...amount of emissions and pollutants that are released, but the most two common ways they use is to tax the companies that are producing the pollutants. This is called the Pigouvian Tax. A Pigouvian Tax is a tax on external activities. These externalities are actions not taken into account by the acting party. For example, pollution is considered an external activity to many industrial processes; therefore, the government might impose a tax on polluters. (WordIQ, 2012). Another way the government can control the amount of emissions is to directly tax the pollution. This is referred to as the standards-charge approach. The government will establish a level of pollution it believes is appropriate and will charge a fine to the company for each unit it is above the allotted amount. (Crandell, n.d.). There are many benefits from reducing pollution, but the most notable are by reducing pollutants in our air, the environment would be much cleaner and ecosystems would be...
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...Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 7e. 9 of 50 10.1 MONOPOLY A Rule of Thumb for Pricing Chapter 10: Market Power: Monopoly and Monopsony Note that the extra revenue from an incremental unit of quantity, ∆(PQ)/∆Q, has two components: 1. Producing one extra unit and selling it at price P brings in revenue (1)(P) = P. 2. But because the firm faces a downward-sloping demand curve, producing and selling this extra unit also results in a small drop in price ∆P/∆Q, which reduces the revenue from all units sold (i.e., a change in revenue Q[∆P/∆Q]). Thus, Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 7e. 10 of 50 10.1 MONOPOLY A Rule of Thumb for Pricing Chapter 10: Market Power: Monopoly and Monopsony (Q/P)(∆P/∆Q) is the reciprocal of the elasticity of demand, 1/Ed, measured at the profit-maximizing output, and Now, because the firm’s objective is to maximize profit, we can set marginal revenue equal to marginal cost: which can be rearranged to give us (10.1) Equivalently, we can rearrange this equation to express price directly as a markup over marginal cost: (10.2) 11 of 50 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Microeconomics • Pindyck/Rubinfeld, 7e. Applying MR-MC Output and Pricing Chapter 10: Market Power: Monopoly and Monopsony MC P 1 1 Ed Ed 4 MC 9 9 9 $12 P .75 1 1 4 Copyright ©...
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...Surplus. Hicksian Approach : Indifference curves – properties of Indifference Curve, Consumer’s Equilibrium, Price effect, Income effect and substitution effect – Derivation of demand from Price Consumption Curve (PCC) – Giffen’s paradox. Samuelson Approach : Revealed Preference Theory. Module 3 : Production and Cost Analysis Concept of production function : short run and long run – Cobb – Douglass production function. isoquants – iso-cost line – producer’s equilibrium. Law of variable proportion and Law of returns to scale – Economies of scale – Economies of scope. Concepts of costs : Money and real cost, Opportunity cost, Social cost, Private cost – Derivation of short run and long run cost curves– Learning curve. SECTION –II Module 4 : Theory of Firm : Concepts of revenue : Total Revenue, Average Revenue and Marginal Revenue – Relationship between TR, AR and MR under perfect and imperfect competition – AR, MR and elasticity. Objectives of a Firm – Analysis of Equilibrium of a firm : TC-TR Approach – MC-MR Approach – Break-Even Analysis. 2 Module 5 : Market Structure : Perfect...
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...Q1. What is microeconomics? “It is impossible to separate microeconomics from macroeconomics”- Do you agree with this statement? Justify your answer with appropriate argument. Ans: Microeconomics is derived from the Greek word ‘mikros’ meaning ‘small’. Microeconomics deals with the small individual units of the economy such as individual consumers, individual firms and small aggregates a group of individual units such as various industries or markets. Thus, microeconomic theory seeks to determine the mechanism by which the different economic units attain the position of equilibrium, proceeding from the individual units to a narrowly defined group. Microeconomic analysis concerns itself with narrowly defined groups since it does not study the totality of behavior of all units in the economy. In other word, the study of economic system or economy as a whole lies outside the domain of microeconomic analysis. Yes I agree with this statement that “It is impossible to separate microeconomics from macroeconomics”. The terms microeconomics and macroeconomics have their origin in the early 1930s, when economists strove to gain an understanding of factors that created the Great Depression. Separate mechanisms to describe the actions of individuals and aggregate populations were first described by the Norwegian economist Ragnar Frisch (1895-1973) in 1933. Frisch called these mechanisms "microdynamic" and "macro-dynamic." He wrote that micro-dynamic analysis seeks to "explain in...
