Microeconomic essay-style questions/general essay points Flashcards
Actions to limit consumption of a demerit good…
- Taxation
- Govt. intervention
- Information campaigns
- Regulation
- However, behavioural economics e.g. bounded self-control, cost of enforcing regulations etc
(Perhaps unintended consequences)
Actions to boost consumption of a merit good…
- Provide subsidies to firm, EoS e.g. marketing economies of scale
- Information campaigns
- However, behavioural economics…
(Perhaps unintended consequences)
Working out govt. tax revenue from supply curves on diagram…
(MCQs)
(Be mindful of units e.g. price or qty may be in thousands etc)
To work out govt. tax revenue…
- highest price - lowest price on diagram (Price at y-axis) OR correct axis value
- Then, multiply this by qty at s2 (qty at x-axis)
—–> (Highest price - lowest price) x qty s2
(Revenue = price x qty)
Working out tax per unit when the govt. imposes an indirect tax…
(MCQs)
- Difference between highest price and lowest price
Why may a country’s exchange rate index fall?
- Due to a rise in I.R rates of other countries
A left shift in AD leads to…
(UK financial crisis0
- Negative output gap and cyclical unemployment
(With additional LRAS curve and SRAS curve)
According to Fisher’s equation of exchange, most likely effect of inflation would be…
- Rise in (V) and fall in (Q)
At what level of employment can a firm max. its output…
- Perhaps when marginal returns are at its lowest
When demand contracts…
- QD falls, not demand!
A firm in a perfectly competitive market…
- Minimises its losses by staying in the market in the short-run
In a monopsony labour market, where is employer’s profit-maximising wage rate and level of employment is a…
(Single employer and competitive labour supply)
- Perhaps where lowest wage…
If MCQ question involves labour markets…
- know that answer should link with labour market terms e.g. earning and MRP
Most likely short-run trade-off between macroeconomic objectives being achieved
- Govt. budget deficit rises as unemployment rate reduced
What to do when working out consumer surplus change on diagram - For MCQs
- Pick answer in overall consumer and producer surplus area or ‘triangle’
For MCQs
- Link logical specific corresponding terms with answer and do not go to uncorresponding terms
(When its close, most of the time ;)
Most likely result from increase in bank rate
- Rise in savings from risen I.R rates
MCQ links for price and subsidy (when subs are in question)…
- Reduction in price
If a good is inelastic, what could a firm do to boost its profits?
- Boost the good’s price, and vice versa
Discuss the view that economic agents will always act as rational decision makers so as to maximise their utility…
Intro - Yes but not always
P1 - Behavioural economics WILL NOT maximise the utility -> e.g. irrational behaviour
P2 - Classical economics say consumers WILL maximise their utility
P3 - Behavioural economics WILL NOT maximise their utility e.g. nudging, social norms…
Conc - Yes but not always
‘Evaluate the view that technological change tends to bring industries closer to the market structure of perfect competition’…
Intro - Yes, but not always
P1 - Yes, better tech leads to better marketing -> Better information (perf. comp. feature) -> e.g. price comparing
P2 - No, creative destruction -> Job losses -> Firms will shutdown (AC > AVC) -> lower firms (perf.comp feature missed)
P3 - Yes, better tech -> More firms as firms appealed by more innovation (perf. comp feature) -> Due to firms maximising revenue
Conc - Yes, but not always
‘Discuss how the divorce of ownership from control may affect both the conduct and performance of firms’…
Intro - Define divorce of ownership from control and principle-agent problem -> Can lead to firms not performing well, leading to misconduct
P1 - Lead to inefficiency -> due to differing objectives e.g. allocative inefficiency or x-inefficiency
P2 - Whether if affects it or not depends on mechanisms available to shareholders to control managers’ behaviour -> So, good mechanisms could prof. max. if they wish, or if not, managers could max. revenue
P3 - Whether managers want to max. revenue due to no mechanisms for divorce of ownership from control would lead to reputable perception -> high revenue makes firm look reputable
When market structure read…
- Think of definition and characteristics
For finding ‘range’ on data questions that state ‘for every £1’ or ‘for every $1’…
Newest value / oldest value
Tax things…
- LOWEST INCOME LEFT AT START = REGRESSIVE
- HIGHEST INCOME LEFT AT START = PROGRESSIVE
