Analysis/Evaluation - Microeconomics

Question 1

What anagram can you use to structure externalities paragraphs?

Answer 1

SCEWOAT
* S - State the condition (e.g. MSC > MPC)
* C - Costs/Benefits to society
* E - Equlibrium (MPC = MPB)
* W - Welfare loss/deadweight loss
* O - Over/under-produced
* A - Allocatively efficient
* T - Third party costs reduction or policy suggestion to correct market failure

Question 2

Where do you find consumer surplus on a diagram?

Answer 2

The area above the market price and below the demand curve

Question 3

Where do you find producer surplus on a diagram?

Answer 3

The area below the market price and above the supply curve

Question 4

What is a major assumption of the Kinked Demand curve diagram?

Answer 4

Firms are not collusive
Could evaluate to say in reality, firms might be collusive in order to increase revenue (profits) of all

Question 5

What order does the functions of prices paragraph go in?

Answer 5

• Rationing
• Signalling
• Incentive
• Allocating