微观经济学试题英文版

Managerial Economics

Part 1:

1. The price of good A goes up. As a result the demand for good B shifts to the left. From this we can infer that:

a. good A is a normal good.

b. good B is an inferior good.

c. goods A and B are substitutes.

d. goods A and B are complements.

e. none of the above.

Choose: d) the definition os complements

2. Joe's budget line is 15F + 45C = 900. When Joe chooses his most preferred market basket, he buys 10 units of C. therefore, he also buys :

a. 10 units of F

b. 30 units of F

c. 50 units of F

d. 60 units of F

e. None of the above

Choose: b) We assume that Joe will spend all his income. If C = 10, then 15F =900 – 45(10) =450, so F = 450/15 =30.

3. Kim only buys coffee and compact discs. Coffee costs $0.60 per cup, and CDs cost $12.00 each. She has $18 per week to spend on these two goods. If Kim is maximizing her utility, her marginal rate of substitution of coffee for CDs is:

a. 0.05

b. 20

c. 18

d. 1.50

e. None of the above

Choose: a) At Kim's most preferred market basket, her MRS equals the price ratio (Pcoffee/PCD), which equals 0.6/12 or 0.05.

4. The bandwagon effect corresponds best to which of the following?

a. snob effect.

b. external economy.

c. negative network externality.

d. positive network externality.

Choose: d)

5. A Giffen good

a. is always the same as an inferior good.

b. is the special subset of inferior goods in which the substitution effect dominates the income effect.

c. is the special subset of inferior goods in which the income effect dominates the substitution effect.

d. must have a downward sloping demand curv

e.

Choose: c) the definition of Giffen good

6. An Engel curve for a good has a positive slope if the good is :

a. an inferior good.

b. a Giffen good.

c. a normal goo

d. d. a, b, and c are tru

e.

e. None of the above is true.

Choose: c) Inferior and Giffen goods have negatively sloped Engel curves.

7. The price of beef and quantity of beef traded are P* and Q*, respectively. Given

this information, consumer surplus is the area:

a. 0BCQ*

b. ABC

c. ACP*

d. CBP*

e. 0ACQ*

Choose: d)Consumer surplus is the area between the demand line and the price.

8. In Figure 1, holding income constant, what change must have occurred to rotate the budget line from the old line(1) to the new line(2)?

Figure 1

a. The price of Coke fell

b. The price of pizza fell

c. The price of pizza rose

d. The price of Coke went up

e. b and c

Choose: b) The horizontal intercept, I/PC, is unchanged, which implies that PC could not have changed (holding income constant). Since the slope is PP/PC, the slope change means that the price of pizza must have fallen. This can also be seen intuitively from Figure 1, since the consumer can now buy more pizza than before if he spends all his income on pizza.

9. Andy buys 10 pounds of onions per month when the price is $0.75 per pound. If the price falls to $0.50 per pound, he buys 30 pounds of onions. What is his arc

elasticity of demand over this price range?

a. - 1.33

b.–2

c.–2.5

d. - 6

e. None of the above is correct. Choose: c) Using the arc elasticity formula,

5.22

)1030(2

)75.050.0()75.050.0()1030(-=÷+÷??--=???=

Q P P Q EP The next two questions refer to the following information: Opie and Gomer are the

only two consumers in the video cassette rental market in the Mayberry. Their demand curves per week are pictured in Figure 2.

10. If rentals cost $2.50 each, the total quantity demanded each week in the market is :

a. 3

b. 6

c. 15

d. 10

e. None of the above is correct.

Choose: b) Add horizontally to get the market demand curve. At P = $2.50, QO = 3 and QG = 3 for a total of 6 units demanded.

11. For a decrease in price from $2.50 to $1.50, market demand is :

a. elastic.

b. unit elasti

c. c. inelastic.

d. perfectly inelastic.

e. More information is needed. Choose: a) Demand is price elastic:

EP = %ΔQ/%ΔP = [(15

(a)

12. As president and CEO of MegaWorld industries, you must decide on some very risky alternative investments:

a. A.

b. B.

c. C.

d. D.

e. E

Choose: b) Ea=2 Eb=6.8 Ec=0 Ed=6 Ee=6

13. An individual with a constant marginal utility of income will be

a. risk averse.

b. risk neutral.

c. risk loving.

d. insufficient information for a decision.

