Hey there -
I'll check in on occasion over spring break if you have any questions, or just email me. If you've been confused, please spend some time with PC or M so that you can feel more caught up - and if anyone else can answer a peer's question, that's always helpful! :) Most of all - have a nice, relaxing break. You deserve it.
You should be able to:
~recognize a PC graph if it is pictured in front of you but unlabeled
~understand how price is "determined" in PC
~be able to draw accurate industry & firm graphs (completely and appropriately labeled)
~show what happens in the long run if there are short run profits or losses
Introduction to Monopoly. It starts with info on copyright, trademark, etc that is useful for possible questions on the test.
(Price searcher = price taker) This is on MR & D curves and compare PC, M & MC (which we haven't gotten to yet, but shouldn't be too confusing)
The problem with putting problems on the markets on here is that you often need to show the graphs in order to get the idea. So some of these might be easier if you draw a graph - but then again, if you can do it without the graph, on a m/c question you'd be able to cut your timing down. Keep in mind that in the short answers, you WILL need to draw graphs. I promise.
There is a grade for posting from 4-3 to 4-10, but you can get extra credit for posts next week.
Okay - some more things to think over:
1) Consider the delivery of mail. In general, what is the shape of the ATC curve? How might it be different than in isolated rural areas or densely populated urban areas? How might the shape change over time?
2) Singer Diddy has a monopoly over a scarce resource: himself. He is the only person who can produce a Diddy concert. Does this fact imply that the government should regulate the prices of his concerts? Why or why not?
3) Why is the equality of marginal cost and marginal revenue essential for profit maximization in all market structures? Why can price be substituted for MR in the MR=MC rule when an industry is perfectly competitive?
4) In long run equilibrium of a perfect competitor, P = min ATC = MC. Of what significance for economic efficiency is the equality of P and min ATC? The equality of P and MC? Make sure to distinguish between productive efficiency and allocative efficiency.
5) Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, and (d) allocation of resources. Since both monopolists and perfectly competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a PC firm and a monopolist be different? What are the implications of such a cost difference?
Last, but never least: an option for extra credit to turn in on Tuesday 4/18. It will not be accepted after that date! How mean! :) Do some or all - you can get partial credit.
Suppose that the US textile industry is competitive, and there is no international trade in textiles. In long run equilibrium, the price per unit of cloth is $30. (a) Describe the equilibrium using graphs for the entire market and for an individual producer.
Now suppose that textile producers in other countries are willing to sell large quantities of cloth in the US for only $25 per unit. (b) Assuming that US textile producers have large fixed costs, what is the short-run effect of thesse imports on the quantity produced by an individual producer? What is the short run effect on profits? Make sure to illustrate your answer with appropriate graphs. (c) What is the long run effect on the number of US firms in the industry?
Wow. I really don't want to type all this right now. Go to p344 in your text, and do #1 under "Problems and Applications". If you don't have your texts at home, leave a note here by MONDAY MORNING and I will type it in when I come into work on Monday.