ECO365 Principles
of Microeconomics
University of
Phoenix
ECO365
Week-1 Article Analysis
Write a 700 – 1,050-word paper in
which you do the following:
1. Define
economics
2. Define microeconomics
3. Define the Law of supply
4. Define the Law of demand
(For each of these terms, use the text and cite the page where you found the
definition).
Analyze the basis for the trends in consumption patterns as discussed in the
article. Choose an industry that has seen its pricing and marketing patterns
affected by the Internet and in your analysis of the article, talk about your
selected industry as you consider
1. The utility derived from the products as sold on the Internet
2. Describe what has occurred to change the demand for, or the supply of, the
good or service because of the Internet
3. Market prices of those products or services and how they've been affected by
the Internet.
ECO365
Week-1 Knowledge Check (Score 100%)
Question-1:
Price elasticity of demand is the
A. change in the quantity of a good demanded divided by the change in the price
of that good
B. change in the price of a good divided by the change in the quantity of the
good demanded
C. percentage change in price of that good divided by the percentage change in
the quantity of that good demanded
D. percentage change in quantity of a good demanded divided by the percentage
change in the price of that good
Question-2
In general, the greater the elasticity, the
A. smaller the responsiveness of price to changes in quantity
B. smaller the responsiveness of quantity to changes in price
C. larger the responsiveness of price to changes in quantity
D. larger the responsiveness of quantity to changes in price
Question-3
The price elasticity of supply is the
A. change in the quantity supplied divided by the change in price
B. percentage change in the quantity supplied divided by the percentage change
in price
C. change in price divided by the change in the quantity supplied
D. percentage change in the price divided by the percentage change in the
quantity supplied
Question-4
.
The distinction between demand and the quantity demanded is best made by saying
that
A. demand is represented graphically by a curve and quantity demanded as a
point on that curve
B. the quantity demanded is represented graphically by a curve and demand as a
point on that curve
C. the quantity demanded is in a direct relation with prices, whereas demand is
in an inverse relation
D. the quantity demanded is in an inverse relation with prices, whereas demand
is in direct relation
Question-5
The U.S. Postal Service printed 150,000 sheets of stamps depicting Bill
Pickett, but recalled them when the USPS realized the image on the stamp was
Bill's brother, Ben, instead. They were unable to recall 183 sheets that had
already been sold. The effect of this recall was to
A. drastically reduce the demand for the stamps, causing their equilibrium
price to fall
B. have no effect on either supply or demand for the Bill Pickett stamps
because there is no market for them
C. drastically reduce the supply of the Bill Pickett stamps, causing their
equilibrium price to rise
D. increase the supply of the Bill Pickett stamps, causing their equilibrium
price to fall.
Question-6
Given that diesel cars get much better gas mileage than the typical car, an
increase in the price of gasoline would be expected to
A. increase the demand for diesel cars.
B. decrease the demand for gasoline.
C. decrease the demand for diesel cars.
D. increase the demand for gasoline.
Question-7
Mike Janet
Price Quantity Quantity
Per peck in pecks in pecks
$1 22 6
$2 18 3
$3 14 0
$4 10 0
$5 6 0
Refer to
the table that presents Mike and Janet's demand for apples by the peck. If they
are the only two in the market, which of the following represents the point on
the market demand curve?
A. Price = $1, quantity = 18
B. Price = $2, quantity = 21
C. Price = $4, quantity = 0
D. Price = $4, quantity = 21
Question-8
Economics is the study of how
A. governments allocate resources in the face of constraints.
B. government policies can be used to meet individuals' wants and desires.
C. human beings coordinate their wants and desires.
D. scarce resources are allocated to their most productive uses.
Question-9
To engage in economic reasoning, one must compare
A. total cost and total benefit.
B. marginal cost, sunk cost, and total benefit.
C. sunk cost and marginal cost.
D. marginal cost and marginal benefit
Question-10
Countries such as Brazil, India, and Moldova–well-known sources of donors–have
banned buying and selling organs. This legal action comes at the risk of
driving trade underground. What idea does this story best illustrate?
