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WGU C211 Global Economics for Managers
Questions and Answers A+ Graded
1. If an import tariff on coconuts was removed in the U.S., how would this
impact the demand for coconuts by U.S. consumers? - ANSWER The
demand would increase.
2. What would happen to the overall domestic demand for a good if an import
tariff were imposed on that good? - ANSWER It would increase.
3. How does a tariff generally impact the following entities: consumers,
producers, government? Compare the effects between the entities -
ANSWER Domestic sellers are better off, and domestic buyers are worse
off. In addition, the government raises revenue.
4. Consumer surplus - ANSWER The amount a buyer is willing to pay for a
good minus the amount the buyer actually pays for it
5. Who receives consumer surplus? - ANSWER The buyer.
6. In relation to the demand curve and price, how is consumer surplus
measured? - ANSWER The area below the demand curve and above the
price measures the consumer surplus in a market.
7. Producer surplus - ANSWER The amount a seller is paid for a good minus
the seller's cost of providing it
8. Who receives producer surplus? - ANSWER The seller.
9. In relation to the demand curve and price, how is producer surplus
measured? - ANSWER The area below the price and above the supply curve
measures the producer surplus in a market.
10.How is total surplus determined? - ANSWER The total value to buyers of
the goods, as measured by their willingness to pay, minus the total cost to
sellers of providing those goods.
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11.In what ways might government or policy makers make use of surplus
measures? - ANSWER To measure the economic well being of a society, in
terms of efficiency and equality. (i.e. maximizing total surplus received
(efficiency) and distributing economic prosperity (equality) uniformly
among the members of society
12.Macroeconomics - ANSWER The study of economy-wide phenomena,
including inflation, unemployment, and economic growth.
13.Microeconomics - ANSWER The study of how households and firms make
decisions and how they interact in markets.
14.Globalization - ANSWER Recent phenomenon sweeping the world.
15.Evolutionary Globalization - ANSWER Ongoing historical process.
16.Pendulum Globalization - ANSWER Swings between extremes of
globalization and isolation.
17.Foreign Direct Investment (FDI) - ANSWER Investment made by a
company or individual in one country in business interests in another
country.
18.Radical View of FDI - ANSWER Hostile to FDI.
19.Free Market View of FDI - ANSWER Minimal restrictions, win-win.
20.Pragmatic Nationalism - ANSWER Weigh costs vs. benefits of FDI.
21.FDI Pros - ANSWER Capital inflow, tech transfer, management skills, jobs.
22.FDI Cons - ANSWER Loss of sovereignty, competition harm, capital
outflow.
23.Mercantilism - ANSWER Zero-sum game; export > import.
24.Absolute Advantage - ANSWER More efficient production.
25.Comparative Advantage - ANSWER Lower opportunity cost.
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26.Product Life Cycle - ANSWER Shifts in location over time.
27.Strategic Trade Theory - ANSWER Government intervention in trade.
28.National Competitive Advantage (Diamond) - ANSWER Factor
endowments, firm strategy, demand conditions, related/supporting
industries.
29.Currency Value - ANSWER Determined by supply and demand.
30.Hedging - ANSWER Tools to reduce FX risk (forward transactions).
31.Strategic Hedging - ANSWER Diversification across currencies.
32.Indifference Curve - ANSWER All combos giving equal satisfaction.
33.Budget Constraint - ANSWER Income limits.
34.Optimal Consumption - ANSWER Where budget line = indifference curve.
35.Marginal Cost (MC) - ANSWER Cost of producing one more unit.
36.Average Total Cost (ATC) - ANSWER Fixed + Variable costs.
37.Shutdown Rule - ANSWER Shut down if total revenue < variable costs.
38.Perfect Competition - ANSWER Price taker, identical products.
39.Monopoly - ANSWER Price maker, barriers to entry.
40.Monopolistic Competition - ANSWER Many sellers, product differentiation.
41.Oligopoly - ANSWER Few sellers, interdependent (Prisoner's Dilemma).
42.Price Elasticity - ANSWER Responsiveness to price changes.
43.Income Elasticity - ANSWER Positive = normal good; Negative = inferior
good.
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44.Cross-Price Elasticity - ANSWER Positive = substitutes; Negative =
complements.
45.GDP Components - ANSWER Consumption + Investment + Govt Spending
+ Net Exports.
46.Real GDP - ANSWER Adjusted for inflation.
47.Nominal GDP - ANSWER Not adjusted for inflation.
48.Fiscal Policy - ANSWER Controlled by Congress.
49.Expansionary Fiscal Policy - ANSWER Lower taxes/increase spending.
50.Crowding Out - ANSWER Govt borrowing increases interest rates.
51.Monetary Policy - ANSWER Controlled by the Fed.
52.Monetary Policy Tools - ANSWER Open Market Ops (buy/sell bonds),
Discount Rate, Reserve Requirement.
53.Expansionary Monetary Policy - ANSWER Increase money supply → lower
rates → increase AD.
54.Tariff - ANSWER Tax on imports.
55.Quota - ANSWER Import limits.
56.Embargo - ANSWER Trade ban.
57.Local Content Requirement - ANSWER % must be produced domestically.
58.Consumer Surplus - ANSWER Willing to pay - actual price.
59.Producer Surplus - ANSWER Price received - cost.
60.Total Surplus - ANSWER Consumer + Producer surplus.
61.Deadweight Loss - ANSWER Efficiency loss from market distortions (e.g.,
tariffs, monopoly).
