What are the four different types of market structures?
i. Oligopoly
ii. Monopolistic competition
iii. Monopoly
iv. Perfect competition
In two or more sentences provide at least 3 or more characteristics that separate a perfectly competitive market structure from a monopolistic market structure?
In a monopolistic competition market structure only one company sets the prices in the market, and how they are supplied while in the perfect market structure, the level of supply and prices of the commodities is dictated by more than one firm. Furthermore, in perfect competition, the prices of goods/services depend on supply and demand while in the monopolistic market structure the price of goods depends on the firm and thus prices are generally high. Ina perfectly competitive market structure the buyers/consumers are limited while in the monopolistic competition the number of consumers is unlimited.
Which type of market structure has differentiated goods and services?
Monopolistic.
Identify at least one market structure that is predominant in the United States?
Oligopoly
Perfect competition
At what point do all four market structures maximize profits?
Firms will maximize their profits when the marginal cost of production within the organizations is equal to or lower than the marginal revenue realized from the sale of products.
In one to two sentences explain, how a monopolistic market structure determines its optimal price and quantity?
A monopolistic market structure determines its optimal price and quantity by interpreting the result of marginal costs and marginal revenues of increasing the number of units produced. If a company realizes that the marginal cost is lower while marginal revenue is higher, then it may consider producing an extra unit of the goods.
Which type of market structure faces a perfectly elastic demand curve?
Perfectly competitive market structure.
In two or more sentences, explain the difference between consumer surplus and producer surplus?
Consumer surplus is the differentiating value obtained from the highest price that a consumer is willing to spend on a product while producer surplus is the differentiating value realized from the market price of a product and is the lowest price that a consumer is willing to spend on a product.
Given the graph below explain which triangle color represents consumer surplus and which triangle color represents producer surplus.
The yellow triangle represents the consumer surplus because it shows the price of a product increasing until the price reaches equilibrium. The green triangle represents the producer surplus because the price is decreasing up to a given point where it intersects with the equilibrium.
Values to construct the graph above are given in the table below:
Price
Quantity Supplied
Quantity Demanded
30
30
0
28
25
5
26
20
10
24
15
15
22
10
20
20
5
25
18
0
30
Given the graph below, in one to two sentences, state whether consumer surplus will increase or decrease and state whether producer surplus will increase or decrease if the price was increased from $24.00 to $28.00.
The consumer surplus will increase while the producer surplus will decrease due to this increase in price.
Question 2
What are the four phases of the business cycle?
Peak
Trough
Contraction
Expansion
Which phase of the business cycle would be the best time to purchase a large ticket item?
The peak phase is the best time.
How do you calculate the labor force participation rate?
The labor force participation rate LFPR is equal to the labor force divided by the civilian minus non-institutionalized populace.
The labor force=employed population=unemployed population
Who is accounted for in our country’s labor force?
People who are eligible to work and are either working or looking for work. Must be 16 years old and above and may include the self-employed population.
How is our country’s unemployment rate calculated?
Unemployment in the USA today= the total number of unemployed citizens (this population doesn’t include the individuals who claim that they want a job) divided by the total civilian labor force
In one to two sentences, please define the term, “full employment?”
Full employment in economics relates to the situation where a citizen who can work and have the willingness to work are employed.
In one to two sentences, what is a discouraged worker?
A discouraged worker is an individual who has attained the legal age to be employed but isn’t looking for employment on an active basis or a person who is unable to get employment even after long periods of being/staying unemployed.
What are the four types of unemployment?
Frictional, cyclical, seasonal, and structural
Which type of unemployment is the direct cause of our country (economy) contracting?
Cyclical unemployment.
In one to two sentences, please define, inflation?
Economists define inflation as the economic situation where the cost of living inverses.e. the cost of goods and services increases while the economic income of citizens or residents of a country remains stagnant/doesn’t increase.
Question 3
What does Gross Domestic Product (GDP) measure?
It measures the economic activity value of a country.
What is the equation used to calculate the Gross Domestic Product (GDP)?
Gross domestic products= C+I+NX+G
In which;
Ø C represents consumer spending.
Ø I represents private citizens’ investment.