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...follows: max pq (p) − c (q (p)) . p Note, however, that there is a one-to-one correspondence between the price charged and the quantity the monopolist sells. Thus we can rewrite the problem in terms of quantity sold instead of the price charged. Let p (q) be the inverse demand function. That is, p (q (p)) = p. The firm’s profit maximization problem can then be written as max p (q) q − c (q) . q It turns out that it is usually easier to look at the problem in terms of setting quantity and letting price be determined by the market. For this reason, we will use the quantity-setting approach. 1 References: Tirole, Chapter 1; MWG, Chapter 12; Bulow, “Durable-Goods Monopolists,” JPE 90(2) 314-332. 233 Nolan Miller Notes on Microeconomic Theory: Chapter 9 P ver: Aug. 2006 P0 A B D Q0 Q Figure 9.1: The Monopolist’s Marginal Revenue In order for the solution to be unique, we need the objective function to be strictly concave (i.e. d2 π dq2 < 0). The second derivative of profit with respect to q is given by d2 (p (q) q − c (q)) = p00 (q) q + 2p0 (q) − c00 (q) . dq 2 If cost...
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...cost to consumers and businesses. 2. The primary focus of the study of economics is with: A. expanding the production of goods and services. B. equalizing the distribution of consumer income and wealth. C. making the most efficient use of scarce productive resources. D. reallocating resources from consumption to production in the economy. 3. The general concern of economics is with the study of the: A. degree of competition in stock and bond markets in the economy. B. efficient use of limited productive resources to satisfy economic wants. C. issue of equality in the distribution of income and wealth among households. D. budget deficits in the domestic economy and trade deficits in the international economy. 4. Which of the following is not a central focus of the "economic perspective"? A. Scarcity and choice. B. The scientific method. C. Purposeful behavior. D. Marginal analysis. 5. The term scarcity in economics refers to the fact that: A. economic wants are limited and resources are abused. B. even in the richest country some people go hungry. C. no country can produce enough products to satisfy everybody's economic wants. D. it is impossible to produce too much of any particular good or service in a market economy. 6. The basic economic problem is essentially one of deciding how to make the best use of: A. limited resources to satisfy limited economic wants....
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...Question 1: How is the Microeconomics different from macro economics? Discuss also the subject matter of Microeconomics in detail. Answer: MICROECONOMICS "Micro Economics is the study of particular firm, particular household, individual prices, wages, incomes, individual industries and particular commodities." ( K. E. Boulding) In micro economics, we study the small segments of an economy or, in other words, we take up the individual decision – making units of an economy in microeconomics e.g., we analyze the demand of a product or often individual and the equilibrium price of a product rather than discussing the aggregate demand of the economy and the general price level in a country. Similarly in microeconomics, we study the determination of price/reward of a factor of production, analysis of an individual firm or industry, the consumption pattern of a person, choice of technique and different market situations etc. Microeconomics is generally called the “Price Theory”. • Production. In this part of microeconomics we study the meaning of the production of wealth, the cost of production and how it is minimized factor of production and their relative importance in the production process, the production function, the analysis of supply etc. • Exchange. This part covers the market mechanism or the exchange of wealth through the forces of demand and supply, perfect and imperfect market at the behavior of the competitors etc. • Distribution. This part starts with the theory...
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...cost to consumers and businesses. 2. The primary focus of the study of economics is with: A. expanding the production of goods and services. B. equalizing the distribution of consumer income and wealth. C. making the most efficient use of scarce productive resources. D. reallocating resources from consumption to production in the economy. 3. The general concern of economics is with the study of the: A. degree of competition in stock and bond markets in the economy. B. efficient use of limited productive resources to satisfy economic wants. C. issue of equality in the distribution of income and wealth among households. D. budget deficits in the domestic economy and trade deficits in the international economy. 4. Which of the following is not a central focus of the "economic perspective"? A. Scarcity and choice. B. The scientific method. C. Purposeful behavior. D. Marginal analysis. 5. The term scarcity in economics refers to the fact that: A. economic wants are limited and resources are abused. B. even in the richest country some people go hungry. C. no country can produce enough products to satisfy everybody's economic wants. D. it is impossible to produce too much of any particular good or service in a market economy. 6. The basic economic problem is essentially one of deciding how to make the best use of: A. limited resources to satisfy limited economic wants....
