Economics Questions Thread

[chrisjb]

I'd just like to edit that MC was only 15 marks out of 95 LOL.

My MC was 15 marks out of 30 if I remember correctly. My sac was prety easy but I made one silly mistake (a graph showed an increase in demand and I was going to write advertising as a factor but got cocky and thought I'd write about intrest rates instead and then promptly forgot that it was an increase in demand- not a decrease) and the freaking teacher decided to fuck wtih our minds by making one of the multiple choice questions 'how many states are there in Australia?'
I'm one hundred percent sure he's not allowed to do that...

^ Lol how is that even remotely related to Economics? More states does not necessarily mean more income.

I know! I'm hoping that it was a joke or something and it's not being counted because lots of people in the class got it wrong (said 7 or 8 states). It's just not fair if they lose marks for something like that.

[chrisjb]

I have a question about economies of scale... I just don't realy understand the term. I get that if a firm increases their output then their average cost will decrease, but what does the term actualy mean? Like... what is it? Is it a specific type of barrier to entry or is it a way of measuring a firm's market share? Also, how do you use it in a sentence, would it be 'this firm must enter into an economy of scale' or 'this firm must tackle the problem of economies of scale' or 'this firm's market is of a large economic scale'?

I'm very confused

[Hutchoo]

Why is GDP regarded as a lagging indicator of economic activity? 

[Water]

@Hutchoo

You can only calculate GDP based on past economic activity, on what has already occurred.

Since the calculation of GDP is the total annual production of goods and services per year, Calculated, per quarter.

By calculating per quarter <<< It makes it a lagging indicator, because we are calculating past events.

Whereas coincident indicators would be something like stock market, advertisement, etc etc.. Things happening now, that can reflect on economic activity levels



@chrisjb,

Don't put my word on this,

 but my teacher taught that, economies of scale, is the volume in which a firm must produce to cover it fixed cost and to be effectively efficient.

Say Toyota produces 200,000 cars, at a $20,000 rate per car.

Assume this is the most cost effective way of tackling car production, then every company must produce at this quantity, in order to survive in the car market. Then any firm that produces more or less than this amount, and it wouldn't be cost effective. Means cost per unit of car would go up, meaning less profits/ or no profits if in very competitive oligopoly, means bad business > Go Bust.




Having said that, my teacher is somewhat unreliable.


For the terms of barrier, I guess, what you can say, if involved in entering the markets of oligopolies and monopolies, the the economy of scale would involve large set up costs.....and if fail, could mean huge losses. Therefore many competitors shy away? << blah blah blah? (Clarify this with your teacher, our teacher just spent 2 - 3 mins on this crummy topic)


PS: anyone playing stock market for the asx, cause I am  :smitten:

[Hutchoo]

As usual, very nice
Thanks Water!
P.S Your bio box about economists made me laugh LOL. <3
Peace (Y)

[schmalex]

@Hutchoo

You can only calculate GDP based on past economic activity, on what has already occurred.

Since the calculation of GDP is the total annual production of goods and services per year, Calculated, per quarter.

By calculating per quarter <<< It makes it a lagging indicator, because we are calculating past events.

Whereas coincident indicators would be something like stock market, advertisement, etc etc.. Things happening now, that can reflect on economic activity levels



@chrisjb,

Don't put my word on this,

 but my teacher taught that, economies of scale, is the volume in which a firm must produce to cover it fixed cost and to be effectively efficient.

Say Toyota produces 200,000 cars, at a $20,000 rate per car.

Assume this is the most cost effective way of tackling car production, then every company must produce at this quantity, in order to survive in the car market. Then any firm that produces more or less than this amount, and it wouldn't be cost effective. Means cost per unit of car would go up, meaning less profits/ or no profits if in very competitive oligopoly, means bad business > Go Bust.




Having said that, my teacher is somewhat unreliable.


