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Economics Homework Eleven - Model (view source)
Revision as of 23:15, December 6, 2009
, 23:15, December 6, 2009added more
:I would want him to pay interest because the interest will pay for the service I am giving him by letting him use my money. (Isaac)
:I would want him to pay interest because the interest will pay for the service I am giving him by letting him use my money. (Isaac)
:When you loan someone money, there is the risk of him never giving your money back. Money also has an opportunity cost. By loaning out your money you lose the interest it could be earning in the bank, or a better way of investing it. For these reasons, you want to be compensated for loaning out your money. This the point of charging interest. (Sean)
2. Suppose I loaned you $1000 today, and interest rates are 5% per year (compounded annually), and you repaid the loan plus interest in 2 years, then what is the total you would pay to satisfy this debt?
2. Suppose I loaned you $1000 today, and interest rates are 5% per year (compounded annually), and you repaid the loan plus interest in 2 years, then what is the total you would pay to satisfy this debt?
:The cost of the bus for a trip to D.C. is a fixed cost, because the price of the bus won't change whether one person goes down or the bus is full. (Seth)
:The cost of the bus for a trip to D.C. is a fixed cost, because the price of the bus won't change whether one person goes down or the bus is full. (Seth)
:A "variable cost" is one that "varies" with output. In this case, the cost of the bus does not "vary" with output, and thus it must be a fixed cost. (Instructor)
4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?
4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?
:This should be illegal because it is an attempt to create a monopoly out of the public eye. It could also be described as creating economic rent that would not exist in the unmanipulated market. Reducing output impedes the free market and causes loss of wealth, and to impede the market unnecessarily to make more money is harmful to the consumers. In fact, banning false reduction of output is a less involved procedure than breaking up a monopoly, and so possible harm due to regulation is also diminished by making this illegal. (Addison)
:This should be illegal because it is an attempt to create a monopoly out of the public eye. It could also be described as creating economic rent that would not exist in the unmanipulated market. Reducing output impedes the free market and causes loss of wealth, and to impede the market unnecessarily to make more money is harmful to the consumers. In fact, banning false reduction of output is a less involved procedure than breaking up a monopoly, and so possible harm due to regulation is also diminished by making this illegal. (Addison)
:It is a cartel, and because it causes higher prices and less quantity. (Sarah)
9. What is your favorite concept in Economics, and why?
9. What is your favorite concept in Economics, and why?
:Coase Theorem is my favorite because it reminds us that the only obstacle to an efficient market is excessive transaction costs. (Elizabeth)
:Coase Theorem is my favorite because it reminds us that the only obstacle to an efficient market is excessive transaction costs. (Elizabeth)
:Price elasticity - Because I can relate it to the world around me and I can understand the reasons behind what stores are doing. (Kate)
10. Nash equilibrium, revisited: What is the Nash equilibrium for two gas stations (an oligopoly) that are situation immediately across the street from each other? In other words, what price do they sell at, expressed in terms of one of their cost measures? Explain the process that reaches that "equilibrium".
10. Nash equilibrium, revisited: What is the Nash equilibrium for two gas stations (an oligopoly) that are situation immediately across the street from each other? In other words, what price do they sell at, expressed in terms of one of their cost measures? Explain the process that reaches that "equilibrium".