Introduction to Economics 1

Yanıt Açıklaması: Marginal profit is the additional profit that a firm earns when it increases its output by one more unit. The marginal profit is equal to the marginal revenue minus marginal cost. MP=MR–MC =246- 110 =136 The correct answer is C.

Yanıt Açıklaması: The tax incidence shows who pays the tax and how the tax burden is shared among buyers and sellers. As it is seen above the tax incidence is not affected by whether the tax is levied on buyers or sellers. It does not matter who pays the tax to government, the burden is shared by buyers and sellers. What determines the tax incidence? How is the burden of tax shared? The answer to this question is elasticity, specifically, the price elasticities of demand and supply. In general, it can be said that a tax burden goes more heavily on the side of the market that is less price elastic

Yanıt Açıklaması: We can also look at how productive the labor is on average. To do that, we need to look at the average output per worker or more formally the average product of labor ( APL ). It is equal to the division of the total product by the quantity of labor employed. APL = TP /L

Yanıt Açıklaması: The demand curve can also be called the willingness to pay curve. Willingness to pay tells us the maximum amount that a buyer will pay for a good or service. The correct answer is B.

Yanıt Açıklaması: In the short run, firms can make a profit or suffer an economic loss. A positive economic profit creates an incentive to enter the market whereas an economic loss causes a firm to shut down and exit in the long run. A perfectly competitive firm makes zero profit in the long run. Long-run equilibrium can be defined as a case in which there is no incentive to enter or exit. In the long-run equilibrium, each firm has: P = MC = ACmin = LRACmin.

Yanıt Açıklaması: The opportunity cost of a desired item or outcome to a person is what that person has to give up to get that item or to achieve that outcome. When making decisions, individuals should recognize the opportunity costs of each action that they can take. Production Possibilities Frontier is a graph that shows the combinations of output that a firm or a society can possibly produce using the available production technology and the given amount of inputs. A country’s standard of living depends on the economy’s ability to produce goods and services. Since this ability displays great variation across countries, there are huge differences in the living standards of countries around the world. Efficiency refers to the ability of a firm or society to get the most out of a given level of inputs. Equity refers to the distribution of resources fairly among members of the society. As it can be understood from the definitions given the correct answer is “A”.

Yanıt Açıklaması: Some consumers may find new products more to their taste and start consuming them instead of old products. This consumer behavior in turn decreases demand for old products. Hence demand curve facing an existing monopolistic firm decreases and shifts to the left as new firms enter into the market. The correct answer is B.

Yanıt Açıklaması: Monopolistic competition is a market structure where there are many firms that sell differentiated products. Each firm has a monopoly over the product it sells, but many other firms make similar products that compete for the same customers.

Yanıt Açıklaması: The marginal rate of substitution (MRS) is defined as the number of units of good Y that must be given up if the consumer, after receiving an extra unit of good X, is to maintain a constant level of satisfaction or utility.

Yanıt Açıklaması: The production process converts resources, which are called inputs or factors of production, into new goods and services called output over a period of time. The basic factors of production available to a society are natural resources, labor, capital and entrepreneurship. Profit is not one of them. The correct answer is E.

Yanıt Açıklaması: Opportunity Cost: The best alternative that we give up when we make a choice or a decision.

Yanıt Açıklaması: Nash Equilibrium represents a situation among the interacting firms, each of which chooses their best strategy given the strategies that all the other firms have already been chosen. The Correct Answer is C.

Yanıt Açıklaması: More goods are preferable to fewer goods— thus, bundles on indifference curves lying farthest to the northeast of a diagram are always preferred. Lets assume, a consumer consumes only two commodities, X and Y, that are both desired, the individual will always prefer a bundle with more of one good (without loss of the other) to the original bundle.

Yanıt Açıklaması: Marginal Product of Labor (MPL) is the additional output produced when a small amount of additional labor is employed with all other inputs remaining the same. More formally, it is the ratio of change in total product to the change in the amount of labor used (MPL = ΔTP / ΔL = ΔQ / ΔL). The correct answer is A.

Yanıt Açıklaması: Allocative efficiency refers to a situation in which production meets consumer preferences. In other words, it is an economic concept that occurs when the output of production is as close as possible to the marginal cost. The correct answer is C.

Yanıt Açıklaması: A firm needs to bring inputs together to produce goods or services. These inputs are called Factors of Production. Classical economists identified three widely defined groups of the factors of production: Labor, capital and land. The answer is E.

Yanıt Açıklaması: A monopoly arises when there is only one firm which produces a good or service with no close substitute. Therefore, the correct option is E.

Yanıt Açıklaması: A monopoly’s marginal revenue is less than its price: In order to increase its output by one unit, a monopoly must reduce the price it charges for every unit and this cut in price reduces the revenue on the units it was already selling. Therefore, the correct option is B.

Yanıt Açıklaması: When new firms enter a market, the number of firms rise and the supply curve shifts to the right (supply increases, equilibrium quantity increases and the equilibrium price falls). New firms continue to enter the market until positive economic profits are eliminated, which means that they keep entering the market till their economic profits fall to zero. When firms exit a market, the supply decreases and the supply curve shifts to the left (equilibrium quantity falls and equilibrium price rises). Firms continue to exit until economic loss is eliminated. The correct answer is D.

Yanıt Açıklaması: Nash Equilibrium represents a situation among the interacting firms, each of which chooses their best strategy given the strategies that all the other firms have already been chosen.