It's Friday!

Okay - a few more links, and some brain teasers for you.

Here is the PC side by side graphs we used today in class: http://www.reffonomics.com/perfectcompetition2.html

PC and an increase in D:
http://www.reffonomics.com/perfectcompetitionincreaseindemand.html

Entry and Exit in PC:
http://www.reffonomics.com/entryexit.html

Shut Down rule:
http://www.reffonomics.com/shutdownrule.html
http://www.reffonomics.com/shutdown3.html

Here's part of an online textbook on PC:
http://www.howardcc.edu/social_science/micropdf/unit-6.jb.pdf

And here is another online text that could help - there are chapter notes, possible overheads, and an online quiz:
http://william-king.www.drexel.edu/top/prin/txt/Comp/Ch8ToC.html


~~~~~~~~~~~~~~~~~~~~~~~~~~

And some questions to think about:

1. The licorice industry is competitive. Each firm produces 2 million strings of licorice in a year. The strings have an average total cost of $.20 each, and they sell for $.30. (a) What is the marginal cost of a string? (b) Is this industry in long run equilibrium? Why or why not?

2. Bob's lawn mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. What can you say about Bob's short run decision regarding shut down and his long run decision regarding exit from the market?

3. Your best friend's long hours in the chemistry lab have finally paid off - she discovered a secret formula that allows people to do an hour's worth of studying in 5 minutes. So far, she's sold 200 doses, and faces the following ATC schedule: (Q--ATC) 199 -- $199, 200 -- $200, 201 -- $201. If a new customer offers to pay your friend $300 for one dose should she make one more? Explain.

Have a nifty weekend! :)

Links

Hey guys -

Here is the link to the ppt that Mr. Newy is going to go over with you in class. It's in html format, so everyone should be able to access it.

http://www.reffonomics.com/perfectcompetition/frame.htm

And no, I didn't write it. :)

Second - check out Sarah's question on sales in the last post. Interesting.

Third - some more links for your economics enjoyment -

Profit Maximization MR/MC stuff: http://apecon.us/allmeroth1aa.gif

And part II to that: http://apecon.us/allmeroth2aa.gif
This will become more important as we get into the other three types of markets.

http://www.reffonomics.com/costs2/frame.htm for basic cost information. There are teacher instructions in the bottom frame that explain what's going on.

http://www.reffonomics.com/costs/frame.htm More costs stuff

http://www.reffonomics.com/shutdown2.html Costs & Shutdown rule

http://apecon.us/explicitandimplicit.gif explicit vs implicit costs

http://apecon.us/longrunshortrun.gif short run vs long run

http://www.reffonomics.com/longrunatccurve.html Long run ATC

http://www.reffonomics.com/typesofcompetition.html Types of competition
http://www.reffonomics.com/spectrumofcompetition.html Spectrum of competition


There are a lot more, this guy has tons of info. But...I think that's enough to start with. :)

Note: He does separate oligopoly & cartel, which are together in your book.

"Day without a Latino"

I had read about this in the Milwaukee J-S on Friday, and Jonathan brought up a great point.

Here's the article:

http://www.jsonline.com/story/index.aspx?id=408736&date=3/16/2006

And here's J0n's comment:

"...there was a article about a peaceful rally in Milwaukee about keeping unregistered migrant workers. If possible, could you possibly put that as one of the forums so we can debate what the economy would be like if we sent all the unregistered immigrants back or if we made them legal US citizens. I personally would think it would be interesting. Thank you."

An excellent point - one that I have a decided opinion on, but will keep my mouth shut so you can think it through. :)

I like these opinion ones. They're awesome to get your brain juices flowing, and your economic reasoning hats on.

I'll check in tomorrow - but will be incommunicado on here until Wed evening. See you in class!

KM

Questions

I know there havent' been any new posts this week - there just aren't that many discussion things that go with terms.

Posts this week will be extra credit. I'll get them in Monday morning.

It would be good, though, to revisit the ideas that Jacqui brought up in her comment before:

jacnbox said...
ok, so i was sitting on messenger tonight, procrastinating my homework, per usual, while talking to katie athas. she was writing a persuasive paper for college. it was on the positive effects of minimum wage. even though economists would say any government inference is bad, she still asked me for an argument. here is our conversation:

Katie says:what is one way the raising minimum wage would help the economy

Jac says:it wouldnt. most economists agree. if the government steps into the economy, ex: tariffs, quotas, minimum wage, ceilings and floors, this intereferes with the markets ability to retain or switch equilibrium. raising minimum wage is similar to inflation.

Katie:well that doesn't help my argument

Jac says:i know, im sorry.

Katie says:oh well

Jac says:im trying to think of some bs argument here. what do you have so far as your arguments?

Katie says:i will just have to find something else to babble about

Katie says:minumim wage is not livable, children suffer from it

