1-  Noun Explanation　 

Moral hazard: is a concept exist when either party to an agreement has an incentive not to abide to the agreement, and one party cannot cost-effectively monitor the agreement or cannot effectively enforce the agreement.

Price elasticity of demand: the elasticity in general is a rate which measures sensitivity between two variables, in this case, price elasticity of demand measures sensitivity of consumers to changes in price of good, it’s mean simply if the price change (increase or decrease) by one unit, how can that affect the quantity demanded by the consumers.

                   E= (% Variable Q / % Variable P)

Elasticity can became three form:

·                        Absolut Value of Elasticity > 1: Elastic (if the price change by 1 unit, the quantity change by more than 1 unit)

·                        Absolut Value of Elasticity < 1: Inelastic (if the price change by 1 unit, the quantity change by more than 1 unit)

·                        Absolut Value of Elasticity = 1: Unitary Elastic (if the price increase 1 unit, the quantity decrease 1 unit)

Opportunity cost is what the owners of a business must give up to use the resource, for get another resource. It’s mean if the consumer is faced two product and he must choose one, than the opportunity cost is how much of product can give up to get one unit of another product. (If I consume bananas and apples, so how much units of apples can I give up to have one addition banana).

Law of demand: the demand is the quantity demanded by the consumer in the market, this quantity is variable with any change of price, so the law of demand affirm that if the quantity demanded in the market increase, the price will be decrease (increase curve).

Market equilibrium: is the point to meet the demand and the supply in the market, it is the situation which the consumers can buy all of goods which they wish and in the same time the producers can sell all of the goods which they wish. So the price is at the level for which quantity demanded is equal to quantity supplied.



2-  Reading the material and answer the following questions:

For each of the firms below, identify the market structure that best matches the competitive characteristics found in that firm’s market.

a.    Microsoft Corporation, in the market for business-application software, such as word processing, spreadsheet, and database.

b.    Becker Brothers Farms, a 1,000-acre wheat farm near Beaver City, Nebraska.

c.     Robo Wash, the only coin-operated car wash in Monroe, Louisiana.

d.    The Jumping Bean, a family-owned Mexican food restaurant in San Antonio, Texas.

e.     Après Ski, one of only two restaurants licensed to operate at the base of the main ski lift in Park City, Utah.

Answer:

  1. Oligopoly Market
  2. Perfect Competition Market
  3. Monopoly Market
  4. Monopolistic competition Market
  5. Oligopoly Market