ECS3704 Assignment 1 Semester 1 2023 (211581) Questions and Answer {Distinction level}

external scale economies - -when the average cost of the typical firm declines as the output of the industry within a geographic area increases -internal scale economies - -firm specific, caused internally -product differentiation - -the process of distinguishing a product or service from others, to make it more attractive to a particular target market. -constant returns to scale - -when input use and total cost rise in the same proportion as output increases -consumption effect - -of the tariff shows the loss to the consumers in the importing nation based on the reduction in their total consumption -one-dollar, one vote metric - -every dollar of gain or loss is just as important as every other dollar of gain or loss regardless of who the gainers or losers are -production effect - -f the tariff is the amount by which the cost of drawing domestic resources away from other uses exceeds the savings from not paying -terms of trade effect - - -monopsony power - -a nation has a large enough share of the world market for one of its imports that changes in the country's import buying can noticeably affect the world price of the product. -elasticity - -measures the percent change in one variable resulting from a 1 percent change in another variable -price elasticity of demand - -the percent change in quantity demanded resulting from a 1 percent increase in price. -consumer surplus - -is the increase in the economic well-being of consumers who are able to buy the product at a market price lower than the highest price that they are willing and able to pay for the product. -arbitrage - -Arbitrage is buying something in one market and reselling the same thing in another