BADURIA, Heina Lyllan P.

2CLM

1. What are the differences between the microeconomic and macroeconomic perspectives
on the economy?

Microeconomics focuses on the individual industries and business decisions, supply

and demand as well as determining price levels whilst macroeconomics focuses on
studying the decisions of the countries and its government to its economic pursuits.

2. Why are both input and output prices important to managers?

Output prices influence the profits a firm obtains from the selling of its production,
while input prices gives influence to a business’ costs of producing its products. The
difference between a firm’s overall profit and overall costs is the determine its profit.

3. What are the four major types of markets in microeconomic analysis? What are the key
characteristics that distinguish these markets?

1. Perfect Competition: A very large number of firms sell to a very large number of
consumers wherein firms make the same goods and consumers have perfect knowledge
of its prices and the quantities.

2. Pure Monopoly: It is where only one firm is selling in a market and production
being done in low quantities at higher costs.

3. Oligopoly: Markets where there are only a few competitors, although oligopolies

would opt to produce more than monopolies.

4. Monopolistic Competition: In this type of market, firms produce different

products from each other of which they start of monopolistic and turn to competitive
firms in the long run, continually investing in their products to remain atop the market.

4. Since a monopolist has some degree of market power and can also take measures to keep
competitors away from the market, a monopolist can set the price of their product as high as
they want. The higher the price charged, the higher the revenue. Do you agree? Explain your
answer.

No, not necessarily. Consumers would have to pay higher prices and fewer
consumers can afford to buy. This also leads to allocative inefficiency because the price
is greater than marginal cost. Fewer consumers would, using common sense and logc,
less revenue for there would be less people who’d buy the good.
Bonus:

1. In macroeconomics, what are the five major categories of spending that make up GDP?
Are all five categories added together to determine GDP?

 Consumption spending
 Investment spending
 Government spending
 Export spending
 Import spending

These are all components to the formula to calculate GDP such that Consumption spending
+ Investment spending + Government spending + Export spending are added together, its
sum then being subtracted to the Import spending to get the GDP.

2. Discuss the differences between fiscal and monetary policies.

Monetary policy gives reference to the activities of central banks to attain

macroeconomic policy objectives such as balancing of prices in the market, employment,
and the overall stable economic growth. Fiscal policy denotes to the taxation and
spending policies of the government.