Recall, the allocation of resources refers to the
question of who makes and gets what?
Welfare economics is the study of how the
allocation of resources affects economic wellbeing
First, we look at the well-being of consumers.
prepared Feb. 8, 2017; revised Feb. 15, 2017
Practice worksheet for reading and understanding material balance problems with no recycle.
Below is a generalized block-flow diagram for continuous processes with no recycle, along with the
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Practice Exam 1
Answer the questions in the spaces provided. If you run out of room for an answer,
continue on the back of the page.
1. (10 points) Find a vector equation
A monopoly is a firm that is the sole seller of a
product without close substitutes.
In this chapter, we study monopoly and contrast
it with perfect competition.
The key difference:
A monopoly firm has market power, the ability
a market structure in which many firms sell
products that are similar but not identical.
One type of market failure: externalities.
Externality: the uncompensated impact of
one persons actions on the well-being of a
the effect on bystanders is adverse
A market is any group of participants who have
the desire and ability to trade with each other.
We will consider markets that can be divided into
buyers and sellers, although in some real world
markets a participant may play both r
Two goods: pizza and Pepsi
A consumption bundle is a particular combination
of the goods, e.g., 40 pizzas & 300 pints of Pepsi.
Budget constraint: the limit on the consumption
bundles that a consumer can af
PW = the world price of a good,
the price that prevails in world markets
PD = domestic price without trade
If PD < PW,
country has comparative advantage in the good
under free trade, country exports the good
Since the presidential election (including the primaries) began, the federal minimum
wage has been a big discussion between the political parties. Democrats and Progressives believe
the minimum wage should be raised to a