Choose: b)An individual with a constant marginal utility of income is risk neutral.

14. In the figure below, what is true about the two jobs?

a.Job 1 has a lower standard deviation than Job 2.

b.All outcomes in both jobs have the same probability of occurrence.

c. A risk-averse person would prefer Job 2.

d. A risk-neutral person would prefer Job 1.

e.Job 1 has a higher expected income than Job 2.

Choose: a) Job 1 has a lower standard deviation than Job 2. Expected income of Job 1 equals to Job 2.

Part 2:

The demand curves for steak, eggs, and hot dogs are given in the table below. The current price of steak is $5. The price of eggs is $2.50, and the price of hot dogs is $0.75. Fill in the remaining columns of the table using this information.

Solution:

Steak and eggs are complements. Steak and hotdogs and eggs and hotdogs are substitutes.

Part 3:

Draw indifference curves to represent the following descriptions of consumer preferences:

a. I can’t taste the difference between apple and grape jelly, but I like

them both.

b. I only like grape jelly and never eat apple jelly.

c. Apple and grape jelly are better mixed, although I don’t care to o much about the proportions.

Answer:

a) See Figure 7(a). Since the consumer can not tell the difference between the two flavors, all he would care about is the total amount of jelly he has.

b) See Figure 7(b). An increase in the amount of apple jelly does not affect the consumer since he never eats it.

c) See Figure 7(c). Here, a mixed bundle is better than an extreme one, but the consumer is willing to trade off the different flavors.

Figure 7

Part 4:

There are reasons other than fads, fashions, and consumer insecurity for bandwagon and snob effects. Various types of externalities in the consumption of certain goods also exist. Explain which these effects (bandwagon or snob) might be present in the following cases:

a. A restaurant that is often crowded

b. A personal computer software product

c. A rock concert

Answer:

a) A price decrease will attract more customers, but the crowding(longer lines,

poorer service) will discourage others. This would resemble a snob effect.

Ounces of Grape Jelly Ounces of Apple Jelly (a) Ounces of Grape Jelly Ounces of Apple Jelly

(b) (c) Ounces of Grape Jelly Ounces of

Apple Jelly

b) The more people you expect to buy a software product, the more likely you can

find another experienced user to ask questions about it. Also, the more likely it is that a computer bookstore will carry publications about how to use the software. Thus, we would expect to see a bandwagon effect.

c) Here, crowding might discourage some customers. But, since part of the enjoyment of a concert is seeing the band with other fans, we might observe a bandwagon effect.

Part 5:

Tom Wilson is the operations manager for Bi-Corp, a real estate investment firm. Tom must decide if Bi-Corp is to invest in a strip mall in a northeast metropolitan area. If the shopping center is highly successful, after tax profits will be $100,000 per year. Moderate success would yield an annual profit of $50,000, while the project will lose $10,000 per year if it is unsuccessful. Past experience suggests that there is a 40% chance that the project will be highly successful, a 40% chance of moderate success, and a 20% probability that the project will be unsuccessful. a. Calculate the expected value and standard deviation of profit. b. The project requires an $800,000 investment. If Bi-Corp has an 8% opportunity cost

on invested funds of similar riskiness, should the project be undertaken? Solution:

a.Expected Value

∑==n

1

i ^i ^i P ππ

πi ^ P i ^ πi ^P i ^

100,000 .4 40,000

50,000 .4 20,000 -10,000 .2 -2,000

π = 58,000

Standard deviation

σπ

π=

-=∑i

2

i ^

i 1

n

P

πi ^ ππi -

ππi 2

-

ππi 2

P -

100,000 42,000, 764,000,000 705,600,000

50,000 -8,000 64,000,000 25,600,000 -10,000 -68,000 4,624,000,000 924,800,000 σ2 = 1,656,000,000

σ = 40,693.98 b.Bio-Corp's opportunity cost is 8% of 800,000 or 0.08 x 800,000 = 64,000.

