Macroeconomics: Production, Costs, and Supply

• An airline's factors of production include: aircraft as capital, airline owners are labor, computer networks are land, and the pilots as enterprise.

Macroeconomics

• Cost-push inflation studies.
• A country's production possibility curve (PPC) shifts to the right (from PPC1 to PPC2) when there is an increase in its productive capacity.

PPC Movement

• Can be caused by better education and higher investment.
• Is not necessarily caused by lower unemployment (unemployment lowers inside the PPC curve).

Opportunity cost

• A student spending $5 on a party present (with free admission) involves an opportunity cost equal to the value of other goods that could have been purchased with that $5.

• If the market for a good was in equilibrium and a change resulted in a new equilibrium with a higher price but a lower quantity traded, the supply curve has moved to the left.

• A perfectly inelastic supply curve is a vertical line, indicating quantity supplied (Supply Curve B) does not change regardless of price.

Face Mask Allocation

• Would be inefficient in a free market because consumers only consider private costs and benefits.

Price Ceilings

• When a maximum price (P1) is fixed by the government, it likely leads to a shortage of the good.

Government Intervention

• When trying to reduce traffic congestion
• Building a new road with a toll is mainly to address a market failure

Monopoly Markets

• High profits can be caused by barriers to entry, preventing competition.

Currency preference

• If consumers use less paper money, one likely reason is more ways of making payments becoming available.
• Organizations that can directly fund the growth of firms: commercial banks and governments

Worker Specialization

• Main disadvantage for a worker in specialization, is boredom due to repetition of the same task.

Firm Costs and Production

• For 4 bicycles, the average cost of production is $15.
• In government finances, an 8% revenue increase to $3.25 trillion coupled with a reduction in expenditure to $3.20 trillion results in a budget surplus and the government policy is aimed to increase surplus.

Economic growth

• Is unlikely to be caused by decreased taxation

Expansionary Monetary Policy

• When a government use this policy is trying to decrease interest rates

Unemployment Types

• A shop worker being made redundant due to self-service checkouts is an example of structural/technological unemployment

Household borrowing

• Combination of higher consumer confidence and higher rates of interest would increase amount of borrowing by a household.

Types of Mergers

• A Swedish furniture maker buying a Romanian firm that owned 83,000 hectares of trees (a supplier) is most likely a vertical backward merger

Fiscal Policy Measures

• Reducing the rate of corporation tax is an example of fiscal policy

• Country with the lowest standard of living: lowest real GDP per head ($190) despite a relatively high population density and low life expectancy (46 years).

• Deflation is a sustained fall in the general price level

• It maybe be caused by insufficient private capital investment or loss of confidence in the governments economic policies

Economic Development

• Rapid population growth limits economic development in low-income countries.
• To end a recession and increase economic growth the likely choice is low taxes and increase government spending

Human Development Index (HDI)

• Includes life expectancy at birth, expected years of schooling, and GDP per head.
• A typical characteristic of a developing country is a high reliance on natural resources.
• High-income economies typically feature low birth rates and high adult literacy rates.
• Reducing the Rate of Sales Tax: Is among the policies most likely to reduce relative poverty.

Depreciation

• Depreciation in the foreign exchange rate: the value of a country's currency falls on the international exchange market.