Jac says:without minimum wage, the economy's equilibrium between supply and demand would change so that a larger gap between social/monetary classes would emerge. essentially, the rich would get richer and the poor would get poorer. already wealthy business tycoons, would then have the ability to use their resource, labor, to its maximum while paying close to nothing. a cashier could clock an 8 hour workday,

Jac says: but only recieve 8 cents. the lack of minimum wage, which is currently unable to support an average family consisting of two adults and two children, would dramatically increase poverty in america. combine this scenario with the increasing need to pay off the national debt, with the temporary solution of printing more currency, and inflation skyrockets. people immigrate to america to live the

Jac says:american dream. without the minimum wage, a standard as to where to start financial support, the dream is shattered.

Jac says:and yes, you can use it. just save the paper, in case i need to use my words again

Katie says:thank you. now my paper is almost done.
9:50 PM, March 23, 2006
jacnbox said...
km, i think you should make my last comment a big post. maybe we can discuss this as a class more.


**********Jacqui makes some really excellent points - great analysis...any comments?

Have a fun weekend...see you Monday!

KM

This week

I know there's no exciting post this week to get you thinking on what we're actually supposed to be concentrating on...but there aren't that many discussion points on terms.

Malcolm had a good question, though - when you have a holiday like St. Patrick's Day (or any other, really), is that e/affect Micro or Macro (his question was in regards to bars)? I could think of a good argument for either.

What about a bigger holiday - like Easter or Halloween or Christmas?

Have a nice weekend - see you Tuesday. Monday will be time for you to talk with the people in your group about your chapter synopsis/review/whatever you want to call it.

Costs

There's a few other posts here for you to ponder, but the real stuff - for this unit -

Consider the following costs for a pizzaria. They go in order of Q in dozens/TC/VC

0/$300/$0
1/$350/$50
2/$390/$90
3/$420/$120
4/$450/$150
5/$490/$190
6/$540/$240

a. What is the fixed cost? how do you know?

b. What is the marginal cost per dozen pizzas using TC? What is the marginal cost per dozen pizzas using VC? What is the relationship between the two?

Legalizing Drugs

So, as Jonathon asked...

Why are drugs good for the economy?

What would happen if they were legalized?

This is actually a good micro question, and I'm pretty sure I have a reading on it for later in the unit. Think through the S & D of it - if drugs were legalized, what would happen to the price and why?

Or anything else that Jon thought would be good to discuss. :)

National Debt

Keep in mind - this is macro stuff, and has nothing to do with your test. I'm glad you're interested, though! :)

Inflation is a weird thing. Technically, it's a decrease in the value of your money - something that cost $1.00 last year costs, on average, $1.03 now (at 3% annual inflation). This is a good thing - it allows for growth. But our government has a fear of inflation almost as much as a fear of deflation (like during the Depression).

If inflation rises too fast, the government (the Federal Reserve, who controls our money supply) will step in and cut down on the money supply (usually by changing interest rates) in order to get it under control. There's a fear that hyperinflation could occur - and that's talking about something like 1000% annually (which has happened in the past in other countries).

If we just printed $6 trillion to pay off the debt, it limits the scarcity of money and cuts the value. If there are 6 trillion diamonds on the ground, having one diamond won't mean anything. It's the same idea. So - your money becomes worthless. Literally, if they print that much at one time.

The money is owed to people who have loaned money to the government in the form of Treasury bills & bonds. Those people would get some of that printed money in that case, but it would be limited - $1000 here and $2500 there. As the value of the money people had would drop, prices would rise - and probably quickly. Wages would not keep up with the prices, and we would see layoffs as companies could not keep up with their costs.

And with such a huge influx of money at one time, this would happen quickly.

Only a portion of the money is owed to US citizens - we do owe other countries, also, so the currency would be leaving the country, which is a whole different story.

'Course, this is all theory and may not happen at all. But I don't think that politicians are willing to take the chance.

Comments?

Question from "Elasticity Stuff..."

Since no one went back to this one, I wanted to make sure to get the info out to you.

This was the question:

Studies have fixed the short-run price elasticity of demand for gasoline at the pump at -.20. Suppose that international hostilities lead to a sudden cut off of crude oil supplies. As a result, US supplies of refined gasoline drop 10%. If gasoline was selling for $1.40 per gallon before the cutoff, how much of a price increase would you expect to see in the coming months?


I pointed out before that you now have the elasticity (-.2, or for our sake, .2), but how do you determine the percentage change in price from the info given?

