Economics Short Answers PDF

Preview

Summary

All in class short answers answered...

Description

Oligopoly: In the smart phone industry, an oligopoly exists. I believe that an oligopoly exists in this industry because it would be almost impossible for another company to enter this industry and strive more than those that are already a part of it. Out of the major smart phone companies, Apple, Samsung, and Nokia, Apple may be operating as a typical oligopolist as it reduces output while raising prices, spends money on advertising, and has great quality products.                                

Advertising: Advertising is harmful to society because of the way it wastes resources, is manipulative, and impedes competition. Advertising is beneficial in the way that it provides information about products to customers and fosters competition but the negatives it far outweighs the positives. Advertising is a waste of resources because without it, businesses would be able to incur lower costs, perhaps sell their products for lower prices, and thus sell more products. Next, advertising is manipulative because it allows the company that is advertising to pick and choose what the public knows about the product, making viewers believe that what is advertised is all that there is to a product. Lastly, advertising is harmful to society in the way it impedes competition because it convinces consumers that products are more different than they truly are.                           

Monopolies: An argument in favor of monopoly regulation: Monopolies should be regulated because they stop competition, get too powerful, and drive up prices. Having a free market ensures competition and that companies are always improving. With monopolies enforced, the major companies become inefficient and wasteful. Because we live in a democratic country, allowing a few companies to hold all of the cards ruins the purpose of our governmental state and often leads to corruption. Furthermore, monopolies ought to be regulated because, without competition, monopolies have total control over prices. The damage monopolies do far outweigh the benefits of establishing monopolies. An argument that monopolies be left alone to do business as they see fit: Monopolies should be left alone to do business as they see fit because they allow for an increased output of goods and services and for businesses to compete internationally. An increased output of goods leads to a lowering of internal costs; this allows consumers to save money. Leaving monopolies alone allows businesses to create a large level of brand recognition on a global level allowing them to compete in foreign markets. Allowing monopolies to do business as they see fit not only benefits businesses but consumers as well.                     

Goals of Business: In a discussion between the Nobel Prize-winning economist Dr. Milton Friedman and Whole Foods CEO John Mackey, both successful men offer differing viewpoints concerning the number one goal of businesses. Friedman claims “that the only social responsibility a law-abiding business has is to maximize profits for the shareholders” (Rethinking the Social Responsibility of Business) while Mackey makes the point that Friedman’s view is too narrow. Mackey asserts that “‘business is not concerned 'merely' with profit but also with promoting desirable 'social' ends; that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers’” (Rethinking the Social Responsibility of Business). Personally, I agree with Mackey’s side of the argument because I believe businesses are not only focused on profit but also on the social implications that their company administers. I think Mackey has a better viewpoint as he is the head of a company and knows what his goals for his company are.                       

Variable Costs: If I were to set up a pet hotel business where I offered housing for pets whose owners leave town on holiday, I would have both fixed and variable costs. A fixed cost I would enforce would be the amount charged for stay per night because no matter what, the stay would cost the same. Furthermore, a variable cost would be the amount charged for food because the more a food a dog eats the more the owner will be charged. Another variable cost would be the amount charged for grooming as a bigger dog with longer fur should be more expensive than a smaller dog with shorter fur because it would take more time to groom them. Lastly, I think my efficient scale would be the cost to make the hotel and the supplies I must purchase to run my business.                            

Tax Brackets: In the U.S. single filers' tax bracket information given in the lecture, the principle that the more an individual income is the higher their tax rate is is shown. For example, in the tax bracket given, someone who makes $37,660 per year has a tax rate of 25% while someone who makes $415,000 per year has a tax rate of 35%. I would change the tax brackets by enforcing a lump-sum tax, a set dollar amount tax paid by every resident in the country in a given year in order to gain more efficiency. This would be efficient because there would be no deadweight losses and collecting the tax would be very easy.                              

Invisible Hand: The philosopher and political economist Adam Smith, in 1776, wrote regarding the "invisible hand". Smith claims that the innate striving everyone has for personal gain benefits the economy more than if the government had a strong hand in production. As it is understood that individuals want the best for themselves, an example of selfishness aiding the economy is if a producer is making a product they will produce it in the best way possible so that many people will buy their product. In the same way, people must buy products in order to survive and they will most likely purchase items that have good quality. Since people must buy and sell in order to survive, the economy will strive if people make selfish decisions. As long as there is both a consumer and supplier surplus in the market, everyone will benefit.                           

Inflation: In an attempt to lower inflation, the government may lessen the amount of money supply in the economy. Because prices would not balance out right away, individuals would spend less money on goods because they would be too expensive. From the lack of spending, companies would not get enough business and not have enough money to pay their employees. Not having these funds would result in workers having to be laid off; thus, causing unemployment to increase in the short-run.                               

Demand: Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price. If an unexpected storm were to destroy half of the world’s coffee bean crop and coffee bean farmers earn their income from selling these crops, the demand for coffee beans would have to be very elastic in order for the coffee bean farmers' income to decrease. Since the farmers’ income depends on the amount of coffee beans demanded, a drop in the production of coffee beans would greatly increase the price of beans. Since coffee beans are an elastic good in this instance, as the price of beans increases, the demand will decrease, thus decreasing the income of farmers. Many people are enjoying the services of Uber, a company which provides car-rides from point A to point B, scheduled and paid via phone apps. Taxi companies are not happy about this, as they believe Uber provides unfair competition. I think that Uber and Taxi rides are substitute goods because as Uber gains more income, Taxi companies are losing money. I do not believe that Uber competing with Taxi companies is "unfair" because if Taxi companies were to make strides, such as lowering prices and creating a mobile app like Uber’s, they would earn more money.                    

Supply/Demand Charts: In any Supply/Demand chart, the segment on the demand curve which is located below the equilibrium price represents those who would like to buy a particular good if its price was lower, but cannot because the good is currently a higher price. If the market is setting the price of these goods, then there will always be some who cannot quite pay the price required. This feature of the market system strikes me as immoral because it does not guarantee that everyone who needs antibiotics will get them. I believe the market should be abandoned in favor of some other system of pricing and distributing goods and services that support those with insufficient funds for essential goods, such as antibiotics. The individuals who need these do not have a choice and their life and health are on the line. When Christ was on the earth, He took care of the poor, unable people and I believe that is the government's job to do the same. Replacing the current market for one that is in favor of those with insufficient funds will allow those who currently cannot take care of themselves to do so. The law of supply states that as prices rise, quantity supplied will rise, and as prices fall, quantity supplied will fall. Over the last 15 years or so, the price of flat-screen televisions has come down significantly, but there are many more flat-screen televisions produced today than there were 15 years ago. This violates the law of supply because rather than the supply of televisions decreasing along with the decrease in the price of televisions, the supply has increased.   ...