A. Marginal revenue should equal marginal cost.
B. Economic forces always operate despite legal forces.
C. Legal and social forces can eliminate economic forces.
D. The invisible hand is not always invisible.
Question-11
The law of demand states that the quantity demanded of a good is inversely
related to the price of that good. Therefore, as the price of a good goes
A. up, the quantity demanded also goes up
B. down, the quantity demanded goes down
C. up, the quantity demanded goes down
D. down, the quantity demanded stays the same
ECO365
Week-2 Knowledge check (Score 100%)
Question-1
A perfectly competitive firm will be profitable if price at the profit-maximizing
quantity is above
A. MC
B. ACV
C. ATC
D. AFC
Question-2:
In a perfectly competitive market,
A. individual producers determine market prices
B. market supply and market demand determine the price
C. the entrepreneur determines the price
D. individual consumers determine market prices
Question-3.
The demand for clothing increases. As a result, the price of clothing increases
above the minimum average cost of producing it. In the long run, if the
clothing industry is perfectly competitive and is a constant-cost industry,
A. the supply of clothing and the price of clothing will increase
B. the supply of clothing will increase but the price will not
C. the price of clothing will increase but the price will not
D. neither the price nor the supply of clothing will increase
Question-4.
If the long-run market supply curve is perfectly elastic, an increase in demand
will cause the final equilibrium to be at
A. the original price but at a smaller output
B. a higher price with a higher output
C. the original price but with a higher output
D. a higher price but with the same output
Question-5
Number of workers Total Output
1 4
2 10
3 18
4 28
5 35
6 41
7 45
8 48
9 50
10 49
Refer to
the table shown. Diminishing marginal productivity begins when the
A. third worker is hired
B. fourth worker is hired
C. fifth worker is hired
D. sixth worker is hired
Question-6:
A production table can be used to determine
A. a firm's profits
B. a firm's costs
C. how much output is produced from a given quantity of inputs
D. how much of a product will be demanded by consumers
Question-7:
Mr. Woodard's cabinet shop is experiencing rapid growth in sales. As sales have
increased, Mr. Woodard has found it necessary to hire more workers. However, he
has observed that doubling the number of workers has less than doubled his
output. What is the likely explanation?
A. The law of diminishing marginal utility
B. The law of diminishing marginal productivity
C. The law of supply
D. The law of demand
Question-8
Number of Marginal Product of
workers workers
1 5
2 7
3 8
4 10
5 11
6 7
7 5
8 3
9 0
10 -1
Refer to
the table shown. A firm would be most likely to hire between
A. 1 and 3 workers
B. 3 and 4 workers
C. 5 and 8 workers
D. 8 and 10 workers
ECO365
Week-3 Knowledge check (Score 100%)
Question-1: In a monopolistically
competitive market,
A. firms produce differentiated products
B. there are barriers to entry
C. firms produce homogeneous products
D. the demand for any firm's product is perfectly elastic
Question-2:
Strategic decision making is most important in
A. competitive markets
B. monopolistically competitive markets
C. oligopolistic markets
D. monopolistic markets
Question-3:
The general monitoring problem implies that
A. profit maximization should always be considered to be a firm's goal
B. there is a cost of supervising employees so that they work toward the
owner's goals rather than their own
C. government must intervene to protect national goals
D. competition will ensure common goals among the owners and managers of a firm
Question-4:
Lazy monopolists are characterized by the tendency to
A. maximize profits at the cost of losing market share
B. pay too much to protect their monopoly positions
C. earn enough profits to keep their shareholders happy without trying too hard
to hold costs down
D. minimize losses so that the dividends of shareholders are maximized
Question-5: Judgment by performance means that the competitiveness of a market
is determined by
A. the actual behavior of firms in the market
B. the structure of the industry
C. . the number of firms in the market
D. technological considerations
Question-6:
Consumers tend to accept the market restrictions imposed by suppliers because
A. governments prevent them from organizing
B. they see themselves as laborers and therefore benefit from restrictions
C. their costs of organizing are higher than the cost of collusion by the
suppliers
D. when combined, their losses are small for the group as a whole
Question-7:
The fact that U.S. managers' salaries are about four times higher than those of
comparable managers in Japan, where banks control firms more closely, is
probably
A. an example of the monitoring problem in the United States
B. an example of X-inefficiency in Japan
C. due to the fact that the U.S. economy is much less competitive
D. due to the fact that there are more natural monopolies in the United States
ECO365
Week-3 Current Market Conditions and Competitive Analysis
Imagine you are part of a
strategic planning group for a franchise juice and smoothie shop. You are
considering adding some sort of game/exercise station in your store to attract
patrons and differentiate yourself from competitors. It has been suggested to
equip stores with Wii play stations. The marketing director has asked your team
to do a competitive market analysis to determine the idea's potential success.