WGU C211 Global Economics for Managers
Questions and Answers A+ Graded
1. If an import tariff on coconuts was removed in the U.S., how would this
impact the demand for coconuts by U.S. consumers? - ANSWER The
demand would increase.
2. What would happen to the overall domestic demand for a good if an import
tariff were imposed on that good? - ANSWER It would increase.
3. How does a tariff generally impact the following entities: consumers,
producers, government? Compare the effects between the entities -
ANSWER Domestic sellers are better off, and domestic buyers are worse
off. In addition, the government raises revenue.
4. Consumer surplus - ANSWER The amount a buyer is willing to pay for a
good minus the amount the buyer actually pays for it
5. Who receives consumer surplus? - ANSWER The buyer.
6. In relation to the demand curve and price, how is consumer surplus
measured? - ANSWER The area below the demand curve and above the
price measures the consumer surplus in a market.
7. Producer surplus - ANSWER The amount a seller is paid for a good minus
the seller's cost of providing it
8. Who receives producer surplus? - ANSWER The seller.
9. In relation to the demand curve and price, how is producer surplus
measured? - ANSWER The area below the price and above the supply curve
measures the producer surplus in a market.
10.How is total surplus determined? - ANSWER The total value to buyers of
the goods, as measured by their willingness to pay, minus the total cost to
sellers of providing those goods.
, 2
11.In what ways might government or policy makers make use of surplus
measures? - ANSWER To measure the economic well being of a society, in
terms of efficiency and equality. (i.e. maximizing total surplus received
(efficiency) and distributing economic prosperity (equality) uniformly
among the members of society
12.Macroeconomics - ANSWER The study of economy-wide phenomena,
including inflation, unemployment, and economic growth.
13.Microeconomics - ANSWER The study of how households and firms make
decisions and how they interact in markets.
14.Globalization - ANSWER Recent phenomenon sweeping the world.
15.Evolutionary Globalization - ANSWER Ongoing historical process.
16.Pendulum Globalization - ANSWER Swings between extremes of
globalization and isolation.
17.Foreign Direct Investment (FDI) - ANSWER Investment made by a
company or individual in one country in business interests in another
country.
18.Radical View of FDI - ANSWER Hostile to FDI.
19.Free Market View of FDI - ANSWER Minimal restrictions, win-win.
20.Pragmatic Nationalism - ANSWER Weigh costs vs. benefits of FDI.
21.FDI Pros - ANSWER Capital inflow, tech transfer, management skills, jobs.
22.FDI Cons - ANSWER Loss of sovereignty, competition harm, capital
outflow.
23.Mercantilism - ANSWER Zero-sum game; export > import.
24.Absolute Advantage - ANSWER More efficient production.
25.Comparative Advantage - ANSWER Lower opportunity cost.
, 3
26.Product Life Cycle - ANSWER Shifts in location over time.
27.Strategic Trade Theory - ANSWER Government intervention in trade.
28.National Competitive Advantage (Diamond) - ANSWER Factor
endowments, firm strategy, demand conditions, related/supporting
industries.
29.Currency Value - ANSWER Determined by supply and demand.
30.Hedging - ANSWER Tools to reduce FX risk (forward transactions).
31.Strategic Hedging - ANSWER Diversification across currencies.
32.Indifference Curve - ANSWER All combos giving equal satisfaction.
33.Budget Constraint - ANSWER Income limits.
34.Optimal Consumption - ANSWER Where budget line = indifference curve.
35.Marginal Cost (MC) - ANSWER Cost of producing one more unit.
36.Average Total Cost (ATC) - ANSWER Fixed + Variable costs.
37.Shutdown Rule - ANSWER Shut down if total revenue < variable costs.
38.Perfect Competition - ANSWER Price taker, identical products.
39.Monopoly - ANSWER Price maker, barriers to entry.
40.Monopolistic Competition - ANSWER Many sellers, product differentiation.
41.Oligopoly - ANSWER Few sellers, interdependent (Prisoner's Dilemma).
42.Price Elasticity - ANSWER Responsiveness to price changes.
43.Income Elasticity - ANSWER Positive = normal good; Negative = inferior
good.
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44.Cross-Price Elasticity - ANSWER Positive = substitutes; Negative =
complements.
45.GDP Components - ANSWER Consumption + Investment + Govt Spending
+ Net Exports.
46.Real GDP - ANSWER Adjusted for inflation.
47.Nominal GDP - ANSWER Not adjusted for inflation.
48.Fiscal Policy - ANSWER Controlled by Congress.
49.Expansionary Fiscal Policy - ANSWER Lower taxes/increase spending.
50.Crowding Out - ANSWER Govt borrowing increases interest rates.
51.Monetary Policy - ANSWER Controlled by the Fed.
52.Monetary Policy Tools - ANSWER Open Market Ops (buy/sell bonds),
Discount Rate, Reserve Requirement.
53.Expansionary Monetary Policy - ANSWER Increase money supply → lower
rates → increase AD.
54.Tariff - ANSWER Tax on imports.
55.Quota - ANSWER Import limits.
56.Embargo - ANSWER Trade ban.
57.Local Content Requirement - ANSWER % must be produced domestically.
58.Consumer Surplus - ANSWER Willing to pay - actual price.
59.Producer Surplus - ANSWER Price received - cost.
60.Total Surplus - ANSWER Consumer + Producer surplus.
61.Deadweight Loss - ANSWER Efficiency loss from market distortions (e.g.,
tariffs, monopoly).
