Economics Homework Seven Answers - Student Five

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Seth P.

1.The four elements of perfect competition are lots of competitors, lots of things to compete over (perfect substitutes), knowing what all is going on, and everyone has to have the same opportunities.

Superb way to put in your own words. May use as a model!

2.I might use competition to motivate me to achieve more by making myself concentrate which usually allows you to do better.

Good.

3.Income elasticity and inelasticity.

Tricky concepts. Keep in mind that it is a change in demand for a good divided by a change in income by the buyers. If the demand changes a great deal, then it is elastic; if not, then the good is inelastic.

4.I think the converse of Gresham's Law is true with respect to speech and conversation because if you focus on good things, like the Bible, it won't leave room in your life for bad things. The same goes for bad things, if you focus on bad things then there won't be room for good things. I personally think it is better to focus on good things.

Superb.

5.Total cost is the total amount of all your costs put together. Average cost is the costs your spend per unit. Marginal cost is the cost of extra units compared to the units before them.

Correct, except the marginal cost (MC) is the cost of only one more unit, not "extra units". (Minus 1).

6.The loss in wealth for not having the dance is 150 x $15 = $2,250. The loss of consumer surplus is 50 x $5 = $250, 10 x $10 = $100, and 5 x $15 = $75 for a total of $425.

Second part is correct. The first part is not what I meant, but OK. (I meant "wealth" as synonymous for "consumer surplus."

7.There is not perfect competition between homeschooling and public schools, because the competition doesn't have perfect substitutes and both sides don't have the same opportunities.

Right.

8.Competition can be defined as the free market, because the stores in the free market compete against each other for the customers and the customers compete against each other for the lowest prices. The free market takes all that and finds an equilibrium point and says this is what the price will be. Usually everybody agrees that is a good price. That is competition.

Good new definition.

9.I think there would be less jobs because a lot of people want jobs but there aren't that many openings and it costs the owner a lot of money to hire them.

Right.

10.The firm's profit is zero. Loss is zero unless you are including fixed rates like the price of the factory when they bought it. Then they would lose out on the money they already spent.

Right again.

11.

Free pass. You also had a free pass on a question in the first part, which you did not use.
89/90. Best in the class so far! Congratulations.
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