The expected value of the project is less than the opportunity cost. Bi-Corp should not undertake the project.

最新版微观经济学精品习题英文版 (with answer) (16)

Chapter 17 Monopolistic Competition 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. _ __. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. _ __. 1. Because monopolistically competitive firms produce differentiated products, each firm ( d ) a.faces a demand curve that is horizontal. b.faces a demand curve that is vertical. c.has no control over product price. d.has some control over product pric e. 2. Which of the following conditions distinguishes monopolistic competition from perfect competition? ( d ) a. Number of sellers. b. Freedom of entry and exit. c. Small size firms. d. Differentiation of product. 3. A firm in a monopolistically competitive market is similar to a monopolist in the sense that it ( b ) a.must overcome significant barriers to entry. b.faces a downward-sloping demand curve. c.there are no barriers to entry or exit. d.there is only one seller of the good. 4. If existing firms in the fast-food market, which is a monopolistically competitive market, realize sizable economic profits in the short run, the demand of existing firms will ( a ) a.decrease and become more elastic. b.decrease and become less elasti c. c.increase and become more elastic. d.increase and become less elastic.

最新版微观经济学精品习题英文版 (with answer) (9)

Chapter 9 Application: International Trade 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. _ __ 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. _ __ 1. Nations would gain from trade if a(n) ________ exists. ( c ) a.absolute advantage b.specialization https://www.sodocs.net/doc/3211289122.html,parative advantage d.infant industry 2. If Canada has a comparative advantage over Denmark in the production of wood, this implies that ( b ) a.it requires fewer resources in Canada than in Denmark to produce wood. b.the opportunity cost of producing wood in Canada is lower than in Denmark. c.Denmark does not benefit by trading with Canada. d.Canada should buy wood from Denmark. 3. Domestic producers gain from the opportunity to export goods to foreign countries because ( a ) a.the free-trade price of the good is higher than the domestic price in the absence of trade. b.producers are able to reach a wider market. c.although the free-trade price is lower than in the absence of trade, producers are able to sell a greater quantity. d.production rises, although there is no change in the price of the good compared to the no-trade situation. 4. If at the world equilibrium price the U.S. quantity demanded is greater than the U.S. quantity supplied, then ( a ) a.the United States will import the good. b.the United States will export the good. c.the world price will fall. d.the world price will ris e.

曼昆微观经济学英文版课后练习题第一章

曼昆微观经济学英文版课后练习题第一章

————————————————————————————————作者：————————————————————————————————日期： 1

1 Chapter 1 Ten Principles of Economics Multiple Choice 1. The word that comes from the Greek word for "one who manages a household" is a. market. b. consumer. c. producer. d. economy. ANS: D DIF: 1 REF: 1-0 TOP: Economy MSC: Definitional 2. The word “economy” comes from the Greek word oikonomos , which means a. “environment.” b. “production.” c. “one who manages a househol d.” d. “one who makes decisions.” ANS: C DIF: 1 REF: 1-0 TOP: Economy MSC: Definitional 3. Resources are a. scarce for households but plentiful for economies. b. plentiful for households but scarce for economies. c. scarce for households and scarce for economies. d. plentiful for households and plentiful for economies. ANS: C DIF: 1 REF: 1-0 TOP: Resources, Scarcity MSC: Interpretive 4. Economics deals primarily with the concept of a. scarcity. b. poverty. c. change. d. power. ANS: A DIF: 1 REF: 1-0 TOP: Scarcity MSC: Definitional 5. Which of the following questions is not answered by the decisions that every society must make? a. What determines consumer preferences? b. What goods will be produced? c. Who will produce the goods? d. Who will consume the goods? ANS: A DIF: 2 REF: 1-0 TOP: Economies MSC: Interpretive 6. The overriding reason as to why households and societies face many decisions is that a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagre e. ANS: A DIF: 2 REF: 1-0 TOP: Scarcity MSC: Interpretive 7. The phenomenon of scarcity stems from the fact that a. most economies’ production methods are not very good. b. in most economies, wealthy people consume disproportionate quantities of goods and services. c. governments restricts production of too many goods and services. d. resources are limited. ANS: D DIF: 2 REF: 1-0 TOP: Scarcity MSC: Interpretive

