How do economists measure positive and negative externalities?

July 7, 2024 No Comments

A: In economics, an externality is defined as a cost or benefit incurred by a third party as a result of economic activity to which the third party has no relation. Economists use equilibrium models that succinctly measure externalities as a deadweight loss or gain

How do financial market exhibit asymmetric information?

July 7, 2024 No Comments

A: Financial markets exhibit asymmetric information in that in a financial transaction, one of the two parties involved will have more information than the other and will have the ability to make a more informed decision. When it comes to the purchase or sale of

How Do Fiscal and Monetary Policies Affect Aggregate Demand?

July 7, 2024 No Comments

A: Aggregate demand is a macro-economic concept representing the total demand for goods and services in an economy. This value is often used as a measure of economic well-being or growth. Fiscal policy affects aggregate demand through changes in government spending and taxation. Government spending

How Do Fixed and Variable Costs Affect the Marginal Cost of Production?

July 7, 2024 No Comments

A: The total cost of a business is comprised of fixed costs and variable costs. Fixed costs and variable costs affect the marginal cost of production only if variable costs exist. The marginal cost of production is calculated by dividing the change in the total

How do government bailouts increase moral hazard?

July 7, 2024 No Comments

A: Government bailouts increase moral hazard by engendering a business climate in which companies feel they will be protected from the consequences of poor decisions and risky behavior. Because they no longer fear these consequences – at least not to the level they should –

How did mass production affect the price of consumer goods?

July 7, 2024 No Comments

A: Before the advent of mass production, goods were usually manufactured on a made-to-order basis. Once mass production was developed and perfected, consumer goods could be made for the broadest possible market. Anything consumers needed or desired could be made in larger quantities. Mass production

How do government subsidies help an industry?

July 7, 2024 No Comments

A: Government subsidies help an industry by paying for part of the cost of the production of a good or service by offering tax credits or reimbursements or by paying for part of the cost a consumer would pay to purchase a good or service.

How did mercantilism affect the colonies of Great Britain?

July 7, 2024 No Comments

A: England is small and contains relatively few natural resources. During Great Britain’s mercantilist period, the prevailing economic wisdom suggested that the empire’s many colonies could supply raw materials and resources to the mother country and subsequently be used as export markets for the finished products.

How do I differentiate between micro and macro economics?

July 7, 2024 No Comments

A: Microeconomics is the field of economics that looks at the economic behaviours of individuals, households and companies. Macroeconomics takes a wider view and looks at the economies on a much larger scale – regional, national, continental or even global. Microeconomics and macroeconomics are both

How did moral hazard contribute to the 2008 financial crisis?

July 7, 2024 No Comments

A: The financial crisis of 2008 was the result of numerous market inefficiencies, bad practices and a lack of transparency in the financial sector. Market participants were engaging in behavior that put the financial system on the brink of collapse. Historians will cite products such

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