Cube, Jana Isabela B.

January 5, 2022
2019-46047
ECONOMICS 102- TFAB
1st Semester, 2021-2022
FINAL EXAM

I. 5 sentences or less

1. Costs eventually go up in response to increase in demand for the goods or

increase in price of the materials used in the perspective of the producers. Fixed
input can also cause an increase in costs since it is a variable that cannot be
changed immediately by firms. If the firms can not generate enough revenue, it
will be hard for them to generate a certain amount of input demand causing a
larger cost of production.

2. Activists often criticize monopoly owners for being greedy since they most of the
time prioritize the corporate’s interests over the public interest. They also tend to
eliminate other competition in order to be the sole earners of the economy. Elites
are usually associated with monopoly ownership since they are known to
promote privatization of services or goods and they want to dominate the market.

3. Explain the economic costs of consumer choice given differentiated products?

What has markup and excess capacity got to do with consumer choice? If a
society decides to devote much of its resources to supplying basic needs for
every citizen, why will this lead to less consumer choice?

4. Neoliberal economists want to remove the minimum wage since it is a type of

price regulation set on the labor market. Minimum wage puts a fixed amount of
wage for workers whether they are willing to work for a longer time period.
According to the discussions in class, the removal of minimum wage can lead to
flexible price adjustments

5. Economies of scale is the production of more goods and services causing a small
cost of production. This has been used to justify opening up the Philippine
economy to international trade since the country is composed of giant
manufacturing and service corporations. The economies of scale can represent
the competitive advantage of larger companies over smaller ones as they can
produce more products without worrying about the costs it brings – unlike smaller
companies.
II. Welfare analysis

1.
a. Graph

Fig. 1 shows the supply and demand graph of the Philippine rice
industry around the 1970s. The graph shows how the Philippines relies on
the exportation of rice globally and how it positively affects the Filipino rice
farmers as the price increases to world price.

b. Graph

Unlike the first graph, Fig. 2 shows the decline in the profit
generated by the Filipino farmers as the world price is followed. And the
supply of local rice lowers as the country imports supply of rice from other
countries — which can be good for consumers as the price of rice lowers
and more available choice but bad for producers as there’s more
competition in the market.
c. Quota is the limitation, imposed by the government, on the number of
products or monetary value that will be bought and sold in the country.
Elites and state agricultural regulators often prefer quotas since firms
have more generated benefits compared to tariffs. Firms can make higher
profit as they buy the goods at the world price but sell it at a higher price
in the local market.

d. Theoretically, it is more advantageous since it creates a higher profit for

producers and also the government also generates a tariff revenue. And it
can also promote local products as it places a higher price on goods
imported from abroad.

e. Graph

The graph shows with the increase in tariff, the price of rice will
also increase. This will give a negative effect on the consumer since the
government will implement a higher price for rice while producers will get
a higher producer surplus. The government will also generate a revenue
called tariff revenue that they can use in subsidies. Unfortunately, this can
also create deadweight loss as producers’ can overproduce goods as
they are forced to reach the QS2 and that there are consumers that do
not participate in the market or cannot afford the new priced items.

f. A better and long-term solution for our rice industry is for our government
to provide full support to local rice farmers. This can lead to proper
monitoring and repairing of technology for farmers to use which can
create a more stable supply of rice. Included to this is the financial
 assistance to be able to acquire needed equipment and materials such as
fertilizers, machineries, etc.

2. Case study

Privatization of Trains

The graph shows the solution of group in TFAB regarding privatization of

public trains — where they suggested to place a price discrimination on the
goods and services. Using the provided graph, it shows how the consumers have
the freedom to choose which service they are willing to avail. The color of the
boxes (orange, blue and pink) are indicators of the class' maximum willingness to
pay.

I agree with their given solution. First because this type of service charge
has been practiced by our country, from airplanes (economic to first-class) and
buses (normal and air-conditioned). Second, according to the group this method
can encourage the upper and middle class to avail premium services while still
able to serve the urban poor commuters. And lastly, it generates profit for the
government to use for other projects while being able to provide goods and
services to the citizens. Economically, this solution can be beneficial for the
country and it lowers the deadweight loss as resources are used to their
maximum capacity.