Ø NX is the difference obtained from exports minus imports.
Ø G is the government spending
This is generally known as the expenditure approach of calculating the GDP.
In two or more sentences describe the difference between Real Gross Domestic Product (GDP) and Nominal Gross Domestic Product?
The difference is that GDP is estimated when the prices are at a constant while the nominal gross domestic product is calculated during a current period, it is calculated using the current market prices in a nation.
Identify at least three (3) factors that are omitted from our country Gross Domestic Product (GDP)?
There are various things that the nation’s GDP doesn’t account for. These said factors include:
Happiness.
The domestic production
The goods sold as second-hand.
In one to two sentences, please define, the Human Development Index (HDI)?
HDI is a statistical and economics measure used to rank the social standing of consumers in a country with consideration of factors such as life expectancy, education level and finally the per capita income.
In one to two sentences, describe why Gross Domestic Product (GDP) is used as a key economic indicator?
GDP is a key economic indicator since I investigate and reports the economic situation of a country concerning the income of its citizens and their respective expenditure. Therefore, GDP shows the economic wealth and strength of a particular nation.
In two or more sentences describe what assumptions can be made about country’s that have a high Gross Domestic Product (GDP)?
A country that has high GDP is assumed not to be large and thus it has insufficient labor and resources to enable the growth of the economy. The country this results into the importation of labor which is a factor not accounted for in the estimation of GDP.
How is Gross Domestic Product (GDP) per capita calculated?
Gross domestic product per capita is arrived at by dividing the GDP of a nation by entire total population.
If Real Gross Domestic Product (GDP) fall for two or more consecutive quarters, which phase of the business cycle would best describe our economy?
The recession or contraction period.
In one to two sentences describe whether Real Gross Domestic Product (GDP) or Gross Domestic Product (GDP) is a better measure of our country’s well-being?
Real Gross Domestic Product is a better measure because it shows the value of the economy at a given period while still adjusting with the ever-changing levels of commodity prices.
Question 4
In two or more sentences, describe the goals and objectives of the Federal Reserve?
The Federal Reserve aims at making the economy of the USA strong. Further, the Federal Reserve aims at maximizing the sustainability of employment in the country, stabilizing the prices of commodities and moderating the interest rates particularly those that are long-term.
Does the Federal Reserve or the federal government set interest rates for our country?
The federal reserve does set the interest rates for the country because when it lowers its interest rates, it encourages commercial banks to borrow more money and the converse of the statements also applies.
What are the three (3) monetary policy tools used by the Federal Reserve?
Operation of the open-market.
The change of the discount rate.
The changing in requirements of the reserve.
What are the two (2) fiscal policy tools used by the federal government?
Spending and taxes.
In one to two sentences, define the term, “Quantitative Easing?”
This is the method used by the central bank to depreciate the level of interest rates and upsurge the money supply by the purchasing securities owned by the government and other entities.
Does the Federal Reserve or the federal government print our country’s paper money?
The federal reserve doesn’t print the nation’s paper money. However, BEP is tasked with printing paper currency for the Federal Reserve.
In one to two sentences, describe expansionary monetary policy?
The aggregate monetary policy is a situation where a country’s central bank puts into play its resources to motivate the economy by incrementing the supply of money, creating/increasing aggregate demand and lowering interest rates in the country.
In one to two sentences, describe expansionary fiscal policy?
An expansionary fiscal tool is a tool implemented by the government to expand the supply of money within its economy by either cutting on its taxes or increasing the number of resources used in spending.
Explain how the Federal Reserve would be able to contract our country’s money supply using all three monetary policy tools?
By reducing its interest rates, Federal Reserve is continuously encouraging commercial banks to borrow more funds. When the Reserve increases its interest rates, it discourages the banks to borrow less and thus it controls the manner in which money circulates within the economical scope of a country.
Explain how the Federal Reserve would be able to expand our country’s money supply using all three monetary policy tools?
Using the concept of the open markets, the Federal Reserve purchases and sells government securities, for example, bills. When the federal reserve decides to buy back treasury bills (which are securities), it will create a scenario where there is an increment of the money supply. The reverse scenario applies when the Federal Reserve decides to sell back government securities.
