Category: Economics

What common factor turned all four products into “hot” toys? Explain.

➤ How does monopsony differ from monopoly?
A monopsony is buyer market power over inputs, typically labor, while a monopoly is seller power over a product market. Monopolies raise prices and reduce output for consumers; monopsonies lower wages and reduce employment for workers. Both cause allocative inefficiency and deadweight loss, but they act on opposite sides of market transactions.

The greater the MPC, the smaller the spending multiplier. True or false?

➤ How do you use total cost to find average and marginal costs?
Divide total cost by output to get average cost (AC = TC/Q). Find marginal cost as the change in TC when output changes by one unit (ΔTC/ΔQ). These measures guide pricing and output decisions and reveal where production is most efficient or costly.

➤ What is moral hazard and why does it matter for firms?
Moral hazard happens when one party takes greater risks because another bears the cost. It raises agency costs, lowers contract efficiency, and can cause losses, regulatory scrutiny, or reputational harm. Firms that address moral hazard improve alignment between incentives and outcomes and reduce the need for expensive corrections and oversight.

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The opportunity cost is the price for exporting and importing
A Yes
B No

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Prior to 1950, which group of countries had the highest growth rates?