Government works to create a competitive marketplace to help foster competition, yet it also awards patents which prevent competition. Why are both competition and the patent system essential to creating a large economic pie?
What will be an ideal response?
Competition drives prices down close to the cost of the resources used in the production of a product, and this encourages more purchases and expands the economic pie. Patents discourage competition, but by creating a captive market for the first person to come up with a good idea, patents encourage entrepreneurs with good ideas to develop those ideas for the marketplace. Without patents, there would be much less invention and innovation.
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Suppose that the demand for oranges increases. Carefully explain how the rationing function of price will restore market equilibrium
What will be an ideal response?
If Billy's reservation price on a snowboard is $250, how many snowboards would he buy if the market price of snowboards is $500?
A. 0 B. 1 C. 2 D. The amount of snowboards purchased would depend on Billy's income.
Which of the following could impede productivity improvements?
A. Technological advances. B. Management training. C. Higher ratios of capital to labor. D. Lack of savings.
An argument against the use of tariffs to keep out the production of "cheap" foreign labor is that:
A) wage rates and labor productivity are directly related. B) product prices and labor costs are unrelated. C) there is no significant relationship between labor productivity and wage levels. D) they don't work.