Explain three ways we can use microeconomic analysis
What will be an ideal response?
1. To understand markets and predict changes: One reason for studying microeconomics is to better understand how markets work. Once you know how markets operate, you can use economic analysis to predict how various events affect product prices and quantities.
2. To make personal and managerial decisions: On the personal level, we use economic analysis to decide how to spend our time, what career to pursue, and how to spend and save the money we earn. As workers, we use economic analysis to decide how to produce goods and services, how much to produce, and how much to charge for them.
3. To evaluate public policies: While societies use markets to make the most of decisions concerning production and consumption, the government has several important roles in a market-based society. We can use economic analysis to determine how well the government performs its roles in the market economy. We can also explore the trade-offs associated with various public policies.
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Refer to Figure 8.1. If Charla and Mirna agree to pay each other $350 to install the pollution-control device on their heating systems, the Nash equilibrium would be found when Charla plays ________ and when Mirna plays ________
A) Install; Install B) Install; Don't Install C) Don't Install; Install D) Don't Install; Don't Install
Refer to the information above. In which period does gross investment reach its peak?
A) 1 B) 2 C) 3 D) 4 E) 5
Which of the following is true regarding tacit collusion?
A) It is a formal agreement. B) It is more likely to occur when the price elasticity of demand is small. C) It is more likely to occur when barriers to entry are low. D) It is illegal.
Nebraska had an unseasonable cold winter requiring more salt for the roads than normal. If the supply does not change what would happen to the market for salt?
A. The increased demand but no change in quantity supplied causes a surplus of salt. B. There will be more suppliers of salt at every price. C. The increased demand but no change in quantity supplied causes a shortage of salt. D. There is no change in the market.