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Economic Princples

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Please explain in detail to improve my understanding of these questions.

23-4 Why is there a trade off between the amount of consumption that they can enjoy today and the amount of consumption that they can enjoy in the future? Why cant people enjoy more of both? How does saving relate to investment and thuus to economic growth? What role do banks and other financial intstitutions play in aiding the growth process?

26-6 Explain how an increase in your nominal income and a decrease in your real income might occur simultaneously. Who loses from inflation? Who loses from unemployment? If you had to choose between (a) full employment with a 6 percent annual rate of inflation and (b) price stability with an 8 percent unemployment rate, which would you choose? Why?

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1. The trade off between present and future consumption occurs as a result loans (or saving). A consumer makes a certain amount of money in his lifetime, and these money is paid to him periodically (i.e. wage). If the consumer chooses to save the money, he is reducing present consumption and increasing future consumption (we assume this person spends all his money in his lifetime). Similarly, if the person decides to borrow, then he is increasing his present consupmtion and reducing future consumption because he has to pay back the loan. As you can see, increasing present consumption reduces future consumption and vice versa. There is no way to enjoy more of both, given a fixed income.

Now we discuss saving.

Saving leads to long term economic growth. ...

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Economic Princples

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Understanding Economic Principles

Hi, I am trying to get a full understanding of the economic principles below.

1. Problem-solving question: Use the following data for a pure monopoly to calculate the firm's: (a) total revenue, marginal revenue, marginal costs, and average total cost; (b) its profit-maximizing output level and produce price; (c) its profit. (d) Use the price-cost formula to determine whether or not the firm's operations are productively-efficient. (e) Use the price-cost formula to determine whether or not the firm's operations are allocatively efficient.


0 $120 $100
1 119 200
2 118 280
3 117 340
4 116 380
5 115 400
6 114 460
7 113 560
8 112 665

2. (a) Identify three types of competition that most firms encounter other than competition from other firms in their industry in their home country. (b) Is it good for the economy to have more competitive markets? Explain. (c) If government industry regulators underestimate the degree of competition in an industry are they likely to over-regulate the industry? Explain.

3. (a) Economically, when is it best for a firm to outsource or contract-out some part of its production? (b) Provide an example of a business task or operation that it would make sense to outsource.
(c) Provide an example of a government task that it would be economically efficient to contract-out. (d) Is there any risk to outsourcing? Explain. (e) For a task that is already outsourced, could it make sense to bring it back in-house at some future time? Explain.

4. (a) Identify two market structures in which product development and product differentiation is an important type of competition for firms operating in those market conditions. (b) Provide examples of three types of product differentiation that could help make a firm in a particular industry more competitive.

5. (a) Would a minimum-wage law help entry-level workers in some market structure; while hurting them in another market structure? Explain. (b) Would a labor union help workers in some market structure; while hurting them in another market structure? Explain.

6. (a) Identify and describe four causes (i.e., types of unemployment). (b) Are some workers more likely than others to be laid off and have a harder time finding another satisfactory job? Explain.

7. (a) Identify three economic variables that create differences in market interest rates on assets and/or liabilities. (b) For most companies, are business loan interest rates lower than the interest rates on personal loans for most U.S. households. Explain (c) Is the interest rate paid by the U.S. government on its short-term Treasury bills (T-bills) usually less than a comparable commercial paper loan to most corporations in the U.S.? Explain.

8. (a) Recommend some U.S. fiscal policy change in business taxes or government spending that would reduce the U.S. government's budget deficit and also help improve the U.S. economy? Explain. (b) Would reducing the federal budget deficit also reduce the national debt? Explain. (c) What's wrong with raising taxes in a recession?

9. (a) State two economic principles of taxation. (b) Which principle best justifies the excise tax on gasoline, when the tax revenue is used to maintain or improve the roads? Explain. (c) Which principle best justifies the progressive U.S. taxation of corporate profits? Explain.

10. (a) Define the inflation rate. (b) Explain how the CPI differs from the PPI, as a measure of the U.S. inflation rate. (c) Why is inflation risk a business management risk? (d) Which would be better, for the U.S. economy, a low stable inflation rate or deflation? Explain. (e) What U.S. government organization is primarily responsible for controlling the U.S. inflation rate, while helping to reduce cyclical unemployment and increase the U.S. economic growth rate?

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