DQ 1 Understanding economics is an important part of the decision-making process in operating a business. What role does microeconomics play in business decisions as compared to macroeconomics? Provide at least one real-life example each to demonstrate how microeconomics and macroeconomics may impact the decision-making process of a business.
DQ 2 Explain how the market operates as an allocation system for determining who gets goods and services and who does not. Compare the market system with other possible allocation systems such as a central decision maker; first-come, first-serve; or a lottery system. What are the strengths and weaknesses inherent in the market?
DQ 3 The Circular Flow Model provides a snapshot of our economy. Describe how households and businesses slowed down the circular flows of money, goods, and services during the recent economic slump. Give example
DQ 4 What are the characteristics that differentiate between private and public goods? How does the absence of mutual exclusion result in a free rider problem? What is the role of government in preventing market failures that result from too few resources being devoted to production goods and services that are essential to the public?
DQ 5 How would you characterize your demand for health insurance — elastic or inelastic? Does the price elasticity of health insurance vary with age, ethnicity, gender, etc.? Does it vary depending on the type of medical procedure needed? If a doctor faces an elastic demand, should he/she raise or reduce the treatment fee to boost his/her revenue?
DQ 6 Explain what the quote, “Too many cooks spoil the pot” has to do with the law of diminishing marginal returns. In the context of a restaurant operation, what are the variable and fixed costs?
DQ 7 Explain how the profit maximization rule applies in each of the four market structures. Using the framework outlined in Table 3 on page 563 of the textbook, determine what market structure your firm (or a firm you have worked for in the past) operates within? Explain your reasoning. How does market structure impact management decision making in the firm?
DQ 8 In “The Social Responsibility of Business Is to Increase its Profits,” what economic idea is the author alluding to by stating that the social responsibility of business is to increase profits? Explain. What does Friedman mean when he equates social responsibility to “taxation without representation?” Friedman states that the principle underlying the market mechanism is “unanimity.” Provide examples of this “unanimity” in the market mechanism.
DQ 9 Define “derived demand” in the context of the circular flow model. Is the demand for all goods and services derived demand?
DQ 10 Are stocks and bonds substitutes, compliments, or both? If the cross-price elasticity is negative 1.2 (-1.2), what do you expect to happen to quantity demanded for bonds and bond prices if the stock price is expected to increase by 11%?
DQ 11 Why do more countries not choose to adopt a single currency like those who have chosen to adopt the euro? What would be the advantages and disadvantages of adopting a single global currency?
DQ 12 Based on “Grossly Distorted Picture,” how useful do you think GDP is as an economic indicator? What are its limitations as an economic measurement? How is the Human Development Index (HDI) a better barometer of economic well-being? What are its advantages and disadvantages?
DQ 13 If the policy interest rate is near zero, what less conventional monetary policy tools might a central bank use to stimulate the economy? How do these tools work? In what way is central banking in the euro-zone area different from or similar to the Federal Reserve System?
DQ 14 What is the primary goal of monetary policy and what are the three primary tools available to the Federal Reserve to meet this goal? What is the effect of lowering the reserve requirement on the money supply through the deposit expansion multiplier?
DQ 15 If countries can benefit by increasing their consumption possibilities through trade, why do so many countries place restrictions on trade?
DQ 16 How do fixed and floating exchange rates differ in their adjustments to shifts in the supply and demand for currencies? What are the advantages and disadvantages of fixed versus floating exchange rates?
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