曼昆微观经济学课后练习英文答案(第七章)

rkets WHAT’S NEW IN THE SIXTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: the link between buyers’ willingness to pay for a good and the demand curve. how to define and measure consumer surplus. the link between sellers’ costs of producing a good and the supply curve. how to define and measure producer surplus. that the equilibrium of supply and demand maximizes total surplus in a market. CONTEXT AND PURPOSE: Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then 7 CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS

曼昆微观经济学第四版关键概念中英文对照

微观经济学关键概念中英文对照 CHAPTER 1 scarcity稀缺性 economics经济学 efficiency效率 equity平等 opportunity cost机会成本 rational people理性人 marginal changes边际变动 incentive激励 market economy市场经济 property rights产权 market failure市场失灵 externality外部性 market power市场势力 productivity生产率 inflation通货膨胀 business cycle经济周期

CHAPTER 2 circular-flow diagram循环流向图production possibilities frontier生产可能性边界 microeconomics微观经济学 macroeconomics宏观经济学 positive statements实证表述 normative statements规范表述 CHAPTER 3 absolute advantage绝对优势 opportunity cost机会成本 comparative advantage比较优势 imports进口 exports出口 CHAPTER 4 market市场 competitive market竞争市场 quantity demanded需求量 law of demand需求定理 demand schedule需求表 demand curve需求曲线

normal good正常物品 inferior good低档物品 substitutes替代品 complements互补品 quantity supplied供给量 law of supply供给定理 supply schedule供给表 supply curve供给曲线 equilibrium均衡 equilibrium price均衡价格 equilibrium quantity均衡数量 surplus过剩 shortage短缺 law of supply and demand供求定理 CHAPTER 5 elasticity弹性 price elasticity of demand需求价格弹性 total revenue总收益 income elasticity of demand需求收入弹性cross-price elasticity of demand需求的交叉价格弹性price elasticity of supply供给价格弹性

曼昆的《微观经济学原理》课业笔记 英文版

Ch 1 Ten Principles of economic ?Scarcity: the limited nature of society’s resources ?Economics: the study of how society manages its scarce resources, e.g. ?There are 10 principle of economic which are needed to be remember throughout. ?People face trade-off 1. Individual(time,money) and society(efficiency vs equality). ?Cost of something is what your give up to get it.\ 1. The opportunity cost of any item is whatever must be given up to obtain it. ?Rational people thinking at margin(effect of one additional item) 1. This principle assume that everyone is rational people(made their decision base on their interests) this was addressed on Adam Smith's Wealth of Nation. ?People respond to incentives(诱惑物） 1. This statement reveals that human psychology is a important feature in economic study. ?Trade can make everyone better-off 1.Ex: trade of agricultural product and technology between Japan and America, it will break the law of PPF. It involved absolute advantages(low input) and comparative advantage(low opportunity cost win) ?Markets are usually a good way to organize economy activity. 1.Markets can balance the price. ?Government can sometime improve market outcome. ? A country's standard of living depends on its ability to produce goods and services. ?Price rise when government print too much money.

曼昆微观经济学课后练习英文答案完整版

曼昆微观经济学课后练 习英文答案 集团标准化办公室：[VV986T-J682P28-JP266L8-68PNN]

the link between buyers’ willingness to pay for a good and the demand curve. how to define and measure consumer surplus. the link between sellers’ costs of producing a good and the supply curve. how to define and measure producer surplus. that the equilibrium of supply and demand maximizes total surplus in a market. CONTEXT AND PURPOSE: Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 and 9 to determine the winners and losers from taxation and restrictions on international trade. The purpose of Chapter 7 is to develop welfare economics—the study of how the allocation of resources affects economic well-being. Chapters 4 through 6 employed supply and demand in a positive framework, which focused on the question, “What is the equilibrium price and quantity in a market” This chapter now addresses the normative question, “Is the equilibrium price and quantity in a market the best possible solution to the resource allocation problem, or is it simply the price and quantity that balance supply and demand” Students will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes welfare.

