Micro Economics 4

Question 1

Four market structures

Answer 1

perf. competition, monopolistic competition, oligopoly, monopoly

Question 2

Characteristics of a Monopoly

Answer 2

One large firm, unique (homogenous) product, barriers, price maker

Question 3

Marginal Rev. Curve in a Monopolistic Market

Answer 3

falls twice as steep as the Demand curve

Question 4

Profit max.

Answer 4

MR=MC

Question 5

Profit max. price

Answer 5

Quantity Profit max and Price as normal

Question 6

Revenue Max

Answer 6

MR hits 0

Question 7

Elastic Range of Demand

Answer 7

As long as MR is positive, range is elastic, as soon as MR is negative, range will be inelastic

Question 8

What does the spending multiplier consist of?

Answer 8

Marginal propensity to consume + Marginal propensity to safe = 1

Question 9

Spending Multiplier Formular

Answer 9

1/MPS

Question 10

What is more efficient Spending or Tax Multiplier

Answer 10

Spending multiplier as Tax Multiplier is (1/MPS) - 1

Question 11

What is the Macro Tiger?

Answer 11

Trade Balance , Low Inflation, Sustainable Growth, High Employment and Redistribution of Wealth

Question 12

Income Inequality

Answer 12

Uneven distribution of wealth throughout a population

Question 13

Policies to reduce Income Inequality

Answer 13

Higher Minimum Wage, Free Provision of Services, Higher rates of income tax, Investment in training, Subsidies for child care

Question 14

Government Failure Def

Answer 14

Government Failure can occur if a policy decision fails to create enough incentive to change people’s actual behaviour

Question 15

Market Failure Def

Answer 15

Market Failure occurs when the price mechanism leads to an inefficient allocation of resources and a deadweight loss of economic welfare.