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# Macroeconomics and Microeconomics - MicroFB - Essay Example

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MicroFB Name: Course: College: Tutor: Date: PART ONE 1A 2B 3D 4B 5B 6D 7B 8A 9C 10B 11A 12A 13B 14B 15C 16C 17D 18A 19C 20A 21C 22A 23C 24C 25B 26A 27D 28B 29A 30A 31A 32A 33B 34C 35B 36A 37A 38A 39D 40A 41B 42B 43C 44A 45A 46C 47A PART TWO Question one Law of demand in microeconomic is the notion that demand will decrease as the price of a commodity rises and the demand will increase as the price falls…

## Extract of sampleMacroeconomics and Microeconomics - MicroFB

Download file to see previous pages... For example, when a 20% increase in vehicles results from a 20% increase in investment on manufacturing equipments, then the firm could be experiencing constant returns to scale. Question three Economic profit refers to the difference between total revenue and opportunity cost. For instance, Pesso invests \$1,000 to begin a business in a particular year which she earns \$1,200 in profits. But if she had not begun the business she could have earned a salary of \$4,500. In such a case, the economic loss is \$250 (1,200 – 1000 – 450). Question four Law of diminishing marginal returns states that as new workers continue to increase, the marginal product of any additional worker will at some instant be lower than that of the previous worker. For instance, if a company employs workers to produce its commodities, at some point in time each additional worker will provide lower output than the previous worker, if all other factors remain unchanged. Question five Marginal product of labor refers to the change in output resulting from hiring an additional worker. For example, if a pizza restaurant with three employees makes 100 pizzas in a day and 120 pizzas with four employees, the marginal product of labor is 20 pizzas (120 – 100). ...
For instance, a firm that has spent \$10 million acquiring a machine which is not yet installed has to consider the \$10 million sunk because it cannot recover the money. Question eight The principal-agent problem refers to the conflict of interest that occurs when an agent is hired by a principal to conduct specific tasks that are extremely costly but in the best interest of the principal. For example, the problem will occur when a company hires a rating agency to set a credit rating and the agency is objective to give a higher rating than that which is deserved in fear of losing future contracts. Question nine Equilibrium price refers to the market price where demand of a good equals the supply. For example, when a market is able to produce 100 pizzas which exactly equal the demand of the pizzas, the price at which the pizzas are offered is the equilibrium price. Question ten Tragedy of the commons can be defined as the dilemma that arises from the situation in which many individuals, working independently and only consulting own interest, will eventually diminish a shared scarce resource even when it is apparent that the action is not in the long-term benefit of all. For instance, if the activities of a mining company affect a natural spring that is the source of water for local people and animals, the occurrence is a tragedy of the commons. PART THREE Question one Economies and diseconomies of scale refer to two completely opposite models. Economies of scale occur at a point when the quantity produced by a firm offers the firm the low cost advantage and the firm earns the minimum cost advantage. Conversely, diseconomies of scale occur at a point when the firm produces less than the amount of the input costs and the ...Download file to see next pagesRead More
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