ECN 9 EXAM QUESTIONS WITH 100% CORRECT ANSWERS
Describe how natural advantages and thus natural market power can erode. Give examples. - Answer- Advantages don't last forever. New technologies undermine advantages.
Explain the concept: artificially created market power. Give examples. - Answer...
Describe how natural advantages and thus natural market power can erode. Give
examples. - Answer- Advantages don't last forever. New technologies undermine
advantages.
Explain the concept: artificially created market power. Give examples. - Answer- Market
power that is not natural such as patents. Power over the entire market given by the
government to be creative.
Describe the purpose of patents. Explain why a patent is artificially created market
power. - Answer- Patents give an inventor incentive to be creative by promising
exclusive rights over the invention which is complete market power artificially created by
the government.
Define: rent-maintenance activity. Give and explain an example. - Answer- allocating
resources for the purpose of sustaining a market advantages. Rent is return to control
based on power and rent maintenance is an effort to sustain a return to power.
Automotive firms par politicians to keep a tariff up on foreign competitors
Define: rent-seeking activity. Give and explain an example. - Answer- Rent seeking:
effort to achieve an artificially created advantage that will create rent. Pass a law
imposing a tariff on the foreign competitors, which raises the price and makes them less
competitive. Less competition means more market power.
Describe and explain the possible connection between rent-seeking/maintenance
activity and contributions to political groups. - Answer- Rent seeking and maintenance
activity is connected to politics because firms will donate to politicians in order for them
to vote in a certain way that will benefit the firm, such as sustaining or creating market
power.
Explain how socialization connects to markets. - Answer- Socialization can influence
perceptions, which affects choices in the market.
Describe how socialization that demarcates expectations by gender and/or race affects
market outcomes. Give examples. - Answer- Socialization that effects gender or race
affects what markets men, women, blacks and whites can enter for jobs, which limits
market efficiency and productivity.
Explain how socialized perceptions, your own or those in the market, can constrain your
range of choices and effectively limit your access to the market. - Answer- social
, institutions can also factor into our perceptions of what is appropriate for certain
genders or races
Identify the difference between how social and political institutions function as
potentially powerful constraints on market behavior. - Answer- Political uses laws
whereas social institutions just manipulates perceptions and choices.
Ceteris paribus, show and explain how these two markets for comparable jobs would
adjust if one of these jobs initially had a higher wage under out nice assumptions. -
Answer- If one market for similar jobs have a higher pay, the people in the lower paying
market will move to the higher paying marker increasing the supply therefore driving
wages down in the higher paying market and decreasing the supply and driving the
wages up in the lower paying market until they are equal.
Describe the consequence of any institutional constraints, social and/or political, that
crowded women into a limited set of labor markets. Use graphs to tell your story. -
Answer- When women are crowded into markets, supply is artificially expanded which
lowers wages. Absence of women in men's markets artificially contracts supply-
increasing wages. Women have artificially low wages as they compete for limited jobs
and artificially high wages for men.
Describe the equity and efficiency implications of market power. - Answer- Market
power alters the distribution of benefits of those who have power. Equity is effected but
cannot be determined in a good way or bad way. Efficiency is effected negatively
because one is not forced to be efficient. The pressure to be creative and innovated are
eliminated or lessened.
Explain how controlling access to education can serve as a rent-generating mechanism.
Give examples. - Answer- Poor education brings poor human capital skills to the
market, which forces these people in the lowest economic segmentation to fight for low
wage jobs, suppressing opportunity. Higher education gives higher skills, which leads to
higher, paying jobs. This allows for more rent in this market because it is artificially
made to have a lower supply.
Describe the costs and benefits of a rent-generating structure like apartheid. - Answer-
Costs include inefficiency, lack of productivity, and lack of commutative justice. The
benefit is that a few have power and skills.
Explain how and why non-violent and/or violent resistance to a rent-generating power
structure can possibly lead those who hold power to negotiate. Give examples. -
Answer- Protests such as sanctions, boycotts and strikes raise the price of power. The
increase in challenges increased the price of power until negotiations were necessary.
Describe the relationship between the concepts: general competitive equilibrium and
general equilibria. - Answer- Pareto optimal general competitive equilibrium that the
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