Economics Homework Twelve Answers - Student Eight

Duncan B.

Economics Homework 12

1. A monopsony is a single purchaser for a good. One example might be the fifth generation F-22 Raptor stealth fighter, which is only purchased by the United States Air Force.

2. Production possibilities is the balance struck between production of two goods, so a "production possibilities curve" is a graphical representation of the amount of good B you can produce when you produce a certain number of good A.

4. A Lorenz curve is a graphic representation of a hypothetical equal income distribution compared to the real distribution. The government should give priority to it, but not for the purpose of redistributing wealth.

5. The opportunity cost is 350 cars that you could have produced.

6. AFC is average fixed costs: total fixed costs divided by number of units produced . AVC is average variable costs: total variable costs divided by number of units produced. ATC is average total costs, FC+VC/Q. A firm should shut down in the short run if AVC>P.

7. A production possibilities curve can shift outward due to larger factories, or a less expensive production method.

9. A production possibilities curve is not usually straight; that would be an equal tradeoff between two goods, which rarely happens. If the curve was concave, you would have no motivation to make two goods: as you produce more of good B the amount produced for good A decreases a large amount.

10. Yes, you hire the tenth worker: you make a profit of $6 per hour.

11. "Comparative" refers to the comparison in production abilities between two countries. The term "comparative advantage" refers to the advantage that one country has producing nothing but the goods they make best, then trading their goods to other countries for the rest of the goods they require.