econ 4

Question 1

externality

Answer 1

effects of a transaction that hurt or help people who are not a part of that transaction

Question 2

fully explain externalities

Answer 2

it is the cost of a transaction that does not effect the people a part of the transaction. like someone getting lung cancer from second hand smoke from being around smokers

Question 3

how do externalities effect a market

Answer 3

externalities usually account for more taxes to occur within a market

Question 4

describe the market form for grocery stores and distinguish between small towns and larger cities

Answer 4

in large towns companies like walmart take part in monopolistic competition and small towns that have one grocery store are often monopolistic unless it is a small city with two or more stores making it an oligopoly

Question 5

describe Wal-Mart’s market share relative to other large grocery store chains

Answer 5

it is monopolistic competition, because there are typically other large grocery chains in those communities as well

Question 6

define monopsony

Answer 6

a market with only one buyer

Question 7

describe why sales tax revenues, though Wal-Marts collect a great deal, are largely unaffected by a Wal-Mart decision to locate in an area

Answer 7

this is because walmart brings in a lot of other businesses which act in some ways as competitors to walmart
Walmarts exist in markets of monopolistic competition so it would be safe to assume that consumers not only shop at Walmart but also at other large and small stores and groceries within the area

Question 8

explain how business can be helped by Wal-Mart moving into their community

Answer 8

with walmart being so popular businesses build close to walmart so that it will bring in customers

Question 9

amazon marketplace increases the number of customers that see the products of small businesses. What does Amazon gain from providing this service

Answer 9

logistics,
consistent costumers
good customer review

Question 10

amazon marketplace increases the number of customers that see the products of small businesses. What do small businesses gain

Answer 10

they gain customers aka money with small referral fees

Question 11

define a counterfactual in the context of whether workers are better off had Amazon not existed

Answer 11

the workers may have been able to get better jobs and work at other warehouses

would the workers at Amazon had been better off working at seires had Amazon not taken them out

Question 12

explain the issue of “local substitution” as relates to sport franchises

Answer 12

locals are spending their money going to sport games rather than spending the money on local businesses

Question 13

explain the reserve clause

Answer 13

players could only play with the teams they played on in previous seasons

Question 14

how did the reserve clause keep salaries low

Answer 14

it gave players two options of either playing or retiring

Question 15

explain free agency

Answer 15

a player that is able to offer services to the highest bidder

Question 16

explain how free agency relates to the reserve clause

Answer 16

free agency gives players power whilst the reserve clause gives the owners power

Question 17

explain the importance of the Seitz decision

Answer 17

created free agency because it took the reverse clause statement that a player has to be under contract the prior year

Question 18

explain the concept of marginal revenue product

Answer 18

the money team gets in revenue because of a single player

Question 19

why does marginal revenue product matter for an athlete

Answer 19

because it gives the athlete more incentive and gives them more of a choice between teams

Question 20

distinguish insurance from reinsurance

Answer 20

reinsurance is a type of insurance that is bought by insurance companies from other larger insurance companies

Question 21

distinguish between insurance and self-protection in the context of terrorism

Answer 21

self-protection are physical acts to prevent damage

Question 22

how does the “rational terrorist” choose his target

Answer 22

they choose targets that are relatively unguarded and easy to attack

Question 23

show on a supply and demand diagram how we model an externality

Question 24

show on a supply and demand diagram how we can use a tax to deal with an externality

Question 25

show that a tax on cigarettes that has little impact on adults can have a large impact on kids under 18

Question 26

show on a supply and demand diagram the effect of drug interdiction efforts

Question 27

explain the concern that walmart creates a monopsony situation

Answer 27

allows walmart to dictate the price the producers get to sell their products

it makes firms have to

Question 28

what does it mean for firms that sell to walmart in a monopsony situation

Answer 28

that they have to accept the price that Wal-Mart offers for products or get get replaced and potentially get put out of business

Question 29

what does it mean for employees who work for firms that sell to walmart during a monopsony situation

Answer 29

they would often get laid off

Question 30

in essay, describe the impacts of walmart on local economies, touching on impacts to:
consumers
other businesses
workers
communities
taxpayers

Question 31

fully describe the sources of amazon’s market power

Answer 31

Amazon makes sure that consumers can get fast shipping by utilizing logistics,
they have a lot of businesses so consumers often check amazon first for a product they are wanting to purchase
Services are seamless and offer deals to customers
Creating products that enhance customer service that links directly with customers accounts so customers are able to wirelessly access things
Subscriptions so that products will arrive without continuous buying

Question 32

list all of the economic benefits that would accrue to a city with a major league baseball team that would not accrue to it if it lost the franchise. be careful not to list anything that is merely a local substitution from one good to another

Answer 32

growing city population
job opportunities

Question 33

define the marginal revenue product of labor and reservation wage as these concepts apply to professional athletes

Answer 33

MRPL - the additional revenue generated from employing a popular athlete on the team
RW - the lowest rate at which a player will play for

Question 34

explain how Seitz decision moved salaries closer to the marginal revenue product

Answer 34

it popularized free agency

Question 35

use the aggregate demand-aggregate supply model to show the impact of a loss in consumer confidence resulting from a terrorist attact

Question 36

use the aggregate demand-aggregate supply model to show the impact of an increase in oil prices or an increase in the cost of business insurance (same graph) resulting from a terrorist attack