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
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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! :)
4 comments:
1. a. would the marginal cost be 20 cents because each one is costing 20 cents to make? or am i off here. that's the best i can come up with.
b. i'm really unsure of myself when i answer this...but the book says that if there is a fixed number of firms then it is short run and if firms are coming and leaving then it has a long run equilibrium...am i getting hot?
sounds like gorman knows what he's talking about for number three, since the benefits don't exceed the marginal cost it's not worth selling it to him. To be perfectly honest i had no idea how to approach this problem and then saw how he did it and now it makes total sense.
*correction* it's not worth selling it to HER. my bad.
Reid, you're so much fun. :)
Life is more than the national debt. If it wasn't, politicians would be a lot more worried about it.
Money has value because the government says it does and because we believe them.
Why do we study Econ? You mean it's not so I can make you die of frustration?
:)
KM
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