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Monopoly Power in a Perfectly Competitive Industry Granting a private firm monopoly rights over a perfectly competitive industry can have a considerable effect on the general welfare of a country’s citizens. The primary impacts of this policy are the increased

Answer: Marginal Rate of Substitution The marginal rate of substitution (MRS) is the rate at which a consumer is willing to trade off one good for another. In this case, Bridget and Collins have a combined endowment of 18 bars

Answer: False The assumption of a closed economy applies to a single, isolated economy, not the world economy. As the world economy is connected and open, it does not fit the definition of a closed economy. Definition of a Closed

Answer: True Explanation GDP (Gross Domestic Product) is a measure of the value of all goods and services produced within a given period of time. It does not include purchases of capital goods, such as buildings, machinery, and equipment. These

Answer: True The financial system allows savers to store their money in a safe place and earn a return on their investment by charging interest. This interest rate is typically higher than that of a traditional savings account, meaning savers

Answer: A closed economy is an economic system where there is virtually no participation in international trade or financial transactions. This means that the country’s economy is largely isolated from the rest of the world and is self-contained. What is

Answer: The Nominal Interest Rate The nominal interest rate is the rate of interest, expressed as a percentage, that is stated by the lender. In this case, the nominal interest rate is 6%. This is calculated by adding the inflation

Answer: Summary The statement “If the supply curve of loanable funds shifts to the right, then the equilibrium interest rate falls and the quantity of loanable funds rises” is true. How Interest Rates and Loanable Funds are Connected Interest rates

Answer: A Certificate of Indebtedness is called a Bond A Certificate of Indebtedness, also known as a bond, is a type of financial instrument that is issued by corporations and government entities. The bond is essentially an agreement between the

What is a Perpetuity? A perpetuity is a type of bond that pays out a fixed amount of money for an indefinite period of time. It is distinguished from other bonds because it never matures and the payments are made

Answer The inflation rate is 3.5%, which is the difference between the nominal interest rate of 6.5% and the real interest rate of 3%. Calculating the Inflation Rate The inflation rate can be calculated by subtracting the real interest rate

Answer: Government Budget Surplus A government budget surplus occurs when government expenditures exceed tax revenue, which results in a decrease in the supply of loanable funds available to finance investment by households and firms. This is true. A budget surplus

Answer: When a large, well-known corporation sells bonds, it means that the corporation wishes to borrow directly from the public. When a large, well-known corporation sells bonds, it is essentially offering the public an opportunity to loan them money. This

Answer A bond that never matures is known as a perpetuity. Definition of a Perpetuity A perpetuity is a bond that is issued with no maturity date. The bond pays out a fixed sum of money at regular intervals that

Answer: What Does (Y – T – C) Represent in a Closed Economy? In the identity S = (Y – T – C) + (T – G), (Y – T – C) represents private saving. This identity describes the three

Answer: What does (Y – T – C) represent in S = (Y – T – C) + (T – G)? This equation is commonly known as the National Income Identity and represents the total savings of an economy. The

Answer In the closed economy identity, (Y – T – C) represents private saving. Private saving is the difference between a household’s income (Y) and their spending on taxes (T) and consumption (C). What is Private Saving Private saving is

Answer: Summary The statement that if the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, there is a shortage of loanable funds and the interest rate is below the equilibrium level is true. The Quantity of

Answer: Equity and Debt Finance for Corporate Investment Equity finance is a method for corporations to raise money for new investments. This method involves the sale of stocks to investors, who in turn become shareholders in the company. They enjoy

Answer: False: If a Firm’s Production Function Exhibits Diminishing Marginal Returns to Capital, Output Actually Goes Up The statement is false. When a production function exhibits diminishing marginal returns to capital, it means that the output generated from each additional

Answer The statement is False. Diminishing marginal returns to capital means that when a firm inputs more capital, the marginal increase in output will be lower than the previous increase. This does not mean output will decrease, however, as the

