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Principles of market economics

You are running a small yard maintenance business for the summer. What do you expect to happen to the number of
yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf
blowers? _____________

What is a market economy?

"If the amount of product differentiation in a monopolistically competitive industry is very small, the outcome in that
market will not be very different than if it were a perfectly competitive industry." Explain

Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should
raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How
should she advise her boss

Explain what is meant by predatory pricing, and the inherent difficulties involved with predatory pricing from a
firm's point of view. _____________

Studies of real world markets suggest that prices and the number of firms of comparable size in a market are: ______
A) negatively or inversely related.
B) positively related.
C) not related.
D) sometimes negatively or inversely related, but usually positively related.

Solution Preview

You are running a small yard maintenance business for the summer. What do you expect to happen to the number of
yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf
blowers? _____________

Each additional worker would produce less output. This is because if all the equipment is being used, the new employees would have to use their hands. Imagine picking up leaves by hand. Clearly these workers would not be very productive.

What is a market economy?

A market economy depends on buyers and sellers working out between themselves the price of a good. When there is less demand for a good, prices fall as sellers try to find buyers. These market forces will cause producers to ...

Solution Summary

Demonstration of market economics through different scenarios and multiple choice question.

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