Ch. 4 & 7
16 March, 2016
*Show calculation steps clearly. Round the values to 2 decimal places only*
Q1 Assume that you are a Canadian business owner. You may face any of the following business
1. One advantage market economies have over other types of economies is that market economies
a. provide an equal distribution of goods and services to consumers.
b. establish government economic control.
A competitive firm is a price taker; a monopoly firm is a price maker.
Why Monopolies Arise
Definition of monopoly: a firm that is the sole seller of a product without close
The fundamental cause of monopoly is barr
FIRMS IN COMPETITIVE
What Is a Competitive Market?
The Meaning of Competition
Definition of competitive market: a market with many buyers and sellers
trading identical products so that each buyer and seller is a price taker.
THE COSTS OF PRODUCTION
1. The goal of firms is to maximize profit, which equals total revenue minus total cost.
2. When analyzing a firms behavior, it is important to include all the opportunity costs of production.
Some of the opportunity costs, such
The Determinants of Trade
Example used throughout the chapter: the market for steel in a country called Isoland.
The Equilibrium Without Trade
If there is no trade, the domestic price in the textile market wi
ELASTICITY AND ITS
The Elasticity of Demand
Definition of elasticity: a measure of the responsiveness of quantity demanded
or quantity supplied to one of its determinants.
The Price Elasticity of Demand and Its Determinants
INTERDEPENDENCE AND THE
GAINS FROM TRADE
1. Trade makes everyone better off because it allows people to specialize in those activities in which
they have a comparative advantage.
2. The principle of comparative advantage applies to countries as well as
Practice Test 1
1.Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to
another city to attend the concert of her favourite music group. The cost of transportation for
the trip is $250. The cost of the concert
Practice Test 13
Identify the letter of the choice that best completes the statement or answers the question.
1. According to the law of supply,
a. firms' production levels are not correlated with the price of a good.