Question

Explain economic principles and their applications in the real world. Summarize the different types of market structures and the role of government in economics.

Answer 1

Their are different economic principles. The first economic principle is marginal principle.its application is in the output decision taken up by the firm.when marginal cost equals marginal revenue,then profit is maximized. The second principle is opportunity cost principle whose application is deciding comparative advantage. A country with lower opportunity cost of producing a product, will have comparative advantage. The third principle is equimarginal principle that is used for optimum deployment of different resources. Here, marginal benefits per unit of dollar is equal for all the resource.

The first market structure is perfect competition that has large number of price taker girls. With free entry and exit and zero economic profit in long run. The second market is monopolistic market that has firms making differentiated products and zero economic profit in long run. The third market is oligopoly, with entry barrier and few players in the market. The fourth market is monopoly having only one firm setting prices and entry barrier.

Role of the government into set regulations that promote free and fair market competition that encourage private property rights.