The analysis will focus on your primary competitor in the product's market.
Access
and download from IBIS World 72221B Coffee and Snack Shops in the US Industry
Report.
Write a
1,400 – 1,750-word paper analyzing the current market conditions. Address the
following topics:
• A short
history of the organization and a description of their product
• Factors
that affect demand, supply, and equilibrium prices in the market in which the
competitor organization operates: Define the market for your chosen product,
including an analysis of its competitors, potential customers, or potential
buyers.
• Any
issues or opportunities your organization or industry faces that affect its
competitiveness and long-term profitability with regards to your product: This
may include, but is not limited, to the following elements.
• Price
elasticity of demand
• Technological innovation
• The relationship between the amount of labor & capital employed and the
law of diminishing marginal productivity
• Cost structure
• Factors
affecting variable costs, including productivity and others that change the
supply of and demand for labor
• Factors
affecting fixed costs
Make
recommendations on how your organization can maximize their profit-making
potential, and successfully compete in the new market. Consider the effect your
recommendations may have on marginal revenues and costs.
ECO365
Week-4 Knowledge check (Score 100%)
Question-1: What do economists
mean when they say there is “market failure”?
A. Business has introduced a product that consumers did not want.
B. Free markets have led to excessive profits.
C. Markets have surpluses or shortages so that government rationing is
necessary.
D. Free markets yield results that economists do not consider socially optimal.
Question-2:
If a market has no externalities, marginal private costs
A. exceed marginal social costs
B. equal marginal social costs
C. are below marginal social costs
D. intersect marginal social costs
3.Economists generally call the effect of an agreement on others that is not
taken into account by the parties making the agreement
• an externality
• welfare loss
• Pareto optimality
• excess burden
4.The
size performance improvements sought by those pursuing horizontal mergers is
• economies of scale
• increased market share
• to coordinate activities more efficiently to spur growth
• to decrease competition
5.A company buys another company
in the same supply chain, but either in front of it or behind it in the supply
chain. This is called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture
6. Sony and Toshiba become
partners in a microprocessor manufacturing company. This is called
• a horizontal acquisition
• a vertical acquisition
• a conglomerate
• a joint venture
7. If two companies share
ownership in a venture and agree on a formal management structure including
members of both companies, this is called a
• horizontal acquisition
• vertical acquisition
• joint venture
• conglomerate
8.Two companies come together to
take on a project that has an explicit time cycle and ending point. The most
efficient form of acquisition of this project is
• a horizontal acquisition
• a joint venture
• a vertical acquisition
• a conglomerate
9.The more elastic the supply and
the demand curves are,
• the smaller the shortage a price ceiling will create
• greater the shortage a price ceiling will create
• smaller the surplus a price ceiling will create
• greater the surplus a price ceiling will create
10.Assuming a binding price
floor, the more elastic the supply and demand curves are,
• the smaller the shortage a price floor will create
• greater the shortage a price floor will create
• smaller the surplus a price floor will create
• greater the surplus a price floor will create
ECO365
Week-4 How Does the Affordable Care Act Impact Businesses
Discuss the requirements of the
Affordable Care Act as it applies to restaurants and similar business that hire
lots of part time employees. How are companies like Applebee's, Papa John's
Pizza, Olive Garden and others responding to the requirements of the law. Have
each team member select a different company to respond to the question above.
Combine all team member contributions. Based on the profit maximizing goal of a
firm to have total revenues exceed total costs, what are your team's thoughts
about how they are/how they should respond to this law?
Prepare a
350- to 1,050- word paper detailing the findings of your discussion
ECO365
Week-4 Differentiating Between Market Structures
• Consider three firms:
Starbucks, Tropical Smoothie Café Franchise, and Unleavened Bread Cafe.
Starbucks and Tropical Smoothie Café are large corporations. The Unleavened
Bread Café is a single location café located in Indianapolis, Indiana.
