for each additional unit of labor input, i.e. marginal product, might at first increase. We will call this increasing marginal returns. However, as we continue to use more and more labor while other inputs are fixed, the marginal product will eventually become less and less. This is known as diminishing marginal returns.

Yanıt Açıklaması: In all games, chess, poker, or Monopoly, the interactions among the players are crucial in determining the outcome. Rules that determine which actions are allowable Strategies that players employ to attain their objectives in the game Payoffs that are the results of the interaction among the players’ strategies The payoffs in an oligopoly context are the profits earned as a result of a firm’s strategies interacting with the strategies of other firms. The Correct Answer is B.

Yanıt Açıklaması: Natural resources are resources such as land, metals, coal, oil, gas, etc. provided by nature.

Yanıt Açıklaması: For a consumer consumes the goods X and Y, the satisfaction is maximized when the marginal rate of substitution is equal to the ratio of the prices. an increase in the price of one good causes that good’s quantity consumed to decrease and another goods’ consumption to increase. The indifference curves are downward sloping and cannot intersect one another. If the price of one good increases, the budget line shifts inward. If the price of one good decreases, the budget line shifts outward. The true answer is C.

Yanıt Açıklaması: In the real world, inefficiencies are common, even in markets that approach the conditions of perfect competition. These inefficiencies may arise because of externalities, path dependence, and existence of public goods. Therefore, the correct option is E.

Yanıt Açıklaması: In economics, decision makers make decisions by thinking at the margin. Thinking at the margin requires recognizing the need to make decisions by evaluating the costs and benefits of marginal changes. It means that a decision maker should compare his/her action’ marginal benefit and marginal cost. Any action should be undertaken only if the benefit is greater than the cost. If people make choices by comparing cost and benefits, then their decisions may be altered by altering the cost or benefits of their actions. People do respond to positive and negative incentives. When there is a significant increase in the price of gasoline, for instance, demand for public transportation and the demand for smaller, more fuel-efficient cars increase. As it can be understood from the information given, the correct answer is “E”.

Yanıt Açıklaması: There is obviously an inverse relationship between the wage and the quantity of labor demanded. Market Price, Technology, Prices of other Factors of Production, Number of Firms in the Market are determinants of labor demand. The answer is C

Yanıt Açıklaması: Although money is not a factor of production, firms often use credits to buy or hire the capital they use for production, and pay interest in return. Even if they use their own funds, the opportunity cost of using them is the interest foregone. So, the compensation for the use of capital is interest . Therefore, the correct option is D.

Yanıt Açıklaması: What is Cost? Cost is ordinarily understood to be the amount we pay or the price we are charged for a good or service we get. However, economists’ definition of cost is different than what the meaning of cost in daily use.  When economists think of cost, they add the opportunity cost, which is the next best alternative given up, to the out-of-pocket costs or explicit expenses. For example, to attend college, you have to pay tuition and fees. These are explicit expenses you have to incur. However, you also give up a substantial amount of time to become a fulltime student. How much would your time be worth in monetary value? Well, it is the sum of wages you would have received if you worked full time instead of attending college. So, the overall or total cost of you attending college is the sum of the explicit expenses you pay, such as tuition and fees, plus the wages you would have earned if you had chosen to work during the time you devote to being a student. Hence, from an economist’s point of view, the cost includes not only the explicit expenses you must pay, but also the monetary value of time, effort and other resources you have to give up. The sum of all these costs is called the economic cost.

Yanıt Açıklaması: When an investor has to make a decision about which investment project to choose the investor will calculate the NPV of these projects. Then, s/he will pick the project that yields the highest NPV.

Yanıt Açıklaması: The income that resource owners earn in return for land resources is called rent. Economic rent is the price paid for the use of land and other natural resources which are completely fixed in total supply.

Yanıt Açıklaması: Labor is the work time and physical and mental effort devoted to producing goods and services in exchange for a wage.

Yanıt Açıklaması: A natural monopoly occurs when economies of scale are so large that one firm can supply the entire market at a lower average cost than two or more firms. The correct answer is E.

Yanıt Açıklaması: A sunk cost is a cost that has already been incurred and thus cannot be recovered. The correct answer is D.