Economics Homework Twelve Answers - Student Four

Anna M

1\. A monopoly is one seller without any competitors. What is a "monopsony"?

Only one buyer.

Correct!

2\. Define, in your own words, what a "production possibilities curve" is.

A visual example of all the different good combinations that a company can produce.

Superb answer. Could use as a model!

3\. Review: how is the elasticity of demand for labor related to the price elasticity of demand for the product of that labor?

It's like a circle. The more people are hired, the more money they have, and the more money they spend. This, in turn, requires greater quantity of product, which requires more labor, which creates more jobs, thus creating a cycle.

Not quite here. The market is typically much bigger than any one company or its employees. Please see model answers when ready. (Minus 1).

5\. Look again at Figure A. What is the opportunity cost of shifting production from B to C?

350 cars lost.

Superb!

6\. Review: explain again what AFC, AVC and ATC are, and how they relate to each other. When should a firm shut down in the short run?

AFC (Average Fixed Costs) are costs with no output. AVC (Average Variable Costs) are costs that change depending on output and ATC (Average Total Costs) are all the costs added together. When total revenue falls below total costs, the firm will have to go out of business.

Correct until the last sentence. The firm will stay in business "in the short run" (see question) if Price > AVC (which is the same as saying that Price times Quantity is greater than Total Variable Costs, because each side can be multiplied by quantity). (Minus 1).

7\. What is needed to reach point D in Figure A? (In other words, what causes a production possibilities curve to shift outward?)

An increase in the overall number of workers or investment capital, or a technological advancement.

Correct!

58/60. Well done on a difficult assignment!--Andy Schlafly 22:42, 12 December 2009 (EST)