Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economics 3/20/17 http://mrmilewski.com • OBJECTIVE: Examine Pure Competition in the long run. AP Micro-3.9 • Language objective: SWBAT define essential vocabulary in regards to Micro economics. In addition, swbat write notes on performance and read and write answers to questions and problems regarding the objective. • I. Administrative Stuff -attendance -Review Macro Final Exam • II. Chapter#9 Homework -Answer questions (1-5) & Problems (1-2) p.193 • Notice: Grades posted to Google classroom tonight. 3rd Hour Google Classroom q3lae 5th Hour Google Classroom gsuwytt Homework • Answer Questions (1-5) and Problems (1-2) p.193 Economics 3/21/17 http://mrmilewski.com • OBJECTIVE: Examine Pure Competition in the long run. AP Micro-3.9 • Language objective: SWBAT define essential vocabulary in regards to Micro economics. In addition, swbat write notes on performance and read and write answers to questions and problems regarding the objective. • I. Daily Opener#59 -ACDC Econ Micro 3.9 Perfect Competition in the Long Run -Welker Long Run Video • II. Notes#59 -notes on pure competition in the long run • Notice: Chapter#9 Test Thursday 09 Pure Competition in the Long Run McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. The Long Run in Pure Competition • In the long run: • Firms can expand or contract capacity • Firms enter and exit the industry LO1 9-7 Profit Maximization in the Long Run • Easy entry and exit • The only long run adjustment we • • LO2 consider Identical costs • All firms in the industry have identical costs Constant-cost industry • Entry and exit do not affect resource prices 9-8 Long-Run Equilibrium • Entry eliminates profits • Firms enter • Supply increases • Price falls • Exit eliminates losses • Firms exit • Supply decreases • Price rises LO3 9-9 Entry Eliminates Economic Profits P P S1 MC ATC $60 50 MR 40 S2 $60 50 D2 40 D1 0 100 (a) Single Firm LO3 q 0 80,000 90,000 100,000 Q (b) Industry 9-10 Exit Eliminates Losses P P S3 MC ATC $60 S1 $60 50 50 MR D1 40 40 D3 0 100 (a) Single Firm LO3 q 0 80,000 90,000 100,000 Q (b) Industry 9-11 • • • LO4 Long Run Supply Constant cost industry • Entry/exit does not affect LR ATC • Constant resource price • Special case Increasing cost industry • Most industries • LR ATC increases with expansion • Specialized resources Decreasing cost industry 9-12 LR Supply: Constant-Cost Industry P P1 P2 $50 Z3 Z1 Z2 S P3 D1 D3 0 LO4 Q3 90,000 Q1 100,000 D2 Q2 110,000 Q 9-13 LR Supply: Increasing-Cost Industry P S P2 $55 Y2 P1 $50 Y1 P3 $40 Y3 D2 D1 D3 0 LO4 Q3 90,000 Q1 100,000 Q2 110,000 Q 9-14 LR Supply: Decreasing-Cost Industry P P3 $55 X3 X1 P1 $50 X2 P2 $40 D3 S D2 D1 0 LO4 Q3 90,000 Q1 100,000 Q2 110,000 Q 9-15 Exit Question • 59.) In pure competition, what is the long run economic profit? Homework • Continue reading Chapter#9. Economics 3/22/17 http://mrmilewski.com • OBJECTIVE: Examine Pure Competition in the long run. AP Micro-3.9 • Language objective: SWBAT define essential vocabulary in regards to Micro economics. In addition, swbat write notes on performance and read and write answers to questions and problems regarding the objective. • I. Daily Opener#60 -no daily opener Ch#8 Retake • II. Notes#60 -notes on pure competition in the long run • Notice: Chapter#9 Test TOMORROW! Pure Competition and Efficiency • In the long run, efficiency is achieved • Productive efficiency • Producing where P = min. ATC • Allocative efficiency • Producing where P = MC LO5 9-19 Pure Competition and Efficiency Single Firm Market P=MC=Minimum ATC (Normal Profit) MC Consumer Surplus S Price Price ATC P MR P Producer Surplus D 0 LO5 Qf Quantity 0 Qe Quantity 9-20 Dynamic Adjustments • Purely competitive markets will • LO6 automatically adjust to: • Changes in consumer tastes • Resource supplies • Technology Recall the “Invisible Hand” 9-21 Technological Advance: Competition • Entrepreneurs would like to increase profits beyond just a normal profit • Decrease costs by innovating • New product development LO6 9-22 Creative Destruction • Competition and innovation may lead to “creative destruction” • Creation of new products and methods destroys the old products and methods LO6 9-23 