Interview Questions - Essay Example

Question Explain the similarities and differences between microeconomics and macroeconomics. Microeconomics represents the study of the economyat a smaller level, whereas macroeconomics is the study of the entire economy and how certain economic events impact situations. For instance, microeconomics might study the characteristics of a local company, in relation to how the firm spends its cash for increases in inventory to make a particular product. This involves the study from the level of the individual entity.

Macroeconomics might study a large-scale government (such as the U.S. govt) and how its decisions impact the international community all the way from consumers to manufacturing. These highlight the differences, however there are similarities as well, as both micro-level and macro-level analysis involve understanding how the activities of specific entities creates somewhat of a trickle-down effect on all aspects from either an individual level or wide-scale business/government/finance activities.

Question 2: Explain the concept of opportunity cost and why it is an important economic concept. Opportunity costs can best be defined as the largest-valued decision that is relinquished after a decision has already been determined. Opportunity costs are different for each individual or organization and they represent what has been missed in order to fulfill a different objective. For example, a student who decides they must take a full-time class load at a local university would have several opportunity costs: They would lose time with friends in order to study hard or they would miss out on working at their fathers business in order to receive a higher education.

This is an important economic model as it indicates scarcity and further aids in decision-making to assist in determining what the best course of action is once a decision has been made. Question 3: Suppose that more companies receive permission to drill for oil in Alaska and U.S.-controlled waters. In addition, assume that the popularity of SUVs declines in favor of smaller, more fuel efficient automobiles. What will be the result on the market (supply, demand, price, and quantity) for oil in the U.S.?

How does this move the supply and demand curve? The demand for oil would be considerably less, as more fuel efficient automobiles represents less consumer need for gasoline. At the same time, with companies digging in Alaska (and other areas), the supply of oil would also continue to increase. When this happens, when demand decreases and supply increases, likely the most significant impact would be a temporary lowered price for oil, at least until the demand for it grew. Assume that before the dig in Alaska gasoline was $3.

50 per gallon. Afterward, assuming they hit a big oil reservoir and oil became largely available in the U.S., the price would likely drop to below $3.00 per gallon. If the gas were suddenly a scarcity, meaning supply is lowered, the demand would increase, thus so would the price under this theory. Question 4: Explain what factors would increase the supply (shift the supply line to the right) of a manufactured product like white bread and what factors would cause a decrease in demand (shift of the demand curve to the left) for that same product.

This could involve complementary goods, or those goods which are used in conjunction with one another. For some people, bread may be a staple product that they must have and they consider bread to be necessary in order to make peanut butter sandwiches. Assuming that consumers consider bread and peanut butter to go hand in hand, when the price of peanut butter rose, the demand for bread would decrease. Perhaps, too, the price of lunch meat were to rise to a very high price. This would lower the demand for bread.

In relation to supply, the company who manufactures the bread would maintain a close awareness of how consumers are buying bread, and the market price it can fetch, and they would adjust the supply accordingly. For instance, if bread demand was high and it was fetching a price of about $2.89 on the market, the supply would be adjusted. Question 5: Explain the role of economic theory and answer the question, “what is an economic model?” Economic theory is important as it helps to understand how the activities of various entities, all involved within a specific macro- or micro-level activity, impact the stability of supply, demand, and basic consumerism.

It helps to understand the mentality of consumers, how their activities impact the forward progress of companies, and how all of this decision-making impacts the lives of a nations (geographic regions) citizens. Economic models create a template by which the characteristics of a specific object of study creates either value or negative consequences for the world at large. For example, assume that a less-developed nation makes only two products which they use the profits from to sustain their infrastructure.

Suddenly, their only export customer decides not to buy from this country anymore. Quickly, the local economy is affected and decisions must be made about new export opportunities or new product manufacture. The economic model would show how consumers typically act in these situations, assisting to create a forward direction on how to stabilize this local economy.