Economics Homework Thirteen Answers - Student Six

Economics lecture 13[edit]

James G

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"?

A) Free trade is a contributor to this dilemma however another cause is man’s own choice. It isn’t free trade that perpetuates these problems but the executives that seek to take advantage of their fellow countrymen for their personal “bottom line” gain.

Superb, could be a model answer.

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

A) The Federal Reserve Bank controls the interest rates of banks which controls the flow of money.

Terrific, could also be a model answer.

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).

A) A good must be elastic so that I can increase revenue with my price.

Nope. Be careful not to answer an economics question too quickly. Elasticity means the demand "stretches" easily, so demand falls by more than the price increases. Revenue falls when there is price elasticity and the price increases. Inelastic goods -- such as addictive goods -- have the revenue increase when price increases. (Minus 1)

6. You can go on www.orbitz.com and watch the price of airline tickets change from day-to-day. If you pick fixed dates of travel, such as Jan. 15 to fly somewhere and Jan. 18 to return, then you will notice that the closer you get to those dates, the higher the price of the ticket usually is. In other words, the earlier in advance that you can buy a ticket, the cheaper it usually is. Explain how this illustrates a basic difference between long run and short run costs.

A) As you draw closer to an event in this case an airline flight, the later you order the tickets, more of a burden is placed on the supplier, which increases the tickets price. This is why its better to buy your tickets earlier.

Right.

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

A) In a monopolistic competition firms sell slightly different goods that are not perfect substitutes to each other. This makes perfect competition impossible.

Superb.

Great finish! 49/50. Congratulations.--Andy Schlafly 21:45, 19 December 2009 (EST)