Efficiency Gains from Entry • Patent protected prescription drugs earn • substantial economic profits for the pharmaceutical company. Generic drugs become available as the patent expires on the existing drug. • Results in a 30-40% reduction price • Greater consumer surplus and efficiency 9-24 Efficiency Gains from Entry a S P1 b c d f P2 D Q1 Q2 9-25 Exit Question • 60.) When is the Chapter#9 Test? Homework • Study for Chapter#9 Test Tomorrow! Economics 3/23/17 http://mrmilewski.com • OBJECTIVE: Demonstrate mastery of pure competition in the long run. AP Micro-3.9 • Language objective: SWBAT define essential vocabulary in regards to Micro economics. In addition, swbat write notes on performance and read and write answers to questions and problems regarding the objective. • I. Administrative Stuff -attendance & review • II. Chapter#9 Test -test on pure competition in the long run • Homework: Begin Reading Chapter#10 Homework • Begin Reading Chapter#10 Economics 3/24/17 http://mrmilewski.com • OBJECTIVE: Examine Pure Monopoly. AP Micro4.1 • Language objective: SWBAT define essential vocabulary in regards to Micro economics. In addition, swbat write notes on performance and read and write answers to questions and problems regarding the objective. • I. Daily Opener#61 -ACDC Econ Micro 4.1 Monopoly Demand & MR -ACDC Econ Micro 4.2 Monopoly Graph • II. Notes#61 -notes monopoly • Notice: Read Chapter#10 10 Pure Monopoly McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. An Introduction to Pure Monopoly • • • • • LO1 Single seller – a sole producer of a specific good or service. The firm and the industry are one No close substitutes – unique product that nobody else produces. Price maker – control over price and quantity supplied. Blocked entry – strong barriers to entry block potential competition. The barriers can be economic, technological or legal for example. Non-price competition – the product produced can be standardized (utilities) or differentiated (Windows). Standardized products use mostly PR for product awareness and differentiated products will use advertising to promote their product. 10-32 Examples of Monopoly • • • • LO1 Pure monopolies are very rare, but there are other firms that exist that are close. Public utility companies • Natural Gas • Electric • Water Near monopolies • Intel • Wham-O Professional Sports Teams 10-33 Barriers to Entry • LO1 Barrier to Entry: factors that keeps firms from entering an industry: • Economies of Scale – Declining ATC with added firm size makes it difficult for a new firm to start up. They cannot realize the economies of scale. • Legal Barriers: Patents and Licenses. Patents enable monopolies to have the exclusive right to an invention. Licensing makes it difficult for new firms to enter because there is a limited number of licenses. For example, the taxi cab business in a large city. • Ownership of Essential Resources – a monopoly can own or control the resources necessary to produce their product. • Pricing – A monopoly can prevent new firms from entereing by slashing their prices. 10-34 Average total cost Economies of Scale $20 15 0 LO1 ATC 10 50 100 Quantity 200 10-35 Monopoly Demand • • LO1 The pure monopolist is the industry The demand curve is the market demand curve, also. • The difference between a pure competitor and a pure monopolist is on the demand side. • Instead of a purely elastic demand curve like pure competition, it is a down-sloping demand curve. 10-36 Marginal Revenue is Less Than Price • Marginal revenue is less than price – The only way for a monopolist to increase sales is by charging a lower price. But by doing so, they forgoe the revenue from the higher price. • For example: If a monopolist is selling a product at $100 and then lowered the price to $90 to sell additional units, they would lose $10/unit in marginal revenue. If they sold 5 units their revenue would be $450, but had it been at the original price, they would have earned $500. The next unit they sell will actually generate a revenue of $40.($90 less the $50 forgone on the first five units sold) So, clearly, marginal revenue is less than price. Exit Question • 61.) Where will a monopoly produce? Homework • Begin Reading Chapter#10