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...Unit 1 - Individual Project - Introduction to Macroeconomic Theory Click Link Below To Buy: http://hwcampus.com/shop/unit-1-individual-project-introduction-macroeconomic-theory/ Assignment Details Assignment Description Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices...
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...Unit 1 - Individual Project - Introduction to Macroeconomic Theory Click Link Below To Buy: http://hwcampus.com/shop/unit-1-individual-project-introduction-macroeconomic-theory/ Assignment Details Assignment Description Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. In economics, they say a picture is worth a thousand words. Below, you will find two scenarios. Your assignment is to discuss the situation by writing the solutions, and then show the solutions and how you got here in one or more graphs or flowcharts. Scenario One Supply and demand are foundational concepts in understanding economic theory. Whether you are a coffee drinker or not, you have been tasked to examine the impact of supply and demand when dealing with the coffee retail industry. A few companies probably come to mind. Pick a major coffee retailer, and then contemplate what has been happening to both the supply and demand for this product. Next, analyze the following scenario that deals with what happened in the coffee industry at the beginning of the last decade: In the early part of the last decade, there was an overproduction of coffee. The price dropped so low that producers' costs were higher than the market price. The reason this happened was that market prices...
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...MIcroeconomics: Markets, Methods & Models Douglas Curtis and Ian Irvine | Version 2014/2015 $ ADAPTED OPEN TEXT FORMATIVE ONLINE ASSESSMENT COURSE SUPPLEMENTS COURSE LOGISTICS & SUPPORT a d v a n c i n g l e a r n i n g www.lyryx.com Copyright This work is licensed under a Creative Commons AttributionNonCommercial-NoDerivs 3.0 Unported License. http://creativecommons.org/licenses/by-nc-nd/3.0/deed.en_GB Douglas Curtis and Ian Irvine Edition 1.11 This edition is differentiated from the first edition solely by minor editorial adjustments. Content has not been altered. Microeconomics: Markets, Methods and Models About the Authors Doug Curtis is a specialist in macroeconomics. He is the author of twenty research papers on fiscal policy, monetary policy, and economic growth and structural change. He has also prepared research reports for Canadian industry and government agencies and authored numerous working papers. He completed his PhD at McGill University, and has held visiting appointments at the University of Cambridge and the University of York in the United Kingdom. His current research interests are monetary and fiscal policy rules, and the relationship between economic growth and structural change. He is Professor Emeritus of Economics at Trent University in Peterborough, Ontario, and Sessional Adjunct Professor at Queen’s University in Kingston, Ontario Ian Irvine is a specialist in microeconomics, public economics, economic inequality...
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...Econ 101: Intro to Microeconomics Spring 2012, Handout 8 Solutions More on Monopolies 1. A monopoly faces a market demand curve given by P = 42 − Q. Its marginal cost curve is given by M C = Q. (a) Find an equation for the marginal revenue curve. Graph market demand, marginal revenue, and marginal cost for this monopoly. Double the slope of the demand curve to get the MR: M R = 42 − 2Q. The graph should show a line twice as steep as the original demand curve, but with the same price intercept. Note: the “double the slope” rule only works when the equation is solved for P! (b) Find the profit-maximizing level of production for this monopolist. M R = M C to get 42 − 2Q = Q ⇒ Q = 14. (c) What price will the monopolist charge? Plug the Q from part (b) into the demand curve: P = 42 − 14 = $28. (d) Is marginal revenue equal to price? Why or why not? Marginal revenue is less than price because the price effect (an increase in price per unit tends to increase total revenue) and the quantity effect (an increase in the price per unit tends to decrease the quantity sold, which lowers total revenue) move in opposite directions. (e) What price would be socially optimal? 1 Econ 101: Intro to Microeconomics Spring 2012, Handout 8 Solutions Socially optimal price where M C = P ⇒ Q = 42 − Q ⇒ Q = 21 ⇒ P = 42 − 21 = $21. (f) What is the monopolist’s total revenue? T R = P ∗ Q = 28 ∗ 14 = 392 2. Suppose a local utility company has a demand curve given by P = 120 − 4Q. TC for...