• Explain which market structure each company is in, and why.
• For the typical firm in the market structure you describe, what might the
owner of each of these sorts of shops do to comply with minimize the costs to
comply with the Affordable Care Act (Also known as Obama Care)?
Additionally,
Identify three or more competitive strategies of your choice that may be used
by the organization to maximize its profits over the long run. Evaluate the
efficacy of these strategies in the market structure you identified.
Make recommendations related to the strategies each organization might consider
to maximize its profits.
Select one of the following assignment options:
Paper
Write a 1,400- to 1,750- word paper.
ECO365
Week-4 Coca-Cola Market Structure
Select an industry. Identify an
organization in that industry. Your selected organization must be submitted for
instructor approval.
Identify the market structure in which this organization competes. Clearly
indicate why the market structure was decided upon and how this market
structure differentiates from the other alternatives.
Describe the level of competition the organization will face if under each of
the following market structures:
• Oligopoly
• Perfect competition
• Monopoly
• Monopolistic competition
Identify three or more competitive strategies of your choice that may be used by
the organization to maximize its profits over the long run. Evaluate the
effectiveness of these strategies in the market structure you identified.
Consider the following:
• Expected changes in supply and demand
• Price elasticity of demand
• Market structure
• Government regulations
Make recommendations related to the strategies the organization might consider
to maximize its profits and consider the following:
• What are the ethical implications of these strategies?
• Does this strategy align with the organization’s current values?
• Does this strategy align with your own values?
Cite a minimum of 3 peer reviewed sources.
Select one of the following two assignment options:
Option 1:
Paper:
Write a 1,400- to 1,750-word paper.
At least 3 sources.
ECO365
Week-5 Competitive Strategies and Government Policies
Look at your team paper from week
3. Management has recognized the effect of changes in the real-world
competitive environment and government policies on other industries and
anticipates similar events occurring in their industry, so they ask you for a
report considering the following points.
Write 1,400
-1,750-word paper and a 10 – 15 slide power point presentation in which you
describe how each of the following will affect your industry or one with which
you are familiar: Your team will present its findings in class.
• New
companies, such as Borsha Coffee, are using network marketing to sell its
caffeinated lemonade drink over the Internet, thereby avoiding fixed costs of
brick and mortar establishments like yours. How might such competitors impact
you (just as Amazon impacted Borders Books?)
• Identify
the type of merger activity in your industry. Why is it happening, and does it
pose a threat to your franchise company?
• Current
and expected government policies and regulations, including higher taxes and
regulations under the Affordable Health care act can impact the firm's bottom
line. Should your firm provide health care for all employees? Should it not
provide health care and simply pay the fine? Or should your firm make sure that
it has fewer than 50 employees, and if necessary, convert some employees to
LLCs and enter into business to business contractual arrangements?
• There
has been a recent call on companies in your industry to allow employees to
unionize. What would be the cost impacts of this to your franchise firm?
Recommend
how the franchise company might respond to each of the previous points. Make a
presentation the last night of class.
Answer
includes a paper and power point presentation.
ECO365
Week-5 Knowledge check (Score100%)
1. What problem do economists see
with free trade areas such as NAFTA and the European Union?
• They tend to lead to free trade rather than fair trade.
• They can lead to regional trading blocs then restrict trade.
• They lead to globalization.
• They encourage countries to rely on others rather than being self-sufficient
2. A group of countries that
allows free trade among its members and puts up common barriers against all
other countries’ goods is called
• a tariff-free zone
• a most-favored nation agreement
• an autarky
• a free trade association
3. Mexico has a comparative
advantage in producing corn
• if its opportunity cost of producing corn is higher than the opportunity cost
in other countries
• if its opportunity cost of producing corn is the same as the opportunity cost
in other countries
• if its opportunity cost of producing corn is lower than opportunity cost in
other countries
• regardless of the opportunity cost in other countries
4. Workers in education, health
care, and government sectors have
• seen their incomes fall just like in manufacturing
• been mostly hurt from globalization
• benefited from globalization in terms of lower consumer prices
• been hurt because the sector has been shrinking
5. In the United States
globalization has
• played a significant role in growing income disparity because some sectors
have benefited and others have not
• played little role in growing income disparity because all Americans are
consumers who have enjoyed lower prices
• played a significant role in growing income disparity because foreign
workers’ incomes have risen
• played little role in growing income disparity because while some jobs were
lost, the gain in jobs balanced out those that were lost
6. Most economists
• oppose free trade
• favor free trade
• have no opinion on free trade
• Would prefer to have no trade with other nations
7. World trade declined in the
1930s. Which of the following is the best explanation of that decline?
