Introduction to Economics 1

Yanıt Açıklaması: In a perfectly competitive market, marginal revenue equals price: P=MR.

Yanıt Açıklaması: Collusion is an agreement among firms to charge the same price or decide on quantities in cooperation with each other. The Correct Answer is B.

Yanıt Açıklaması: The theory of demand indicates that an individual’s decision about what quantity of a specific good to demand is determined by factors such as the tastes and preferences of the individual, the price of the good, the income of the individual, the price of related goods and services, the individual’s expectations about the future income, wealth, prices, and etc. Abundancy of the product or the service is not one of them. The correct answer is D.

Yanıt Açıklaması: Education and health services (doctor visits), heating in the winter, gasoline for car owners are considered necessities for consumers and these items have inelastic demand since the case of price increases in these items gets small reactions from consumers to cut their quantity demanded

Yanıt Açıklaması: Profit Maximization: a seller should increase production up to the point where MR = MC. As MR = P under perfect competition, we can also define the profit maximizing solution by setting P = MC. Therefore, the correct option is B.

Yanıt Açıklaması: Profit of a firm is equal to the total revenue minus total cost. Therefore, the correct option is B.

Yanıt Açıklaması: A monopoly is a market where there is only one seller of the product and this seller sets the price alone. The Türk Telekom, for example, is a monopoly in internet infrastructure. All the other internet providers have to use Telekom’s infrastructure. Likewise, TCDDY is a state owned monopoly in railway transportation. There are also local monopolies. Many cities in Turkey are served by a single airline (typically THY subsidiary Anadolu Jet). In smaller towns, many goods and services could be offered by a single seller. There are a few worldwide monopolies as well: SpaceX, for example, is the only company selling touristic trips to the space. The pricing behavior of a monopoly is totally different than the behavior of firms operating in a competitive market. Monopsonist markets are the ones in which there exist only one buyer and many sellers. The relatively high agricultural prices in Turkey might be attributed to near monopsonist local markets where there are only a few merchants buying the farmers’ products. For example, larger milk and dairy product firms generally act as monopsonist buying wholesale milk from cow owners in many towns around Turkey. The correct answer is Choice E.

Yanıt Açıklaması: PRODUCTION, COST AND PROFIT The objective of a firm that produces a good or service is to maximize its profit, which is the difference between total revenue and total cost. For profit maximization, the firm has to decide how much output to produce or supply along with the amount of each input needed to produce that particular level of output. When producing a given level of output, the firm chooses the amount of different inputs in a way that minimizes the production cost of that particular level of output.

Yanıt Açıklaması: Since a competitive firm can sell all it wants at the market price, there is no price effect. When a monopoly increases production by one unit, it must reduce the price it charges for every unit it sells, and this cut in price reduces the revenue on the units it was already selling. As a result, a monopoly’s marginal revenue is less than its price.

Yanıt Açıklaması: The difference between total revenues minus total costs is maximized when for the last unit produced, the marginal revenue of this last unit is exactly equal to its marginal cost. The Correct Answer is D.

Yanıt Açıklaması: Not all technological change favors labor. Sometimes technological change means that workers are replaced by machines (capital) and as a result of this, labor is demanded less. Therefore, the correct option is A.

Yanıt Açıklaması: The Labor includes human resources that contribute to production. Firms pay wage to the labor they use in 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. The price of using land is called rent. The answer is A.

Yanıt Açıklaması: A monopoly is a market where there is only one seller of the product and this seller sets the price alone. The Türk Telekom, for example, is a monopoly in internet infrastructure. All the other internet providers have to use Telekom’s infrastructure. Likewise, TCDDY is a state owned monopoly in railway transportation. There are also local monopolies. Many cities in Turkey are served by a single airline (typically THY subsidiary Anadolu Jet). In smaller towns, many goods and services could be offered by a single seller. There are a few worldwide monopolies as well: SpaceX, for example, is the only company selling touristic trips to the space. The correct answer is D.

Yanıt Açıklaması: The factors that determine the demand for land are: the price of the good produced on the land, the productivity of land which depends in part on the quantity and quality of the resources with which land is combined, and the prices of the other resources that are combined with land. The production cost of land is zero. It is a “free and non-reproducible gift of nature”. The correct answer is E.

Yanıt Açıklaması: The higher the availability of inputs for production, the higher the elasticity of supply. For example, the supply of beachfront property in Istanbul Bosporus or Mediterranean coasts is harder to vary and thus less elastic than the supply of new cars or computers. Supply is more elastic in the long-run than in the short-run. The more easily sellers can change the quantity they produce due to availability of inputs, the greater the price elasticity of supply. Also, the price elasticity of supply is greater in the long-run than in the short-run, because firms can build new factories to extend their plant size, or new firms may be able to enter the market. Answer is B.

Yanıt Açıklaması: (100928374-9834567)/(158-157)=91093807

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: Competition occurs when each producer maximizes its profits by choosing its own price or quantity without consulting other firms. The correct answer is A.

Yanıt Açıklaması: When MPL curve is above the APL curve, AVC curve stays above the MC curve.

Yanıt Açıklaması: Opportunity Cost: The best alternative that we give up when we make a choice or a decision. Therefore, the correct option is B.