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Unit III Assignment Guide
Product Markets: The Theory of the Firm
Chapters 21, 22, 23, 24, 25, 26, & 27
Fri. 10/16 & Mon. 10/19
1. Handout and discuss Unit III Assignment Guide
2. Discussion: “Introduction to Market Structures”
Objectives and Key Terms—You must be able to:
1) Define market structure.
2) Define market power.
3) Identify the main characteristics and results of perfect competition.
4) Identify the main characteristics and results of monopolistic competition.
5) Identify the main characteristics and results of an oligopoly.
6) Identify the main characteristics and results of a monopoly.
3. Activity
--Different Types of Market Structures
4. Return and discuss Unit II Test
5. Micro PS #3 (due Mon. 10/26)
6. Begin reading Chapter 21
Tues. 10/20-Wed. 10/21
1. Discussion: “Marginal Product and Marginal Cost”
Objectives and Key Terms—You must be able to:
1) Define and interpret production functions.
2) Define productivity and technical efficiency.
3) Define and differentiate between short run and long run and between fixed and
variable inputs.
4) Define, explain, and calculate total product, marginal product and average
product and describe the relationship among these concepts.
5) Define the law of diminishing returns and explain how it is depicted by the total
product and marginal product curves.
6) Define marginal cost (MC).
7) Explain the relationship between marginal product and marginal cost.
2. Activity
--Mirror Images: Marginal Product and Marginal Cost
Thurs. 10/22-Fri. 10/23 & Mon. 10/26
1. Discussion: “Cost Curves” & “Long Run Costs and Economies of Scale”
Objectives and Key Terms—You must be able to:
1) Explain the relationship between production and cost.
2) Define and graph total fixed cost (FC), total variable cost (VC), and total cost
(TC).
3) Define and graph average fixed cost (AFC), average total cost (ATC), and
marginal cost (MC).
4) Explain the relationship among MC, VC and AVC.
5) Explain why fixed cost is unrelated to marginal cost.
6) Calculate AFC, AVC, ATC and MC given a schedule of the quantity of output
and fixed and variable costs at each output level.
7) Explain why MC = ATC at the minimum ATC level.
8) Define and differentiate between explicit and implicit costs.
9) Define and differentiate between economic profit and normal profit.
10) Define long run in the context of inputs and costs.
11) Define and explain economies and diseconomies of scale and constant returns
to scale.
2. Activity
--Costs of the Individual Firm
3. Micro PS #3 Due (Mon. 10/26)
Tues. 10/27
1. Return and discuss Micro. PS #3
2. Chapter 21 Mini-Test (“The Costs of Production”)
3. Begin reading Chapters 22 & 23
Wed. 10/28-Thurs. 10/29
1. Discussion: “The Competitive Firm”
Objectives and Key Terms—You must be able to:
1) List the conditions that must be fulfilled if an industry is to be perfectly
competitive.
2) Define marginal revenue.
3) Explain why for a perfectly competitive firm, price, marginal revenue and
demand are equal.
4) Compute and graph price, average revenue and marginal revenue when given the
demand schedule faced by a perfectly competitive firm.
5) Define and calculate total revenue.
6) Explain the profit-maximizing rule.
7) Determine the price and output of a perfectly competitive firm in the short run.
8) Define and identify profit, loss, the break-even point, and the shutdown point
for a perfectly competitive firm.
2. Activity
--An Introduction to Perfect Competition
3. Micro PS # 4 (due Mon. 11/2)
Fri. 10/30
1. Discussion: “The Competitive Market”
Objectives and Key Terms—You must be able to:
1) Determine the price and output of a perfectly competitive firm and of the industry
in the short run.
2) Determine the price and output of a perfectly competitive firm and of the industry
in the long run.
3) Explain how the entry and exit of firms assure this long-run result.
4) Explain why P=ATC=MC in perfect competition in long-run equilibrium.
5) Distinguish between technical (productive) efficiency and economic (allocative)
efficiency.
2. Activity
--Graphing Perfect Competition
Mon. 11/2
1. Finish discussion of Perfect Competition
2. Micro PS #4 Due
3. Discuss Micro PS #4 and Review for Chapter 22 & 23 Mini-Test
Tues. 11/3
1. Chapter 22 & 23 Mini-Test (“Perfect Competition”)
2. Begin discussion of Monopoly
3. Begin reading Chapter 24
Wed. 11/4-Fri. 11/6 & Mon. 11/9
1. Discussion: “Monopoly”
Objectives and Key Terms—You must be able to:
1) Define marginal revenue.
2) Explain why the marginal revenue curve for a monopolist lies below the demand
curve when plotted on a graph.
3) Calculate marginal revenue from a schedule of output and total revenue, and plot
marginal revenue and price.
4) Explain why a monopoly firm should never operate on the inelastic portion of its
demand curve.
5) Given cost and demand information, find the monopolist’s profit-maximizing
output and the price consumers will be charged.
6) Calculate the monopoly firm’s profit or loss at its profit-maximizing output.
7) Compare and contrast the monopolist’s profit-maximizing price, output and profit
with those of a perfect competitor.
8) Describe the effect of a monopoly on consumer and producer surplus.
9) Identify the characteristics of a natural monopoly and discuss why natural
monopolies occur.
10) Describe price discrimination and analyze its effects on society.
11) Define contestable market.
12) Define antitrust and regulation.
13) Identify the socially optimal and fair return price for a regulated monopoly.
2. Activities
--Marginal Revenue for an Imperfect Competitor
--Monopoly Pricing
--A Quick Review of Perfect Competition and Monopoly
--Regulating a Monopoly
3. Micro PS #5 (due Mon. 11/16)
4. Begin reading Chapters 25 & 26
Tues. 11/10
1. Simulation: Cartels and Competition
Wed. 11/11
1. Holiday
Thurs. 11/12-Fri. 11/13
1. Discussion: “Oligopoly”
Objectives and Key Terms—You must be able to:
1) Define and identify the characteristics of oligopoly.
2) When given cost and price data, determine the output and price charged by an oligopolist
in the short run and in the long run.
3) Discuss the role of nonprice competition in oligopoly.
4) Describe the types of nonprice competition used by oligopolists.
5) Discuss the mutual interdependence of oligopolists and analyze how this provides
incentives to cheat on a collusive agreement.
6) Define cartel, price fixing, and price leadership.
7) Use game theory to illustrate how the prisoner’s dilemma affects collusive and
competitive strategies.
2. Activity
--The Kinked Demand Curve of an Oligopolist
3. Video Clip (A Beautiful Mind)
4. Begin reading Chapter 27
Mon. 11/16
1. Discussion: “Monopolistic Competition”
Objectives and Key Terms—You must be able to:
1) Define and identify the characteristics of monopolistic competition.
2) When given cost and price data, determine the output and price charged by a
monopolistic competitor in the short run and in the long run.
3) Identify the wastes of monopolistic competition, and explain why product
differentiation may offset these wastes.
2. Micro PS #5 Due
Tues. 11/17-Wed. 11/18
1. Test Review and Practice
Thurs. 11/19
1. Unit III Free-Response Test
Fri. 11/20
1. Unit III Multiple Choice Test