• World income shrank and trade restrictions increased.
• World income shrank, but there were few changes in trade Restrictions
• Trade restrictions increased, but there was little change in world income
• The incomes of most nations increased, allowing them to become more
self-sufficient.
8. As a country develops
economically, what changes usually take place in the goods it exports?
• There is little change because comparative advantage does not change.
• Raw materials and agricultural products decline in importance and are
replaced by services and manufactured goods.
• Services and manufactured goods decline in importance and are replaced by raw
materials and agricultural products.
• Exports go from being diversified to being specialized in whatever the
country finds to be its comparative advantage.
9. When a U.S. company
establishes a call center in India that answers its customer service calls, the
United States is
• outsourcing, a form of importing services
• outsourcing, a form of exporting services
• in sourcing, a form of importing services
• in sources, a form of exporting services
1
Because you can only obtain more of one good by giving up some of another good,
the shape of a production possibility curve is _______________.
downward-sloping
perfectly vertical
perfectly horizontal
upward-sloping
2. Refer
to the table shown. The average product when eight workers are employed is —
Number of
workers Total Output
1 4
2 10
3 18
4 28
5 35
6 41
7 45
8 48
9 50
10 49
3. A
resource is said to have a comparative advantage if
it is equally suited to the production of all goods.
it is better suited to the production of one good than to the production of an
alternative good.
4Refer to
the graph shown. Initially, the market is in equilibrium with price equal to $3
and quantity equal to 100. Government imposes a tax on suppliers of $1 per
unit. The effect of the tax is to
lower the
price consumers pay from $3 to $2.
lower the price sellers keep after paying the tax.
raise the price consumers pay from $3 to $4.
5. Refer
to the table shown. Diminishing marginal productivity begins when the
fourth
worker is hired.
sixth worker is hired.
third worker is hired.
fifth worker is hired
6Refer to
the graph shown. If this monopolistically competitive firm maximizes profit, it
will
charge
$45 per dress.
charge $85 per dress.
charge $78 per dress.
shut down because it cannot cover its opportunity costs
7 The
price of a ticket to a rock concert is set at $35. All the tickets for the
concert sell out 1 hour after they go on sale and there are still 1,000 fans
who want to buy tickets. It follows that
the quantity of tickets demanded is equal to the quantity supplied at the $35
price.
the equilibrium price of tickets to the concert is more than $35.
the equilibrium price of tickets to the concert is $35.
8 Which
of the following statements is true?
Many different production processes can be economically efficient, but only the
method that involves the lowest possible cost is technically efficient.
Many different production processes can be technically efficient, but only the
method that involves the lowest possible cost is economically efficient.
9 State
what type of business combination is occurring in the following scenario:
Samsung and Sony become partners in a flat screen manufacturing company.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
10
Suppose a firm finds that an additional dollar spent on labor increases output
more than does an additional dollar spent on machines. Under these conditions,
the firm
should
substitute machines for labor if it wants to increase economic efficiency
is economically efficient
is technically efficient
should substitute labor for machines if it wants to increase economic
efficiency
11
Economists and laypeople see the pros and cons of international trade in
different ways. Which of the following is one of those ways?
Laypeople
enjoy the benefits of trade in terms of lower consumer prices.
Laypeople tend to think of foreign trade only in terms of manufactured goods.
Laypeople believe in the law of one price and economists do not.
12 The
morel is a prized mushroom that is often abundant in the Western United States
in years after forest fires. Suppose two companies are buying morels from
workers willing to find them. One company offers to pay workers $5.00 per
pound, and the other company will pay workers only $4.00 per pound. Economists
would say that
this
situation violates the law of one price and is not likely to persist.
the company willing to pay only $4.00 has a comparative advantage in selling
morels.
13 Which
of the following is the best example of a macroeconomic externality?
