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    (Original post by Ploop)
    One more question, the question is with the help of table 2, discuss the likely effects of the free trade area on the economic development of its members. There's a boom in jobs and an increase of $1200mn PPP increase in total in GDP, so where's the negative? I could talk about the inflation I suppose, but that's a bit tenuous and is not something we've focused on when talking about Development Economics.
    Hmm, does it have to be something you can see from the data? If not, free trade could lead to initial job losses, especially in uncompetitive industries. In underdeveloped countries without a social security system this can lead to malnutrition etc.
    A possible BoP deficit? Exchange rate and currency issues?
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    (Original post by Apagg)
    Hmm, does it have to be something you can see from the data? If not, free trade could lead to initial job losses, especially in uncompetitive industries. In underdeveloped countries without a social security system this can lead to malnutrition etc.
    A possible BoP deficit? Exchange rate and currency issues?
    I suppose it needn't come from the table. The rise in employment confused me initally until I realised that there would be foreign investment as a result of turning to the free trade, but I never considered the short term implications of being priced out of the market so output and employment falling. Thanks, I love this forum. It has the most intelligent posters on.
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    im really confused on how to answer this question.
    It gives me this table and asks me what the profit-maximising output is.

    Output 0 1 2 3 4 5 6
    FC 60
    VC 0, 50, 80, 105, 152, 225, 330
    TC
    AFC
    AVC
    ATC
    MC
    TR
    AR 0, 60
    MR

    I just assumed that Marginal revenue is 60 for all because it doesnt give me enough info to figure out otherwise, but at no point does MR = MC so could some please tell me how i'm supposed to answer this question. Would appreciate it, exam on thursday
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    (Original post by lolzorz)
    im really confused on how to answer this question.
    It gives me this table and asks me what the profit-maximising output is.

    Output 0 1 2 3 4 5 6
    FC 60
    VC 0, 50, 80, 105, 152, 225, 330
    TC
    AFC
    AVC
    ATC
    MC
    TR
    AR 0, 60
    MR

    I just assumed that Marginal revenue is 60 for all because it doesnt give me enough info to figure out otherwise, but at no point does MR = MC so could some please tell me how i'm supposed to answer this question. Would appreciate it, exam on thursday
    I just did the question and it works fine.

    Remember that the marginal cost is really between the units of output (e.g. between 0 and 1, between 1 and 2, etc.). You could even sketch out the curve and put the MC values half-way between the output values (0.5, 1.5). And as you've mentioned, MR is fixed at 60 so it's a straight line. The profit-maximising output is where the lines intersect.

    Actually, it works out perfectly if you just use the numbers and take an average. So the MC at output 2 would be (30 + 25) / 2 = 27.5. If you work it through like that you should get an answer.

    And I don't think I've ever seen a question like this on an exam (at least not OCR) so don't worry too much about it.
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    thanks for the reply, i understand profit-maximization better how to do it now . The help's much appreciated
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    For the market failure paper, it asks, 'besides reducing the market failure, what are the other benefits of using a subsidy/taxation/regulation in this instance?'

    For taxes and regulation, I can see how it can earn extra revenue for the government, but for subsidies, what other benefits are there? It improves consumer welfare yes, but surely that's part of the 'reducing market failure' part? :confused:
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    (Original post by Ploop)
    For the market failure paper, it asks, 'besides reducing the market failure, what are the other benefits of using a subsidy/taxation/regulation in this instance?'

    For taxes and regulation, I can see how it can earn extra revenue for the government, but for subsidies, what other benefits are there? It improves consumer welfare yes, but surely that's part of the 'reducing market failure' part? :confused:
    I didn't like that question too much either.
    Maybe with subsidies you can mention the infant industry argument.
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    You can say that in some markets a quantity of the good being produced domestically is of national importance, for example we will want to produce some food here should there be a drought in another country or we want to produce energy here because we don't want all our gas coming from Gazprom where national security could potentially be at risk depending on Russia's foreign policy.

