Economics Homework Eleven - Model - Revision history

Karajou: Reverted edits by KirkJ (talk) to last revision by AddisonDM

2011-09-21T02:15:39Z

Reverted edits by KirkJ (talk) to last revision by AddisonDM

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KirkJ at 02:14, September 21, 2011

2011-09-21T02:14:15Z

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AddisonDM at 01:08, March 9, 2011

2011-03-09T01:08:04Z

Aschlafly: completed

2009-12-09T17:14:37Z

completed

Aschlafly: added more

2009-12-06T23:15:09Z

added more

Aschlafly: added two

2009-12-06T22:37:20Z

added two

Aschlafly: built through the online answers

2009-12-06T16:20:26Z

built through the online answers

Aschlafly: built through first five students

2009-12-06T15:59:36Z

built through first five students

Aschlafly: setting up model answers

2009-12-05T00:15:52Z

setting up model answers

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1. If you were to loan someone money, why would you want him to pay you something extra (interest) when he pays back the loan? Give at least one reason.

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?

3. Review: is the cost of the bus for a trip to D.C. a "fixed cost" or a "variable cost"? Explain, assuming for the purpose of this question that one and only one bus can be used (in reality, we may have several buses).

4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?

5. Suppose I will pay you $1000 in two years, and the interest rate is 10% per year, compounded annually. How much should you pay me today to receive $1000 in two years? Show your work.

6. Pick another question from the midterm exam that you answered incorrectly, and explain the correct answer.

7. Explain what “economic rent” is in your own words, using your own example.

8. An agreement by different firms with each other to reduce output is illegal. Why should that be illegal?

9. What is your favorite concept in Economics, and why?

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".

[[Category:Economics lectures]]
{{DEFAULTSORT: Economics Lecture 12}}

← Older revision		Revision as of 01:08, March 9, 2011
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−	1. If you were to loan someone money, why would you want him to pay you something extra (interest) when he pays back the loan? Give at least one reason.	+	1. If you were to loan someone [[money]], why would you want him to pay you something extra (interest) when he pays back the loan? Give at least one reason.

	:Instead of loaning money, I could invest the same amount of money and earn more. Interest makes it profitable to loan money. (Mark)		:Instead of loaning money, I could invest the same amount of money and earn more. Interest makes it profitable to loan money. (Mark)

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 :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)
 .  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?
@@ Line 12: / Line 14: @@
 :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)
 .  Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?
@@ Line 38: / Line 42: @@
 :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)
 .  What is your favorite concept in Economics, and why?
@@ Line 46: / Line 52: @@
 :Coase Theorem is my favorite because it reminds us that the only obstacle to an efficient market is excessive transaction costs.  (Elizabeth)
 .  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".

← Older revision		Revision as of 22:37, December 6, 2009
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	:I like the concept of the invisible hand: one of mankind's great flaws--greed--is turned for the benefit of society. (Duncan)		:I like the concept of the invisible hand: one of mankind's great flaws--greed--is turned for the benefit of society. (Duncan)
		+
		+	:My favorite economics concept is cross elasticity because I find it interesting to see how one good can affect another. (Courtney)
		+
		+	:Coase Theorem is my favorite because it reminds us that the only obstacle to an efficient market is excessive transaction costs. (Elizabeth)

	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".

@@ Line 33: / Line 33: @@
 .  Pick another question from the midterm exam that you answered incorrectly, and explain the correct answer.
+:(Answers varied.)
 .  Explain what “economic rent” is in your own words, using your own example.

@@ Line 1: / Line 1: @@
 .  If you were to loan someone money, why would you want him to pay you something extra (interest) when he pays back the loan?  Give at least one reason.
+:Instead of loaning money, I could invest the same amount of money and earn more. Interest makes it profitable to loan money. (Mark)
 .  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?
@@ Line 14: / Line 16: @@
 :“Carpe Diem”, seize the day, motivates you to accomplish as much as you can in the time you are given. You would use your time wisely if it was to be your last day on earth. We do not take the possibility of not having the privilege of living tomorrow it seriously. So live each day to the fullest as if it were your last. (Veronika)
 .  Suppose I will pay you $1000 in two years, and the interest rate is 10% per year, compounded annually.  How much should you pay me today to receive $1000 in two years?  Show your work.
 :To find the amount paid the second year, divide $1000 by 1.1. Then you take that number and you divide that by 1.1 again, and your result is $826.45, which is the answer. (Anna)
 .  Pick another question from the midterm exam that you answered incorrectly, and explain the correct answer.
@@ Line 25: / Line 33: @@
 .  Explain what “economic rent” is in your own words, using your own example.
+:Economic rent is a return greater than the normal profit/return for that particular good or service. It is the additional revenue you get for having a good/service that is in high demand, without having put any more money into your product, simply because your product is unique in some way. For example, there are Pop Tarts, and then there are the store brands. They are fairly good substitutes, but the prices are much higher for Pop Tarts. They receive economic rent on that good simply because they are better known. (Michelle)
 .  An agreement by different firms with each other to reduce output is illegal.  Why should that be illegal?
@@ Line 33: / Line 41: @@
 .  What is your favorite concept in Economics, and why?
+:I like the concept of the invisible hand: one of mankind's great flaws--greed--is turned for the benefit of society. (Duncan)
 .  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".
+:Consider as a starting point high sales prices by each gas station, much higher than marginal cost (marginal cost is a "cost measure").  Next notice that the high prices won't be the equilibrium, because one station can earn more profits by slightly lower his price to pick up many new customers, as many people choose his station for his slightly lower price.  But then the other station does likewise to win the customers back, and this same pattern of underselling the other guy each other continues again and again ... until the sales price falls to the level of the marginal cost.  At that point neither station is better off by lowering his price further, because then he would be selling BELOW marginal cost and losing money on each sale.  So the Nash equilibrium for this oligopoly is where marginal revenue equals marginal cost, which is the same as in a fully competitive market.  (Instructor)
 [[Category:Economics lectures]]
 {{DEFAULTSORT: Economics Lecture 12}}