英文版微观经济学复习提纲Chapter 5. Economic efficiency, government price setting and taxes

5 Economic Efficiency, Government Price Setting, and Taxes Chapter Summary Although rent controls no longer in Australia, many governments around the world, such as Malaysia and the U.S., have placed ceilings on the maximum rent some landlords can charge for some apartments and houses. Governments also impose taxes in some markets. To understand the economic impact of government in markets it is necessary to understand consumer surplus and producer surplus. Consumer surplus is the dollar benefit consumers receive from buying goods and services at market prices less than the maximum prices they would be willing to pay. Producer surplus is the dollar benefit producers receive from selling goods and services at prices greater than the minimum prices they would be willing to accept. In a competitive market with no externalities the equilibrium price for a good or service occurs where the marginal cost of the last unit produced and sold is equal to the marginal benefit consumers receive from the last unit bought. At this same level of output, economic surplus, the sum of consumer and producer surplus, is maximized. Although price controls on rent no longer exist in Australia, there are many other examples of the government setting prices, such as the minimum wage in labour markets (a “floor price”). Compared to the competitive equilibrium, price ceilings and price floors reduce economic efficiency. A tax on the sale of a good or service also reduces economic efficiency. The burden of a tax (or tax incidence) is the degree to which consumers or producers actually pay the tax. The incidence of a tax depends on how responsive producers and consumers are to the price change caused by the tax. Learning Objectives When you finish this chapter you should be able to: 1Understand the concepts of consumer surplus and producer surplus. Consumer surplus is the benefit consumers receive from paying a price lower than the maximum price they would be willing to pay. Producer surplus is the benefit a firm receives from selling a good or a service at a price higher than the minimum the firm would be willing to accept. Economic surplus is the sum of consumer surplus plus producer surplus. 2Understand the concept of economic efficiency, and use a graph to illustrate how economic efficiency is reduced when a market is not in competitive equilibrium. An economically efficient outcome occurs when a competitive market equilibrium is reached. Maximum economic efficiency results when the marginal benefit received by consumers from the last unit bought equals the marginal

曼昆微观经济学课后练习英文答案

WHAT’S NEW IN THE SIXTH EDITION: There are no major changes to this chapter. LEARNING OBJECTIVES: By the end of this chapter, students should understand: the link between buyers’ willingness to pay for a good and the demand curve. how to define and measure consumer surplus. the link between sellers’ costs of producing a good and the supply curve. how to define and measure producer surplus. that the equilibrium of supply and demand maximizes total surplus in a market. CONTEXT AND PURPOSE: Chapter 7 is the first chapter in a three-chapter sequence on welfare economics and market efficiency. Chapter 7 employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 and 9 to determine the winners and losers from taxation and restrictions on international trade. The purpose of Chapter 7 is to develop welfare economics —the study of how the allocation of resources affects economic well-being. Chapters 4 through 6 employed supply and demand in a positive framework, which focused on the question, “What is the equilibrium price and quantity in a market” This chapter now addresses the normative question, “Is the equilibri um price and quantity in a market the best possible solution to the resource allocation problem, or is it simply the price and quantity that balance supply and demand” Students will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes welfare. CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS

微观经济学英文版名词解释超详细

微观经济学名词解释 11

22 Chapter 1 business cycle 经 济周期 fluctuations in economic activity, such as employment and production economic s 经济学; 经济，国家 的经济状况 the study of how society manages its scarce 缺乏的，罕见 的 resources efficien cy n.功效; 效率，效 能; 实力， 能力; [物] 性能; the property of society getting the most it can from its scarce resources equality n .同等，平 等; [数] 相等，等式; the property of distributing economic prosperity uniformly among the members of society external ity[,eks t ?? the uncompensated impact of one person’s ac tions on the

Chapter 2 circular-flo w diagram a visual model of the economy that shows how dollars flow through markets among households 家庭; 家庭，户and firms macroeconomi cs [,m?kr??i?k?'n?m?ks; -ek-]the study of economy-wide phenomena, including inflation, unemployment, and economic growth microeconomi cs [,ma?kr ??i?k?'n ?m?ks the study of how households and firms make decisions and how they interact in markets normative['n ??m?t?v]标准的statements claims that attempt to prescribe定，规定; 指定，规定;美[pr??skra?b] how the world should be positive statements claims that attempt to describe the world as it is production possibilitie s frontier a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production 33

