Question 1. Explain why the terms market, capitalist, or socialist economies are no longer appropriate to differentiate between today’s economic systems.
Question 2. The U.S. economy may be thought of as consisting of three large groups.
(a) Name them.
(b) Provide an example of the interaction between each of these groups.
(c) Sometimes a fourth group is included. What would that group be? Provide an example of the interaction between this and the groups listed in your answer to (a).
Question 3. Consider the following table of numbers, which represents demand and cost conditions for a competitive firm.
(a) Fill in the missing values.
(b) What level of output should the firm produce? Explain.
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P = MR
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Q
|
TFC
|
AFC
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TVC
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AVC
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TC
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ATC
|
MC
|
TR
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Total
Profit
|
|
600
|
0
|
|
-
|
0
|
-
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570
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-
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|
|
|
|
600
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1
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570
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240
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|
|
|
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600
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2
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|
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430
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|
|
|
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|
|
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600
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3
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|
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670
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|
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|
|
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600
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4
|
|
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960
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|
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|
|
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600
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5
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|
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1350
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|
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600
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6
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|
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1840
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|
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600
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7
|
|
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2430
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|
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600
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8
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3120
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|
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600
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9
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3910
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|
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|
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600
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10
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4800
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|
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Question 4. You own four firms that produce different products. The following table summarizes the conditions in each firm. After calculating the missing numbers for each firm, make one of the following four decisions regarding operations in each firm, and explain why a particular decision is reached.
(a) continue producing the same output level
(b) shut down
(c) increase output
(d) decrease output
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Firm
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P
|
MR
|
TR
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Q
|
TC
|
MC
|
ATC
|
AVC
|
|
A
|
11
|
8
|
|
20
|
200
|
5
|
|
9
|
|
B
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3
|
1
|
|
100
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|
1.5
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2.5
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2
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C
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4
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2
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200
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|
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2
|
7
|
5
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D
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8
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5
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|
10
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70
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5
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6
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Question 5. Given the market share information in the table below, calculate the four firm concentration ratio and the Herfindahl index.
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Firm Number
|
Market Share (%)
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1
|
35
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2
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25
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3
|
15
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4
|
15
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5
|
10
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