Reference no: EM131095265

Module 1 Assignment

1. Explain the concept of opportunity cost. Provide a simple example for an economy and a simple example for an individual. How is it related to scarce resources? Explain scarce resources for an economy and for individuals.

2. Explain the function of the goods and services market and the factors of production market in the Circular Flow Model. Explain both real and money flows and the role of prices in both the product and factor markets.

3. Using an example, explain why the production possibilities frontier is bowed outward.

4. Use the production possibilities frontier to explain fully economic growth, efficiency, and inefficiency.

5. Suppose that China can use cheaper labour to produce every product more cheaply than Canada. Explain why Canada will still gain from international trade with China.

Module 2 Assignment

1. Explain fully the difference between an increase in demand and an increase in quantity demanded. Be sure to explain increase, not change or decrease. Provide at least four reasons for an increase in demand. Use appropriate graphs to illustrate your answer.

2. Compute the price elasticity of demand if price increases from $10 to $12 and quantity demanded falls from 600 to 400. Use the value obtained and a specific example to determine whether price must be increased or decreased to increase total revenue. Explain why. Note: Explain only how to increase total revenue, not decrease it.

3. Explain the concept of income elasticity of demand. How is it used to identify normal goods, luxuries, necessities, and inferior goods? Be as specific and logical as possible.

4. Why is a minimum wage such a popular government policy in most countries? Use your understanding of supply/demand analysis to explain the advantages of the minimum wage and the disadvantages of the minimum wage. Provide a graph to illustrate your answer. Be sure to use your graph and the laws of supply and demand to answer the question, not public opinion.

Module 3 Assignment

1. Use the Law of Demand to explain why all consumers must receive a surplus whenever they purchase more than one unit of a product but may receive no surplus if only one unit is bought. Make up a numerical example to illustrate. Provide two reasons why consumer surplus must increase when the price of a product falls?

2. Explain fully why taxing a product leads to deadweight loss. Use appropriate graphs to explain why the deadweight loss is greater the more elastic the demand for a product. Focus only on the elasticity of demand, not supply.

3. Governments often claim that they impose high taxes on cigarettes because smoking is bad for your health. They claim that the high taxes are intended to discourage your consumption. Use your understanding of the elasticity of demand to dispute this claim, assuming that cigarettes have a very inelastic demand. Illustrate with a graph.

Hint: Very inelastic is not the same as inelastic or perfectly inelastic.

4. Supposing that Canada and China were the only two countries in the world, why would it be impossible for Canada to import a greater value of goods from China than the value we export to China, even if China produced most goods more cheaply than Canada? Use this example to explain why increasing our imports from China can never create unemployment in Canada.

Module 4 Assignment

1. What is the relationship between Pigovian taxes and market failure? How do Pigovian taxes internalize externalities? Suppose that we are able to identify that the external cost of driving cars is $5,000. How can we use a Pigovian tax to internalize this external cost? Use a graph to illustrate.

2. Explain fully why the private sector of a free enterprise economy cannot produce public goods such as lighthouses.

3. The fishery is the most important common property resource in Canada. Why is it so difficult to prevent over-fishing when the evidence is clear that over-fishing will destroy the fishery? What kinds of policies have Canada used to protect the fishery?

4. The media often claims that high-income Canadians pay the same or lower taxes than low-income Canadians. Is this a valid claim? Why or why not? Compare a Canadian earning $40,000 per year with a Canadian earning$80,000 per year. Would the higher-income Canadian pay the same amount of tax? Twice as much tax? Or more than twice as much tax? Explain. Explain why marginal tax rates in Canada are higher than average tax rates.

Module 5 Assignment

1. Use the law of supply caused by firms experiencing increasing marginal cost in the short run to explain why all producers must receive a surplus whenever they produce and sell more than one unit of a product but may receive no surplus if only one unit is sold. Make up a numerical example to illustrate. Provide two reasons why producer surplus must increase when the price of a product rises.

Hint: Refer back to Question 1 on Assignment 3.

2. Explain why the slope of the production function falls as more workers are hired, that is, total product increases at a decreasing rate, while the slope of the total cost curve rises as more output is produced, that is, TC increases at an increasing rate.

3. Explain fully why the short-run ATC curve is U-shaped, that is, falls then increases as more output is produced in the short run.

4. Why is the long-run ATC also U-shaped? Explain fully.

Module 6 Assignment

1. Explain why both monopolies and perfectly competitive firms produce the output where MR = MC. Since MR = MC for both monopolies and perfectly competitive firms, why is the profit-maximizing price based on MR = MC higher than MC for the monopoly but equal to MC for perfect competition?

2. Under what conditions will monopolies and perfectly competitive firms make losses, even when they are producing the profit-maximizing output? Under what conditions will they both stay in business and continue to produce in the short run, even with making losses?

3. Explain fully why monopolies lead to a "deadweight" loss but perfect competition does not, even though both maximize profits by producing the output where MR = MC. Under what conditions will the monopoly price be lower than the perfectly competitive price, assuming that both are maximizing profits?

4. The existence of excess capacity in monopolistic competition means that there are too many firms. Does this increase in the number of firms increase or reduce the price which consumers pay? Why or why not?

Module 7 Assignment

1. Explain two important differences between the labour market and the product market.

2. Explain why the value of the marginal-product curve for labour is also the demand-for-labour curve in a perfectly competitive labour market.

3. Explain two factors which shift the demand for labour and two factors which shift the supply of labour.

4. Provide four reasons why some workers receive higher wages than other workers.