Economics Homework Thirteen Answers - Student Seventeen

Michelle F

2. Some politicians complain about how people are losing their jobs to workers in China. Is this problem the result of "free trade" or "protectionism"?

Free trade. Protectionism is a theory that protects domestic industries from foreign ones. That theory would not support sending jobs off shore.

Correct.

3. What is one of the primary responsibilities of the Federal Reserve Bank?

To protect the banking system from collapse.

Good.

4. Review: Suppose that after completing this course, you start a new company. In your first year, you "broke even" (had zero profits), and in your second year you want to increase your revenue and profits. After careful study of your market, you decide that you can increase your revenue by increasing your price. Therefore your good must be price elastic/inelastic (choose one).

Price inelastic.

Correct again!

5. A monopolistic competitive firm has the following characteristic that is lacking for a perfectly competitive firm: (a) There are low barriers to entry (b) MR = MC in the long run. (c) P > MC (d) There are many competitors. Choose one of the above and explain your answer.

(c) P > MC

Correct again!

7. Pick any aspect of monopolistic competition (other than problem 5 if you answered that) and explain it.

High barriers to entry. Companies like Microsoft could not have the kind of control of the market that they currently enjoy if there were not high barriers to entry. If it were easy to set up a company to compete with Microsoft, many people would do it, creating a more competitive market, forcing companies to lower their price so they can compete. Since it is very difficult to do enter that market, it creates a naturally monopolistic market.

Wrong answer to the question asked. In Economics, it's very important to carefully understand the question, which here asks about "monopolistic competition," not "monopolies". Microsoft is a monopoly, which is a very different market. Also, Microsoft's monopoly is due to how copyright law prevents copying of its software, which is different from natural monopolies benefiting from high barriers to entry. (Minus 2).

Honors:

8. Explain why in long-run equilibrium the price charged in monopolistic competition is greater than marginal cost but equal to average total cost.

If it were lower than the marginal cost, there would be no money to pay the fixed costs. If P<MC , you would have shut down in the short run. If P>MC then you would put more money into your company until P=MC because that is where the revenue is maximized.

No, your first two sentences are not correct, as there is no direct connection between marginal cost and fixed costs. The third sentence is not correct either. A company does want to sell at as high a Price as possible. (Minus 2).

9. Economics is sometimes called the “dismal science” because economists predicted population to grow faster than the food supply, marginal returns to diminish, and profits to vanish. But, in fact, there is an abundance of food and profits have not vanished. Why is economics not so dismal after all?

Because of new inventions that create wealth, and charity, ingenuity, art, etc. There are things that cannot be worked into the economist sums that have an enormous effect on the economy. There is more to life than profits and losses, numbers and formulas. You can’t predict ingenuity or measure charitableness. Maybe people don’t want to put all of their profits into their business, maybe they want to donate it, or fund research, or simply bank it. Because God knows how to run the world better than any economist and all their predictions mean absolutely nothing if what they predict isn’t in God’s plan.

Excellent answer!

10. "Protectionism" is a pejorative (negative) word. Can you think of a more positive, flattering word to express the same concept in a supportive way?

Stableness. Preservation. Or maybe something along the lines of superiority? I don’t know how to make that an “ism”. I think that would be the best word though, because it could mean that it is a theory intended to make our economy superior.

Good suggestions!

Good answers except on two questions. 76/80. But those two questions ask about key concepts in this course, so please be sure to review them until you fully understand them. Overall, your homework throughout this course was absolutely superb, among the very best in the class. Congratulations on completing the homework in this very difficult course!--Andy Schlafly 13:42, 20 December 2009 (EST)