finals Flashcards
what is average cost? (defn, calculation, graph behavior)
cost per unit of output
- decline in the first stage, reach minimum , and later increases continuously with output
- U-shape curve
AC= AFC + AVC/Q
what is marginal cost? (defn, calculation, graph behavior)
change in total cost as a result of producing an extra unit of output
- declines in first stage, reach minimum, and later increases continuously with output
- U-shape curve
MC= △ TC / △ Q
what is internal diseconomies of scale (defn, graph behavior)
problems & disadvantages faced by the firm itself due to actions inside the firm
- AC is increasing
- LRAC of production is increasing as output increases
- C0 to C1, output increases from Q0 to Q1, shown by movement of point upwards (b to c)
- also shown by LRAC upward sloping
what are the characteristics of a oligopolistic market? (4) general
few sellers, homogenous or differentiated products, mutual interdependence, barriers to entry (EOS, high cost of production, extensive network service & variation of product)
what are the advantages of international trade? (5) general
availability of variety of G&S, increase in efficiency of production, wider market, increase competition, economic development
define Balance of Payments
- a record that shows all transactions made between one particular country and all other countries during a specific period of time
- includes total receipts received & total payments made
- usually calculated every quarter & every calendar year
- includes trades by both private & public sectors
- money received = recorded as credit
- money paid = recorded as debit
- BOP surplus = more $ flowing into* the country compared to $ flow from country
- BOP deficit = more $ flow out the country compared to $ flow in
explain what is a financial account
- records the forms of investment overseas by Malaysians AND inward investment funds from foreigners
- this flow gives rise to flows of investment income in current account
- investments can be long-term of short-term
- made up of: these 2 and more
(a) direct investment
eg: build factory & takeover a firm in another country by Malaysians (debit) OR set up factory or takeover a firm in Malaysia by foreign firm (credit)
(b) portfolio investment
eg: purchase & sale of gov bonds and shares, money deposits into foreign banks
what are the types of protectionism (4)
(1) quotas
- form of physical limitation on quantity of good that’s allowed to be imported
- x generate revenue for gov
- result: raise import prices, reduced demand for imports
eg: gov limits imports of luxury cars like Rolls-Royce to 10 units per year; once quota reached, not allowed to import anymore
(2) embargo
- complete ban on import goods from a particular country
- between countries of different ideologies
eg: embargo on all goods from Israel
(3) import deposit scheme
- gov requires importers to place a sum of money deposit in advance with the central bank b4 buying goods from abroad
- more difficult & time consuming
- reduces importing firms liquidity
(4) subsidies
- gov subsidises certain domestic industries to reduce prices of domestic goods, making it difficult for foreign producer to sell similar products in home market
- consumers prefer domestic goods cuz cheaper
- reduces demand for imports
what are the advantages of a fixed exchange rate (3)
(1) promotes international trade
- ensures certainty in foreign payments among exporters & importers
- both can agree on a price & contracts settled cuz not subject to risk of changes in exchange rate
- more confident to do trading
(2) promotes international investment
- gives certainty to investors & encourages investment
- when negotiating long-term investments, less risky when granting long-term credit & undertake long-term foreign investment
- if exchange rates are fluctuating, lenders & investors x prepared to lend for long-term investments
(3) removes speculation
- fixed = eliminate speculative activities in international transactions
- speculation can destabilise an economy, fixed = very small incentive to speculate
- minimal buying & selling currencies to make profit
- x arise a situation of panic capital movement
- helps developing countries to carry out planned economic development policies
what are the characteristics of a developed economy? (4)
(1) division of labour
- work divided into different levels, categories of geographical location
- workers only perform a part of the work
- workers are specialised cuz repeat the same work again2
- saves time cuz x need move from one place to another or change tasks
- increased productivity & efficiency
- increased quantity & quality of production
(2) economic structure
- industrial & service sectors generally dominate the economy
- major national income from these 2
- agriculture sector is subsidiary
(3) labour forces
- workers are highly educated cuz got opportunity to pursue academic qualification, many training centre & institution
- male & female equality in terms of pay & work benefits
- may face labour shortage cuz slow population growth (eg: Singapore)
- empty vacancies filled by migration of skilled workers to their country
- low unemployment rate cuz hv high demand for exports cuz international trading, increases jobs avail
(4) population growth & population structure
- low population growth due to falling birth rate (eg: Japan, Singapore, some parts of Europe)
- perception of primitive societies that an extra child means source of labour in agricultural sector, extra person to support when old age
- knowledgable societies, perception change
- agricultural economy now technologically focused & capital intensive in production
what are the costs of economic growth? (5)
(1) diversion of resources
- need to produce more capital goods to increase country’s productive capacity
- resources diverted from production of consumer goods to capital goods
- reduces consumer welfare cuz current consumption is reduced
- limited choice of goods
(2) inflation
- cuz high demand for resources & increase cost of production
- reduces living standards when general price level rises faster than rise in wages
- wage spiral effect will have negative impact, cause firms to close down & increase unemployment level
(3) deficit in BOP
- due to rapid economic growth
- setting up new industries & construction of infrastructure that requires import of capital equipment
- deficit = drains foreign currency reserve
- increases national debt, burden for future gen
(4) structural changes
- in work place, increasing stress & anxiety
- workers need learn new skills to be competent
- may need to change work place as firm grows
- greater tasks, increased working hours
- more pressure to come w/ new ideas & solutions to improve production
(5) high cost of living
- economic growth leads to higher income & higher demand for G&S
- prices will rise, cost of living increase
- reduced welfare, may end up in poverty