One
person saving less without considering the effect on their retirement needs
One person starting a business without knowing whether the goods will sell
Many people saving more without considering the effect on unemployment
One person spending more in order to help stimulate the economy
14 If MR
< MC, a monopolist should:
maintain
the same level of production.
stop producing.
decrease production.
increase production.
15
Opponents of government intervention in the economy argue that externalities
may not
be effectively corrected by the government.
are themselves the inevitable result of government policies.
do not create problems for the model.
should be corrected with regulations rather than subsidies.
16 State
what type of business combination is occurring in the following scenario: IBP
meat processing firm buys American Cattle, a very large cattle ranch.
Joint
venture
Vertical merger
Horizontal merger
Conglomerate
17 Refer
to the graph shown. At which point is elasticity zero?
B
D
C
A
18 A Wall
Street Journal headline reads: “Cigar Shortage Draws New Brands into Market.”
The shortage resulted from a renewed interest in smoking cigars. What best
describes the facts behind the headline?
Price is
too low, quantity demanded exceeds quantity supplied.
The cigar market is in equilibrium.
Price is too low, demand exceeds supply.
A shift in supply has equilibrated supply and demand.
19. Refer
to the graph shown. If hamburger dinners are produced by a perfectly
competitive industry with a market demand D:
•
price will equal marginal cost.
output will be the same as it would be under monopoly.
price will equal $6.
price will be greater than marginal revenue.
20 State
what type of business combination is occurring in the following scenario: Golf
Smith, a golf supply retailer buys its competitor, Vango golf.
Horizontal merger
Conglomerate
Joint venture
Vertical merger
21
According to the text, Microeconomics, Colander (2013), economics is the study
of how
government policies can be used to meet individuals’ wants and desires.
human beings coordinate their wants and desires.
scarce resources are allocated to their most productive uses.
governments allocate resources while facing constraints.
22
Oligopoly is characterized by
low market concentration.
inability to set price.
no barriers to entry.
few sellers.
23 When
Ross Perot ran for president as a third party candidate in 1992, he argued that
free trade with Mexico would result in massive job losses in the United States
because Mexican wages were so low. Which of the following is the best
explanation for why few economists agreed with Perot?
Although economists agreed that in some areas the United States would lose
jobs, they expected that the United States would gain jobs in other areas.
Economists believed that the U.S. unemployment rate would rise.
24 Refer
to the graph shown. The figure shows the demand and supply curves for eggs and
shows two equilibrium points, E1 and E2. An increase in demand from D1 to D2
would cause
price to
decline from $1.25 to $1.00 a dozen and a shortage of 2,000 dozen eggs per
week.
price to rise from $1.00 to $1.25 a dozen and a surplus of 2,000 dozen eggs per
week.
price to rise from $1.00 to $1.25 a dozen and equilibrium quantity to be 3,000
dozen eggs per week.
price to remain at $1.00 a dozen and a shortage of 2,000 dozen eggs per week
25 Germany
restricts the use of nonrefillable bottles and cans. The European Union argues
that the rules aren’t just protecting the environment; they also are protecting
German beverage makers from competition. The EU sees Germany’s environmentalism
as _____________________.
a quota
a tariff
a regulatory trade restriction
an embargo
26
Oligopoly is probably the best market for technological change because
funds for research and development are available in an oligopoly due to
innovation, which motivates the need for research and development.
the typical oligopoly lacks the funds for research and development and
therefore will use basic research from universities.
27 George
Davis and Michael Wohlgenant estimate that for every 1 percent increase in the
price of Christmas trees, quantity demanded falls by 0.6 percent. The demand
for Christmas trees is —
perfectly inelastic
inelastic
elastic
unit elastic
28 State
what type of business combination is occurring in the following scenario: A
tobacco producer buys a carbonated beverage plant.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
29
Suppose the minimum possible price of constructing homes is $50 per square
foot. As a result of a sharp drop in the demand for home construction, the
equilibrium price of home construction falls to $40 per square foot. Assuming
the home construction industry is perfectly competitive and there are no
specialized inputs, firms will
exit the industry, and the price will rise above $40 in the long run.
exit the industry, and the price will fall below $40 in the long run.
30 Refer
to the table shown. At what level of employment is the marginal product of
labor seven?
7
5
2
4
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