Answer all of the following questions. This assignment covers Chapters 1 through 6 in the textbook.
What is the mechanism by which the "invisible hand" pushes markets to equilibrium?
Explain the two main causes of market failure and give an example of each.
Use a production possibilities frontier (PPF) to describe efficiency. (This question can be answered either with or without the use of a graph, depending on whether you have a graphing program on your computer. It is possible to describe the various points on the PPF without a graph.)
What is the difference between a positive and a normative statement? Give an example of each.
Explain how absolute advantage differs from comparative advantage.
What are the factors that determine the quantity of a good that buyers demand?
Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.
List and explain the four determinants of price elasticity of demand, discussed in Chapter 5.
If demand is elastic, how will an increase in price change total revenue? Explain.
A recent study found that the demand and supply schedules for Frisbees are as shown in the chart at the following link: Frisbee Chart
What is the equilibrium price of Frisbees? What quantity is sold at this price?
Frisbee manufacturers persuade the government that Frisbee production improves scientists’ understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price. What is the new market price? How many Frisbees are sold?
Irate college students march on Washington and demand a reduction in the price of Frisbees. An even more concerned Congress votes to repeal the price floor and impose a price ceiling of $1 below the former price floor. What is the new market price? How many Frisbees are sold?
Use the graph at the following link to answer the questions below: Tax Graph
What is the equilibrium price paid by the buyer and received by the seller before the tax is imposed?
How many units are made and how many units are sold before the tax is imposed?
What is the amount of the tax?
After the tax is imposed, how much more will the buyer pay than the original equilibrium price?
After the tax is imposed, how much less will the seller receive than the original equilibrium price?
As a result of the tax, what has happened to the level of market activity?