Lesson-3 on Economics

Question: What is Monopoly?

Answer:

Monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service, i.e., one seller in a market.

Question: How Monopoly is maintained?

Answer:

By creating barrier to entry in following ways

Ø Govt. franchise & license

Ø Patents & copyrights

Ø Ownership of the entire supply of resources

Ø By creating a cost advantages of large scale operation

Question: What is Duopoly?

Answer:

A duopoly is a market that has only two suppliers, or a market that is dominated by two suppliers to the extent that they jointly control prices.

Question: What is Oligopoly?

Answer:

An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). It is a market condition where  the actions of any seller will materially affect price and have a measurable impact on competitors.

 Question: What is Break-Even Point?

Answer:

The break-even point for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR = TC).

Formulae for Break oven Point :                                   

Break Even Point (In Units) = Fixed Expense ÷ Unit Contribution Margin

or

Break Even Point (In Taka) = Fixed Expense ÷ CM Ratio

Question: What is Contribution Margin (CM)  ?

Answer:

 Contribution Margin = Sales - Variable Cost

Question: What is Contribution Margin (CM)  Ratio?

Answer:

Contribution Margin Ratio=  Contribution Margin ÷ Sales

Question: What is Margin of Safety ?

Answer:

The Margin of safety is the excess of budgeted (or actual) sales over the break-even volume of sales.

Margin of Safety= Total budgeted(or actual) sales – Break-even sales

Question: What is Balance of Payment (BOP) ?

Answer:

BOP is the summery statement of all economic transactions of a nation with the rest of the world & it is maintained by Central Bank

Question: What is Inflation?

Answer:

Ø Inflation is the rate of changes in the price level

Ø A general increase in prices in an economy and consequently fall in the purchasing value of money.

Question: What is Devaluation?

Answer:

Devaluation is a reduction in the value of currency with respect to other monetary units. It is used by a country to accelerate their export.

 

Question: What is Monetary Policy?

Answer:

Actions/plans taken by the Central Bank to influence the money supply  and interest rate in order to maximize the production and employment and stabilize price . It deals with the following aspects :

Ø Money supply

Ø Price level

Ø Interest rate

Ø Exchange rate

Question: What is Fiscal Policy?

Answer:

Government policy that attempts to influence the direction of the economy through changes in government spending or taxes.

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