Remember: elasticity = % change in quantity over % change in price

So - you have elasticity at -.2, the % change in Q as 10, and need the % change in price

What do you need to make the elasticity at .2 when the change in Q is 10? you need 50% -- therefore you would see a 50% price increase - from $1.40 to $2.10, since 50% of $1.40 is $.70.

Comments? :)

Test today!

Well, the scores look really REALLY good!

Average: 74.5 . I know that number scares you, but I am delighted with it! Anytime I can get a C average on a unit AP test, it is AWESOME! Like I've said before, you should not leave that test thinking, "oh, yeah, easiest thing I've ever done...waste of my time, easy A."

Lowest score so far: 60%
Highest score so far: 86%


Ladies and gents, that is excellent. You should be very proud - even with all of the negative comments about how you don't know it and all that jazz, you did a great job. :)

I only wish we could take a break and relax...but we can't. :( Give me one more unit and we'll slow down. A little.

And of course, things will change after the exam.

I have two students that still have to take the test, so I'll show you your scores tomorrow, the tests by the end of the week.

This afternoon, I'll also post some more info on the questions you've had in the blog messages.


From some of the response to the after school meeting - well, I'll do what I can for us NOT to have to meet, but we'll see how unit 3 goes. It is, by far, the most important unit.

Great job, guys!

KM


**almost forgot - you may start retesting as soon as we can go through the test. Because of the end of the quarter next week, all retakes must be done by Friday 3/24! :)

Test Monday

Okay, I won't tell you the countdown to the national test, or how many days behind we are right now. :)

Test - 50 multiple choice questions. Look at the review sheet to help you determine the important things. Know elasticity well. Regular S & D quetsions are on there, too.

I know, my typing needs help tonight. It's been a horrific day and I'm ready to go home.

It is possible that we may need to talk about a required after school meeting. Maybe we could pot luck it - people bring stuff in to share with others. Maybe we could each chip in $5 and get some pizzas. It really depends on how we're doing in Unit three.

But - just an advance notice to get some feedback. Are there any days of the week that would be absolutely impossible? (I'm not talking work schedules, really - if I can get it planned far enough in the future, I'm hoping you could ask off work for one night). Impossible = "I have stuff planned every Tuesday night that cannot possibly be changed".

Like I said - we may not need it. But then again, we might.

There are a number of questions posted after this to get you thinking. Happy studying!

I'll check in throughout the weekend if you have questions.

KM

Trade

According to an article in the New York Times, "many Midwest wheat farmers oppose the free trade agreement [NAFTA] as much as many corn farmer support it." (Nov 5, 1993) Assume that the US is a small country in the markets for corn and wheat, and that without the free trade agreement, the US would not trade these commodoties internationally (these are both false, but it makes the questions easier to understand).

a. is the world wheat price above or below the US "no trade" wheat price? (the price where we would choose not to trade with another country)

b. is the world corn price above or below the US "no trade" corn price?

c. Considering both wheat and corn, does NAFTA make US farmers as a group better or worse off?

d. Does it make US consumers better or worse off?

Taxes

Suppose the government raises $100 million through a $0.01 tax on widgets, and another $100 million through a $0.10 tax on gadgets. If the government doubled the tax rate on widgets and eliminated the tax on gadgets, would it raise more, less, or the same amount of money as before?

dwl

If the government imposes a tax on heating oil:

a. Would the DWL on this tax likely be greater in the first year it is imposed, or the fifth year?

b. Would the revenue collected from this tax likely be greater in the first year after it is imposed or in the fifth year?

taxes

Agree or disagree, and why?

1. If the government taxes land, wealthy landowners will passt he tax on to their poorer renters.

2. A tax that has no deadweight loss cannot raise any revenue for the government.

3. If the government taxes apartment buildings, wealthy landlords will pass the tax on to their poorer renters.

4. A tax that raises no revenue for the government cannot have any deadweight loss.

Pizza

Okay, the market for piza is characterized by a normal downward sloping demand curve and an upward sloping supply curve.

a. Suppose the government forces each pizzaria to pay a $1 tax on each pizza sold. What happens to CS, PS, tax revenue & DWL in comparison to the same areas before the tax was imposed?

b. If the tax were removed, pizza eaters and sellers would be better off, but the government would lose tax revenue. Suppose that consumers and producers voluntarily transferred some of their gains to the government. could all parties (including the government) be better off than they were with a tax?

Consumer Surplus

If you were to consume 5 hamburgers at Wendy's, would you enjoy a consumer surplus?

CS/PS