    Not sure if that's really within the relms of what you're doing, especially as you're probably trying to talk about why protectionism is bad.
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    Epitomessence - that's all on my notes! By the way, some guy I had never spoken to PMed asking for them, don't suppose you have anything to do with that? :ninja:

    Anyway - A tariff places a tax on an export/import - directly making it more expensive to export/import. A quota put a limit on how many goods can be exported/imported. Effectively they do the same thing - raising the price of exporting/importing (by limiting supply, a quota increases the price - assuming the quota was < previous supply).

    The steel question - a diagram showing the effects of a tariff is on page 6 of unit 6 notes.

    I'll assume the last question is 'assess the basis for trade liberalisation as promoted by the World Trade Organisation.' Basically David Ricardo's theory - page 5 of my notes. And pages 10-11. I would be more helpful on this question, but I fear I'd post an essay.
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    I encountered a problem when doing a past paper (june 06).
    the question is as follows:

    c)The schedule below shows the market demand for the product of a monopoly

    QD per week(millions) 2,3,4,5,6
    Price per unit (£) 6,5,4,3,2

    ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

    Is this consistent with the data in the schedule above? explain your answer.

    After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
    i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance
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    (Original post by lolzorz)
    I encountered a problem when doing a past paper (june 06).
    the question is as follows:

    c)The schedule below shows the market demand for the product of a monopoly

    QD per week(millions) 2,3,4,5,6
    Price per unit (£) 6,5,4,3,2

    ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

    Is this consistent with the data in the schedule above? explain your answer.

    After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
    i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance
    Price falls from £5 to £4 so the sum is:
    -1/5*100 = -20 The original price was £5, the change £1, so it's simply change divided by original price (then *100 for %)

    QD changes from 3 to 4, so it's 1/3*100 = 33.%

    Put that into the PED equation of % change in QD/% change in price and it equals -1.67! Hope that's clear enough.
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    (Original post by lolzorz)
    I encountered a problem when doing a past paper (june 06).
    the question is as follows:

    c)The schedule below shows the market demand for the product of a monopoly

    QD per week(millions) 2,3,4,5,6
    Price per unit (£) 6,5,4,3,2

    ii) Market research has estimated that, as price falls from £5 to £4 per unit, the price elasticity of demand is (-)1.0.

    Is this consistent with the data in the schedule above? explain your answer.

    After i was going through the mark scheme to mark my work, it said that elasticity was (-)1.67
    i cant see how they got this answer. Could some1 please explain this to me. Thanks in advance
    Just use the equation for price elasticity of demand (PED):
    PED = %ΔQD / %ΔP
    %ΔQD: Percentage Change in Quantity Demanded
    %ΔP: Percentage Change in Price

    You should be able to do it from there, if not:
    Spoiler:
    Show
    %ΔQD = (-1/5) * 100
    %ΔP = (+1/3) * 100
    PED = ((-1/5) * 100)/((1/3) * 100) = -5/3 = -1 2/3 = -1.67
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    Thanks, i cant believe i didnt even read the question properly. Only realised it was asking bout PED after i posted it i feel so stupid. Thanks for the helps guys. Very much appreciated
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    Could someone please help me with the question posted on the linked thread:

    http://www.thestudentroom.co.uk/showthread.php?t=509943
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    Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance
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    (Original post by E-Girl)
    Could someone please help me with the question posted on the linked thread:

    http://www.thestudentroom.co.uk/showthread.php?t=509943
    I have posted the answer in that thread
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    (Original post by lolzorz)
    Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance
    Consumer surplus = the difference between the amount that consumers are willing to pay for a product and the amount that they actually pay

    This is represented by the (usually) triangular area under the demand curve and above the price in a supply and demand diagram.
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    (Original post by lolzorz)
    Could somebody give me a clear, consise definition for consumer surplus please. I understand what it is but i fail to give a proper definition, thanks in advance

    The Economist
    is v good for this sort of thing btw


    Consumer surplus

    The difference between what a consumer would be willing to pay for a good or service and what that consumer actually has to pay. Added to PRODUCER SURPLUS, it provides a measure of the total economic benefit of a sale.
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    Thanks loads guys, oh could i also get one for Producer surplus?
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    Producer surplus is the difference in the price that they are willing to accept for the product and the actual price they accept.
 
 
 
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