Economics Homework Seven Answers - Student One

VeronikaF

1.Identify the four elements of perfect competition.

(a)Many buyers and sellers
(b) Goods that are perfect substitutes
(c) Perfect Knowledge
(d) Perfect Mobility

Correct.

2. Describe how you might use competition, perhaps even competing with yourself, to motivate you to achieve more.

Competition is what brings the best effort out of all of us, but sadly sometimes not the best attitude. Competition is the effort of trying to win. By winning a contest of some sort, we feel happy and proud that we could do a certain thing better than another. It gives us a sense of well-being and self assurance that we are great. Some people compete because they feel the need to prove to the world that they are good enough. Competition also helps motivate ourselves to do better in our work and play. We do the best we can when we are competing with another. Competition is a wonderful thing, but when it gets out of hand horrible things can occur because people are then blinded and put all else aside to gain victory.

Good points.

3. We are going to have our midterm in two weeks. Think of a question that you would like to see answered or clarified at the next class.

I would like to know more about MC, MR, AVR, and VC and how price and quantity affects it. I would also appreciate to more deeply understand income, cross, and price elasticity and how to find them by using mathematical equations. The Coase Theorem is another term about which I am lacking in understanding.

Most will be on the exam, I think! Try reviewing the model answers more to understand these better.

4. Do you think the converse of Gresham's Law is true with respect to speech and conversation, such that good speech or conversation (such as discussing the Bible) drives out bad? Explain.

In my personal experience, Gresham’s Law does correctly apply to speech and conversation. When groups of friend are talking about respectful subjects with one another there is no need to speak rudely. Some people feel the need to impress others by speaking about bad subject because they think that is “cool” and by doing this they prove to the others they do not care about their spiritual needs. Speaking rudely is a consolation to them because they make good people feel uncomfortable which they have suffered from many times. It is like a circle that goes on forever. When someone is hurt they spread their anger by hurting other people physically or verbally. And when people speak disrespectfully they drive out the good and evil takes its place. If everyone made an effort and spoke respectfully in every conversation, I believe there would be a lot less evil and hurt people in the world. Also part of it is peer pressure. When your friends start having a bad conversation you join in because you may not have the will to leave and begin a different and good conversation with another group of friends.

Excellent points.

5. Explain the difference between total cost, average cost, and marginal cost.

Total cost is the amount that you must pay for the cost of production of a good. Average cost is the total cost divided by the quantity. Marginal cost is the change in total cost when the quantity that is produced is increased or decreased by one more unit.

Superb!

7. Is there perfect competition between homeschooling and public schools? If not, explain the imperfections. Homeschooling and public schools are not perfect competition because they have different aspects that the others do not. For perfect competition each side must be equal to another (no advantage). In homeschooling, both the students and the teachers (mostly patents) benefit from the studies they learn every day, but in public school not everyone benefits from the work since the teachers have been teaching the same subjects for years. Also, homeschooling allows the students to think independently and to take control of problems, but in public school the teachers and the staff are the ones who control everything. In public school, the students are able to converse and enjoy some time with their peers every day, but in homeschooling it takes more incentive to socialize. In public schools, the students can enroll in different activities that are difficult for homeschoolers to create by themselves. Overall, homeschooling is better than public school in building a strong character as students are forced to solve their own problems and to create ideas on their own. This prepares them for the real world where you are all on your own. Both homeschooling and public schools have pros and cons and since they are unequal they cannot be perfect competition.

Excellent analysis! Could be a model answer.

Honors 8. Define the term "competition" in a new way by using another powerful term developed in this course.

Competition is the rivalry between two sides which brings out the best ability from each. Competition is very similar to the phrase “Time is Money” because when people compete with each other they lose no time in trying to beat the other. They know that time that is wasted could have been their ticket to victory. The phrase, “Time is Money", is much like competition because by not wasting time you are benefitting yourself. In competition, people fight constantly to be ahead of each other. Both Competition and the phrase “Time is Money” are terms that refer to our everyday life.

Good, interesting analysis. But not quite a definition as requested. Instead, you've pointed out some interesting similarities. (Minus 1)

9. Suppose the underlying labor market is perfectly competitive, but there is a minimum wage above the market rate. Then suppose that the supply of labor increases. Explain what the result is and why. There would be an increase in competition since there will be more “contestants”. People will basically be fighting for their jobs because if someone fails to do what they are paid for there will always be someone ready to take their place. The jobs that are paid only the minimum wage are some of the easiest jobs to do, but not always the easiest to get. These jobs are the base for all successful businesses and there are many of them. Also, if the supply of labor increases, the minimum wage may be decreased since more people are willing to work for less.

Right, except the conclusion is that unemployment increases. Because the wage is kept artificially high, the extra laborers will not be able to find jobs. (Minus 1).

10. What is the firm's profit or loss when Q=0 in the honors discussion above? (Answer simply in terms of another cost measure.) Is the firm profitable?

The firm’s profit is the money that is saved from not continuing doing business. The firm obviously is not profitable because they shut down. If the firm continued to do business it would continually lose money instead of collecting as much as it could and then shutting down. So, by closing, they are being smart and escaping the situation in which they would be losing money by staying open.

Right, the firm loses less money by shutting down, but it still loses money. How much? An amount equal to its fixed cost (FC). (Minus 1).

96/99. Well done!--Andy Schlafly 23:13, 30 October 2009 (EDT)