Okay, this one was giving people grief today. My hint is to graph it out. Basic supply & demand. And yes, Nicki, I *was* confusing you today - I realized why during lunch. I was looking at it upside down (I know, it's terrible of me). Make sure to graph the correct quantity and price - with demand, at the lowest price there will be more than one person wanting it. In supply, at the highest price there will be more than one person wanting to produce it. That's the basics of the Laws of Supply & Demand.

There are four consumers willing to pay the following amoutn for haircuts:

Jerry-$7, Oprah-$2, Sally Jessy-$8, Montel-$5

There are four haircutting businesses with the following costs:

Firm A:$3, Firm B:$6, Firm C:$3, Firm D: $2

Each firm has the capacity to give only one haircut. For efficiency, how many haircuts should be given? Which businesses will cut hair, and which consumers should have their hair cut?

Elasticity stuff...

You guys are doing very well on the questions from earlier postings! I can't help but notice, though, that some questions are very sad because they're being ignored. ;) Also, two of them may be easier to answer now that you have more info. Any takers?

1. Other thing equal, an increase in the number of buyers for a product or service will increase demand. Baby diapers and retirement villages are two products designed for different population groups. The US Census Bureau website, http://www.census.gov/ipc/www/idbpyr.html , provides population pyramids (graphs that show the distribution of population by age and sex) for countries for the current year, 2025, and 2050. View the population pyramids for Mexico, Japan, and the US. Which country will have the greatest percentage increase in demand for baby diapers in the year 2050? For retirement villages? Which country do you think will have the greatest absolute increase in demand for baby diapers? For retirement villages?


2. Taxicab fares in most cities are regulated. Several years ago, cab drivers in Boston obtained permission to raise their fares 10%, and they anticipated that revenues would increase by about 10% as a result. They were disappointed, however. When the commissioner granted the 10% increase, revenues increased by only about 5%. What can you infer about the elasticity of demand for taxicab drivers? What were cab drivers assuming about the elasticity of demand? (You may not be able to answer this one without looking up other ways to determine elasticity in your book) :)


3. Studies have fixed the short-run price elasticity of demand for gasoline at the pump at -.20. Suppose that international hostilities lead to a sudden cut off of crude oil supplies. As a result, US supplies of refined gasoline drop 10%. If gasoline was selling for $1.40 per gallon before the cutoff, how much of a price increase would you expect to see in the coming months?

Elasticity and Price Ceilings/Floors

I haven't decided yet what we'll do for the re-quiz - you may have two chances, I'm not sure. The reason why the application quizzes are more difficult is because the assumption is made that you know and understand the material - there's a difference between knowing it and being able to apply it, and the application can get really tricky. This is a good way to prepare for the national exam - because I would estimate it is about 85% application. They assume that you know the material - they are asking you to apply it.

The info next week on taxes and trade involve manipulating the S/D graphs. Colored pencils may be helpful.

Some more questions for you to think about:

1. In an effort to 'support' the price of some agricultural goods, the Dept of Agriculture pays farmers a subsidy in cash for every acre that they leave unplanted. The Agriculture Department argues that the subsidy increases the 'cost' of planting and that it will reduce supply and increase the price of competitively produced agricultural goods. Critics argue that because the subsidy is a payment to farmers, it will reduce costs and lead to lower prices. What argument is correct? Is this a price ceiling or a price floor in action? Explain.

2. Lovers of classical music persuade Congress to impose a price ceiling of $40 per ticket. Does this policy get more or fewer people to attend classical music concerts?

3. The government has decided that the free-market price of cheese is too low. If the government imposes a binding price floor in the cheese market, what would that do to the price and quantity of cheese sold? Is there a surplus or a shortage?


(there are more questions on older posts below)

Extra credit: Answer this to turn in on Monday (at least I'll know who's reading the blog! :) ) This will be worth...let's see...one missing homework assignment (if you have a zero in there) or, if you have all homework in, +10 on a quiz. How's that? --> Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown (The chart didn't work, so use it this way):
Th. of bushels demanded/Price per bushel/Th. of bushels supplied
85/$3.40/72
80/$3.70/73
75/$4.00/75
70/$4.30/77
65/$4.60/79
60/$4.90/81

a. Graph the demand & supply for wheat. Make sure to label all parts correctly.
b. Suppose the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling? Explain the main effects and demonstrate your answer graphically.
c. What if the government established a price floor of $4.60 for wheat? What will be the main effects of the price floor? Show it on your graph.