Economics Homework Twelve Answers - Student Twelve

AddisonDM

1. A monopsony is a buyer without any fellow buyers- a monopoly of a buyer. For example, if there is a store that buys toys from a supplier, and the supplier’s only customer is the store, the store is a monopsony. Partial monopsonies are more realistic however: for example, a single American company that imports foreign goods. The foreign exporter has more than one customer, but the American importer is a partial monopsony.

Excellent!

2. A production possibilities curve is a graph of all the different combinations of the production of (usually) 2 goods.

Good, and you might add "at a given level of resources and technology." Also, the curve is usually drawn for a nation, although it can also be drawn for a firm.

4. The Lorenz Curve addresses economic equality (or inequality) by comparing a graph of perfectly equal income distribution to a graph of actual (unequal) income distribution. If government gives priority to this issue, it means trying to equalize income. This shouldn’t be a high priority of the government at all. Equalizing income, aside from the fact that it never actually works, is harmful because it dissuades work and interferes with the working of the market.

Superb, could use as a model.

5. The opportunity cost of shifting from point B to point C is 350 cars. However, this loss may (and should) be offset by the increase in boat production.

Correct!

6. AFC (average fixed cost) is the fixed (sunk, long run only) costs of a firm, divided by output; thus the fixed cost per unit of output. AVC (average variable cost) is the short-run costs per unit of output. ATC (average total cost) is total fixed cost plus total variable cost divided by output- total cost per unit of output. A firm shuts down in the short run when its AVC exceeds its price.

Correct, except I don't think your references to "long run" and "short run" are accurate here. I think you've confused the time it takes to produce more output (which can be a mere couple of hours) with the very different concepts of short and long run, which often can be measured best in terms of years. As an example, in the long run all costs are variable and none are truly fixed. (Minus 1).

7. An increase in efficiency or technology, or a decrease in regulation (I know regulations have to do with efficiency, but noting regulation separately is important) will allow for increased production, and the curve shifts outward. Also an increase in production capacity, such as new factories, would allow the curve to shift outward.

Superb!

Honors

9. The production possibilities curve is convex because the total output on the curve is not the same all along. It looks like if there were a perfect one for one trade off between the two goods, then it would be a straight line. Being other than straight is a representation of the inefficiencies of changing production possibilities. I do not really understand this, please explain!

Close, but incomplete. It's convex because of inefficiencies in converting production factories from one good to another. If that conversion were efficient, then the curve would be a straight line or even concave. (Minus 1).

10. No. The marginal cost of labor in this case is $10 + (9 x 1), or $19. But the worker will only bring you $15 more in revenue. You will lose $5 on him, so do not hire him.

Correct!

11. At first I thought had something to do with comparing the efficiencies of the two nations, but really Comparative Advantage compares the efficiency of production between the two products within a nation. That is, compare the two efficiencies of production and choose the more efficiently produced good as your main product.

Excellent, but still not quite. I think it is a "comparison of the comparisons." But you have the right idea. See model answers when I complete them.

88/90. Well done on a difficult homework assignment!--Andy Schlafly 21:06, 13 December 2009 (EST)