Answer: Marginal Rate of Substitution between Dark and White Chocolate The marginal rate of substitution (MRS) between dark and white chocolate for Bridget and Collins is the ratio of the marginal utilities they derive from consuming one additional unit of

Pooling Equilibrium in Labor Market Signalling Problems Pooling equilibrium is a concept in economics that refers to a situation in which two or more firms or individuals agree to share information in order to make decisions that are beneficial to

Answer The marginal rate of substitution (MRS) between dark chocolate and white chocolate for Bridget and Collins at the initial endowment point can be calculated using the slope of the indifference curve at that point. The MRS can be expressed

Bridget and Collins’ Budget Equations Bridget and Collins both have preferences regarding dark chocolate (X) and white chocolate (Y) which can be represented by the following utility function: 𝑈(𝑋, 𝑌) = 𝑋1/3𝑌2/3. Initially, Bridget has an endowment of 12 bars

Answer: Analysis of Earll Investments and Pima Financial Trading The Earll Investments and Pima Financial Trading investment opportunities have some striking similarities and differences. Earll Investments advertises a high return on investment with no risk, while Pima Financial Trading advertises

Year Over Year Growth Year over year (YOY) growth is a calculation that measures the percentage change in a metric from one year to the next. It is a key metric for determining the success of a business or industry,

Data Crunch: Most Common Credit Card Fees Credit card fees are a way for banks and credit card companies to make money off of their customers. Credit card fees can range from annual fees, late fees, balance transfer fees, cash

Practical Significance of Remote Diagnostics and Support in After-Sales Service of Office Equipment Remote diagnostics and support services are becoming increasingly popular in the after-sales services of office equipment, such as copiers, printers, and other types of machines used in

Computing Total Revenue and Profit at Given Prices The total revenue and profit at a given set of prices can be calculated using the marginal revenue and marginal cost equations. The marginal revenue (MR) equation is defined as the change

Courbet and Stackelberg Models of Oligopoly Oligopoly is a market structure with a small number of firms producing a homogeneous or differentiated product. The Courbet and Stackelberg models are two different approaches to understanding how firms in an oligopoly interact.

What is a Nash Equilibrium? A Nash Equilibrium is a stable strategy for two or more players in a game, whereby no player has an incentive to deviate from the strategy that they have adopted. This means that each player

Explaining Abnormal Profits/Losses in Perfectly Competitive Markets A perfectly competitive market is an economic model where there are many buyers and sellers, and each participant is considered a price-taker. This means that each firm has no influence over the market

Perfectly Competitive Form of CBA A perfectly competitive form of CBA is a market structure in which there are many firms, all of which produce identical products or services. There is no market power as all firms must accept the

Answer Bridget and Collins both have preferences regarding dark chocolate (X) and white chocolate (Y) which can be represented by the utility function: 𝑈(𝑋, 𝑌) = 𝑋 1 3𝑌 2 3. This means that the utility they get from consuming

Answer: In this scenario, two companies are competing with each other by setting production levels simultaneously. The market demand follows the equation 𝑄(𝑃) = 110 – 𝑃/2, and the marginal costs are constant and equal to £40 for both firms.

Answer The profit maximisation function for two companies competing by setting production levels (output) simultaneously is found by setting the total revenue (TR) and total cost (TC) equal to each other, then solving for the production level (Q). The total

Answer: Market Equilibrium When supply and demand curves intersect, this is known as market equilibrium. In this example, the quantity of ripe peaches supplied is 100 and the price is K1. The demand elasticity is -0.5, which means that a

Answer: Intellectual Citizenship and Sociology Intellectual Citizenship and sociology are two interrelated concepts. The former refers to the idea that individuals should be critical thinkers and participate in public discourse and social change. The latter is the study of human

Intellectual Citizenship & Sociology Intellectual citizenship is an idea that has been discussed in the field of sociology. It is a concept that deals with how individuals interact with each other in a society. It looks at how people form