曼昆经济学原理微观经济学英文版习题答案(考试章节筛选)

曼昆经济学原理微观经济学英文版 课后习题答案（考试章节筛选） UNIT 1 SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The four principles of economic decisionmaking are: (1) people face tradeoffs; (2) the cost of something is what you give up to get it; (3) rational people think at the margin; and (4) people respond to incentives. People face tradeoffs because to get one thing that they like, they usually have to give up another thing that they like. The cost of something is what you give up to get it, not just in terms of monetary costs but all opportunity costs. Rational people think at the margin by taking an action if and only if the marginal benefits exceed the marginal costs. People respond to incentives because as they compare benefits to costs, a change in incentives may cause their behavior to change. 2. The three principles concerning economic interactions are: (1) trade can make everyone better off; (2) markets are usually a good way to organize economic activity; and (3) governments can sometimes improve market outcomes. Trade can make everyone better off because it allows countries to specialize in what they do best and to enjoy a wider variety of goods and services. Markets are usually a good way to organize economic activity because the invisible hand leads markets to desirable outcomes. Governments can sometimes improve market outcomes because sometimes markets fail to allocate resources efficiently because of an externality or market power. 3. The three principles that describe how the economy as a whole works are: (1) a country’s standard of living depends on its ability to produce goods and services; (2) prices rise when the government prints too much money; and (3) society faces a short-run tradeoff between inflation and unemployment. A country’s standard of livi ng depends on its ability to produce goods and services, which in turn depends on its productivity, which is a function of the education of workers and the access workers have to the necessary tools and technology. Prices rise when the government prints too much money because more money in circulation reduces the value of money, causing inflation. Society faces a short-run tradeoff between inflation and unemployment that is only temporary and policymakers have some ability to exploit this relationship using various policy instruments. Questions for Review 1. Examples of tradeoffs include time tradeoffs (such as studying one subject over another, or studying at all compared to engaging in social activities) and spending tradeoffs (such as whether to use your last ten dollars on pizza or on a study guide for that tough economics course). 2. The opportunity cost of seeing a movie includes the monetary cost of admission plus the time cost of going to the theater and attending the show. The time cost depends on what else you might do with that time; if it's staying home and watching TV, the time cost may be small, but if it's working an extra three hours at your job, the time cost is the money you could have earned. 3. The marginal benefit of a glass of water depends on your circumstances. If you've just run a marathon, or you've been walking in the desert sun for three hours, the marginal benefit is very high. But if you've been drinking a lot of liquids recently, the marginal benefit is quite low. The point is that even the necessities of life, like water, don't always have large marginal benefits. 4. Policymakers need to think about incentives so they can understand how people will respond to the policies they put in place. The text's example of seat belts shows that policy actions can have quite unintended consequences. If incentives matter a lot, they may lead to a very different type of policy; for example, some economists have suggested putting knives in steering columns so that people will drive much more carefully! While this suggestion is silly, it highlights the importance of incentives. 5. Trade among countries isn't a game with some losers and some winners because trade can make everyone better off. By allowing specialization, trade between people and trade between countries can improve everyone's welfare. 6. The "invisible hand" of the marketplace represents the idea that even though individuals and firms are all acting in their own self-interest, prices and the marketplace guide them to do what is good for society as a whole. 7. The two main causes of market failure are externalities and market power. An externality is the impact of one person’s actions on the well-being of a bystander, such as from pollution or the creation of knowledge. Market power refers to the ability of a single person (or small group of people) to unduly influence market prices, such as in a town with only one well or only one cable television company. In addition, a market economy also leads to an unequal distribution of income. 8. Productivity is important because a country's standard of living depends on its ability to produce goods and services. The greater a country's productivity (the amount of goods and services produced from each hour of a worker's time), the greater will be its standard of living. 9. Inflation is an increase in the overall level of prices in the economy. Inflation is caused by increases in the quantity of a nation's money. 10. Inflation and unemployment are negatively related in the short run. Reducing inflation entails costs to society in the form of higher unemployment in the