How do explicit and implicit costs relate opportunity costs

Question

Assignment:

PART I

Directions: Please answer the questions below. Your response to each question must be at least one paragraph in length. Explain your thoughts with theory and examples where applicable.

1. What are opportunity costs? How do explicit and implicit costs relate to opportunity costs?

2. If the average total cost curve is falling, what is necessarily true of the marginal cost curve? If the average total cost curve is rising, what is necessarily true of the marginal cost curve?

3. List and describe the characteristics of a perfectly competitive market.

4. Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm sets its price below the current market price, what effect would this have on the market?

5. Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

6. If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

PART II

Please read the article Credit and Liquidity Programs and the Balance Sheet (https://www.federalreserve.gov/monetarypolicy/bst.htm) on the Fed's website.

Write a paper that is at least two pages in length in which you identify the following:

1. The position of the federal open market committee.

2. The primary points articulated in the paper.

3. Whether you believe Krugman would agree or disagree with the positions noted in the paper.

Please review this module's required videos for more information on Krugman's position.

PART III: Reflection Essay

As you read about numerous topics this week including balance sheets and the Fed's policy, reflect on the past two years of your life in terms of microeconomics. Is there information on the website you would have found useful in personal decision making? If not, what would you have found useful? Write a reflection essay that is at least one page in length. You must cite at least one source.