EBK PRINCIPLES OF MACROECONOMICS
6th Edition
ISBN: 9780073534701
Author: Frank
Publisher: YUZU
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Chapter 4, Problem 1RQ
To determine
Use of market value while calculating
Expert Solution & Answer
Explanation of Solution
The gross domestic product is the summation of the market value of all the final goods and services produced within the economy in a financial year. There will be a wide variety of goods and services produced in the economy such as apples, oranges, grapes, automobiles, electronic items and so on. Thus, adding them together will be an impossible task. This issue is handled through the use of aggregating the market values of each goods. This helps to aggregate the value and calculate the GDP value of the economy. This is the reason why the economists use the market values to calculate the GDP.
The weight giving process for the high valued commodities than the low valued commodities is because of the fact of the consumer preferences. The
Economics Concept Introduction
Gross Domestic Product: The Gross Domestic Product (GDP) is the sum total of the money value of all the final goods and services produced within the economy in a given period of time, which is usually a financial year.
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1. After the reopening of borders with mainland China following the COVID-19 lockdown, residents
living near the border now have the option to shop for food on either side. In Hong Kong, the cost
of food is at its listed price, while across the border in mainland China, the price is only half that
of Hong Kong's. A recent report indicates a decline in food sales in Hong Kong post-reopening.
**
Diagrams need not be to scale; Focus on accurately representing the relevant concepts
and relationships rather than the exact proportions.
(a) Using a diagram, explain why Hong Kong's food sales might have dropped after the border
reopening. Assume that consumers are indifferent between purchasing food in Hong Kong or
mainland China, and therefore, their indifference curves have a slope of one like below.
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is identical whether they shop in Hong Kong or mainland China. I
3.
14
(b) In response to the…
2. Health Food Company is a well-known global brand that specializes in healthy and organic food
products. One of their main products is organic chicken, which they source from small farmers
in the area. Health Food Company is the sole buyer of organic chicken in the market.
(a) In the context of the organic chicken industry, what type of market structure is Health Food
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(b) Using a diagram, explain how the identified market structure affects the input pricing and
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any key points such as the profit-maximizing price and quantity. ()
(c) How can encouraging small chicken farmers to form bargaining associations help improve
their trade terms? Explain how this works by drawing on the graph in answer (b) to
illustrate your answer.
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technology with the marginal cost curve MCL or a high polluting technology with the
marginal cost curve MCH. If the farmer uses the high-polluting technology, for each unit of
quantity produced, one unit of pollution is also produced. Pollution causes pollution
damages that are valued at $E per unit. The good produced can be sold in the market for $P
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P
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Q₁
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E
a.
b.
C.
If there are no restrictions on the firm's choices, which technology will the farmer use and
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Chapter 4 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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