Chapter 3 (Skip 2)

Question 1

What is the difference between flow and stock variable?

Answer 1

Flow variables are variables that only make sense when it’s tied to a unit of time. For example, if i mention my income is 20k, is that over a month over a year? Stock variables on the other hand make sense when they are not attached to a time frame. For example, the money in my bank account.

Question 2

How can flow variables be linked to stock variables?

Answer 2

For example, the amount of money in my bank account depends on the in flow and out of the account.

Question 3

What is a supply curve?

Answer 3

The supply curve is a graphical representation of the
relationship between the price of a good and quantity
supplied (or produced).

Question 4

What is the marginal cost curve?

Answer 4

The marginal cost curve is the opportunity cost of
producing one more unit and the number of unit produced.

Question 5

What is quantity supplied?

Answer 5

The amount supplied depending on the price.

Question 6

Why as a firm makes more products, eventually it looses money?

Answer 6

As a company expands it begins to cost more to manufacture more. Resources get more limited, building and equipment costs more, they need more factory workers.

Question 7

What happens when the price of a good changes?

Answer 7

When the price of a good changes the firm is no longer producing the amount that they want to make because…

Question 8

What are exogeneous factors that increase the supply?

Answer 8

– Increases the number of suppliers (More firms enter the market)!
– Decreases in the price of inputs (Labour or Oil for example).
– Technological Improvements

Question 9

What direction does the supply curve go when there is an increase in supply?

Answer 9

The supply curve shifts right when there is an increase in supply.