For the terms of barrier, I guess, what you can say, if involved in entering the markets of oligopolies and monopolies, the the economy of scale would involve large set up costs.....and if fail, could mean huge losses. Therefore many competitors shy away? << blah blah blah? (Clarify this with your teacher, our teacher just spent 2 - 3 mins on this crummy topic)


PS: anyone playing stock market for the asx, cause I am  :smitten:

When it is inefficient to increase production, this is called diseconomies of scale, so it's not really relevent to the concept.

Economies of scale occur when it's more efficient to increase production because fixed costs can be spread more thinly.

If you have a big factory that costs a lot of money to maintain, and you're only producing a few units of a good in the factory, you'll have to charge a lot of money for each unit to cover the cost of the factory, and the marginal cost of producing each unit. If you produce more units of a good, each will be cheaper, because the cost hasn't increased by much, so your revenue doesn't have to increase by as much.

Say I spent $100 maintaining my factory and it cost $10 per unit to produce whatever I'm making.
If I made one, it would cost $110 ($100+$10)
If I made two, it would cost $120 ($100+$10+$10), which is equivalent to $60 per unit.
If I made three, the total cost would be $130, and so my costs would be spread even thinner.

Does that make more sense?

[Hodgeyhodgey]

Could someone explain to me the relationship between demand and supply in the two sector economy? With reference to derived demand, resource allocation, etc.

I've been reading over this and it just isn't sinking in..

[Hodgeyhodgey]

Bump.

Really need this question answered ASAP ^^^

[chrisjb]

Another question for you all (and appologies to Hodgeyhoney, I would answer your question if I could, but it's way over my head).

Market Failure Occurs when:
A)Monopolies and oligopolies encourage competion
B)There is not enough production of luxury goods
C)There is limited production of public goods
D)There are no restrictions on the production of harmfull goods

Shouldn't both C and D be correct? Isn't D just negative externalites? Or is it that D is considered a government failure to regulate rather than a market failure of producing harmfull goods? I can't work it out.

Thanks fory our help and anyone who knows the answer to hodgey's question above, get on it!

[Hodgeyhodgey]

Haha it's ok now mate, turned out to be one of those questions that you can stare at for an hour and be completely oblivious as to how to answer it, then come back a couple of days later and wonder how stupid you could be.

...took me a page to explain the answer though :S

[DNAngel]

Another question, and this comes from a textbook:

'Australians enjoy cheap water relative to many countries. However, if the price of water in Australia was set solely by market forces and actually reflected its relative scarcity, it would be many times higher than it currently is. This would dramatically affect how our nation's resources are used in the future.'

a) Why would the cost of water rise if changes were made so that its price was determined by the free operation of market forces?

b) Into which specific types of industries would more resources flow, if water were dearer? Explain your reasons.

c) From which specific types of industries would resources be repelled, if water were dearer? Explain your reasons.

[chrisjb]

a) because the price is set artificialy bellow equilibrium price by the government regulator (not sure who... infrastructure ministry? Water ministry? treasury? Someone does anyway... but that's beside the point). This means that if the market was deregulated the underlying forces of demand and supply would result in an equilibrium price which is higher than the price set by the government.
b) Water production (increased profits (although they are probably subsidised as it is))
    Substitute products- De-sal plants? artificial water production?- not sure if these count as substitutes...
c) Complimentary products and products for which water is a factor of production- beer, agriculture, water bottles, salty foods, taps, shower curtains, showers, toilets, bath-tubs, anything else that uses water or needs water to be created.

P.S. +1 for eco down under

[Water]

hey Chrisjb, whats the answer to that multiple choice question cause god damn, what a shit question that is.

I've thought bout that question for a great length....

[chrisjb]

To my question above? The book says C, but I'm... skeptical. I don't think I'll ever see on that's that ambiguous in a sac/exam.

[Water]

I would suspect that

If we are going by book by book definition

Market Failure = Mis allocation of Resources


Then D would be wrong because it is a deregulation illustrated by "There are no restrictions" and not, the actual "action" of mis allocation of resources.

Whereas C is actually the "action" illustrated by "There is limited production" of  public goods.


Very Tricky question, I thought you meant C and D weren't right and I went WTF!