Changes

Free trade.  Protectionism is a theory that protects domestic industries from foreign ones.  That theory would not support sending jobs off shore.

Free trade.  Protectionism is a theory that protects domestic industries from foreign ones.  That theory would not support sending jobs off shore.

3. What is one of the primary responsibilities of the Federal Reserve Bank?  

3. What is one of the primary responsibilities of the Federal Reserve Bank?  

To protect the banking system from collapse.

To protect the banking system from collapse.

4. Review: Suppose that after completing this course, you start a new company. In your first year, you "broke even" (had zero profits), and in your second year you want to increase your revenue and profits. After careful study of your market, you decide that you can increase your revenue by increasing your price. Therefore your good must be price elastic/inelastic (choose one).  

4. Review: Suppose that after completing this course, you start a new company. In your first year, you "broke even" (had zero profits), and in your second year you want to increase your revenue and profits. After careful study of your market, you decide that you can increase your revenue by increasing your price. Therefore your good must be price elastic/inelastic (choose one).  

Price inelastic.  

Price inelastic.  

5. A monopolistic competitive firm has the following characteristic that is lacking for a perfectly competitive firm:  

5. A monopolistic competitive firm has the following characteristic that is lacking for a perfectly competitive firm:  

(c) P > MC

(c) P > MC

7. Pick any aspect of monopolistic competition (other than problem 5 if you answered that) and explain  

7. Pick any aspect of monopolistic competition (other than problem 5 if you answered that) and explain it.  

it.  

High barriers to entry.  Companies like Microsoft could not have the kind of control of the market that they currently enjoy if there were not high barriers to entry.  If it were easy to set up a company to compete with Microsoft, many people would do it, creating a more competitive market, forcing companies to lower their price so they can compete.  Since it is very difficult to do enter that market, it creates a naturally monopolistic market.

High barriers to entry.  Companies like Microsoft could not have the kind of control of the market that they currently enjoy if there were not high barriers to entry.  If it were easy to set up a company to compete with Microsoft, many people would do it, creating a more competitive market, forcing companies to lower their price so they can compete.  Since it is very difficult to do enter that market, it creates a naturally monopolistic market.

Honors:

Honors:

If it were lower than the marginal cost, there would be no money to pay the fixed costs.  If P<MC , you would have shut down in the short run.  If P>MC then you would put more money into your company until P=MC because that is where the revenue is maximized.   

If it were lower than the marginal cost, there would be no money to pay the fixed costs.  If P<MC , you would have shut down in the short run.  If P>MC then you would put more money into your company until P=MC because that is where the revenue is maximized.   

9. Economics is sometimes called the “dismal science” because economists predicted population to grow faster than the food supply, marginal returns to diminish, and profits to vanish. But, in fact, there is an abundance of food and profits have not vanished. Why is economics not so dismal after all?  

9. Economics is sometimes called the “dismal science” because economists predicted population to grow faster than the food supply, marginal returns to diminish, and profits to vanish. But, in fact, there is an abundance of food and profits have not vanished. Why is economics not so dismal after all?  

Because of new inventions that create wealth, and charity, ingenuity, art, etc.  There are things that cannot be worked into the economist sums that have an enormous effect on the economy.  There is more to life than profits and losses, numbers and formulas.  You can’t predict ingenuity or measure charitableness.  Maybe people don’t want to put all of their profits into their business, maybe they want to donate it, or fund research, or simply bank it.  Because God knows how to run the world better than any economist and all their predictions mean absolutely nothing if what they predict isn’t in God’s plan.

Because of new inventions that create wealth, and charity, ingenuity, art, etc.  There are things that cannot be worked into the economist sums that have an enormous effect on the economy.  There is more to life than profits and losses, numbers and formulas.  You can’t predict ingenuity or measure charitableness.  Maybe people don’t want to put all of their profits into their business, maybe they want to donate it, or fund research, or simply bank it.  Because God knows how to run the world better than any economist and all their predictions mean absolutely nothing if what they predict isn’t in God’s plan.

10. "Protectionism" is a pejorative (negative) word. Can you think of a more positive, flattering word to  

express the same concept in a supportive way?  

 

10. "Protectionism" is a pejorative (negative) word. Can you think of a more positive, flattering word to express the same concept in a supportive way?  

Stableness. Preservation.  Or maybe something along the lines of superiority? I don’t know how to make that an “ism”.  I think that would be the best word though, because it could mean that it is a theory intended to make our economy superior.

Stableness. Preservation.  Or maybe something along the lines of superiority? I don’t know how to make that an “ism”.  I think that would be the best word though, because it could mean that it is a theory intended to make our economy superior.