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...1 of 7 Massachusetts Institute of Technology Department of Economics 14.01 Principles of Microeconomics Final Exam Wednesday, December 19th, 2007 Last Name (Please print): ______________ First Name: __________________ MIT ID Number: __________________ Instructions. Please read carefully. The exam has a total of 100 points. Answers should be as concise as possible. This is a closed book exam. You are not allowed to use notes, equation sheets, books or any other aids. You are not allowed to use calculators. You must write your answers in the space provided between questions. DO NOT attach additional sheets of paper. This exam consists of (18) sheets (13 pages + 5 blank pages for scratch work). 0. Circle Your Section/Recitation (1 point): Please circle the section or recitation which you are attending below. The marked exam will be returned to you, in the section or recitation that you indicate. You will loose 1 point if you leave it unselected. S01: MWF9 (Peter Schnabl) R01: F10 (Rongzhu Ke) S02: MWF10 (Chia-Hui Chen) R02: F11 (Rongzhu Ke) S03: MWF11 (Chia-Hui Chen) R03: F2 (Rongzhu Ke) S04: MWF1 (Monica Martinez-Bravo) R04: F12 (Marco Migueis) R05: F1 (Marco Migueis) R06: F2 (Marco Migueis) DO NOT WRITE IN THE AREA BELOW: Question 1 __/25 Question 2 __/5 Question 3 __/25 Question 4 __/25 Question 5 __/19 Question 0 _/1 Total __/100 Cite as: William Wheaton, Chia-Hui...
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...cost to consumers and businesses. 2. The primary focus of the study of economics is with: A. expanding the production of goods and services. B. equalizing the distribution of consumer income and wealth. C. making the most efficient use of scarce productive resources. D. reallocating resources from consumption to production in the economy. 3. The general concern of economics is with the study of the: A. degree of competition in stock and bond markets in the economy. B. efficient use of limited productive resources to satisfy economic wants. C. issue of equality in the distribution of income and wealth among households. D. budget deficits in the domestic economy and trade deficits in the international economy. 4. Which of the following is not a central focus of the "economic perspective"? A. Scarcity and choice. B. The scientific method. C. Purposeful behavior. D. Marginal analysis. 5. The term scarcity in economics refers to the fact that: A. economic wants are limited and resources are abused. B. even in the richest country some people go hungry. C. no country can produce enough products to satisfy everybody's economic wants. D. it is impossible to produce too much of any particular good or service in a market economy. 6. The basic economic problem is essentially one of deciding how to make the best use of: A. limited resources to satisfy limited economic wants....
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...AMITY INTERNATIONAL BUSINESS SCHOOL MBA (International Business) Course Title: Economic Analysis Programme Name: MBA (IB)/3C MBA Course Code: MIB 106 Semester: I Classroom contact hours: 40 hours Faculty: Prof. Ajit K Pandey Prof. Kshamta Chauhan Credit Units: 04 Prof. Harendra K Pandey Self Study hours: 80 hours Course Objective This course aims to integrate various principles and concepts from different fields of economics with typical problems of managerial decision-making and policy formulation in business organizations whether in a local or global context. Understanding the application of economic principles to key management decisions will provide guidance to increase value creation within organizations, and allows a better understanding of the external business environment in which organizations operate. Learning Outcomes At the end of this course the student will be able to • − Use the theory of the firm to model business organizations • − Apply demand theory to establish the elasticity of demand • − Use demand estimation to forecast demand trends and change • − Apply production theory to manage production • − Use cost theory to establish short and long run behavior • − Describe market structures to establish market equilibrium • − Use pricing strategies to enable organizational coherence • − Use macroeconomic principles to address market...
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