eco assignment

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Onnqe349

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Business Finance

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List five lessons or takeaways that you have learned in this course this week that you consider to be important. Briefly explain each of them. The takeaways you choose can be big or small. What matters is that these were new pieces of knowledge to you.
Choose one of the five takeaways and explain briefly how it would solve or help you solve a problem or exploit an opportunity that you have encountered already in your past experience or that you know you will encounter when you go back to your company/or country/ or find a job after graduation.
This must be a typed document, double spaced and 12-point font.

please use college student stander for writing each points needs about 2 to 3 sentences

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Chapter 8: Competitive Market and Firm in the Short Run Market Structures Pure Competition Monopolistic Competition Oligopoly Pure Monopoly Characteristics of Pure Competition Characteristic Number of firms Monopolistic Competition A very large number Type of product Standardized Control over price None. “Price takers” Very easy, no obstacles Conditions of entry Nonprice Competition None. Examples Agriculture Characteristics of Monopolistic Competition Characteristic Number of firms Monopolistic Competition Many Type of product Differentiated Control over price Some, but within rather narrow limits. Relatively Easy Conditions of entry Nonprice Competition Considerable emphasis on advertising, brand names, trademarks. Examples Shoes, Bags Characteristics of Oligopoly Characteristic Number of firms Few Type of product Standardized or differentiated Control over price Limited by mutual interdependence; considerable with collusion. Significant obstacles Conditions of entry Oligopoly Nonprice Competition Typically a great deal, particularly with product differentiation. Example Auto Characteristics of Pure Monopoly Characteristic Number of firms Pure Monopoly One Type of product Unique; no close subs. Control over price Considerable Conditions of entry Blocked Nonprice Competition Mostly public relation advertising Examples Local utilities Demand for a Purely Competitive Firm’s Product 1. Perfectly elastic demand. 2. Firm produces as much or little as they wish at the market price. 3. Demand graphs as horizontal line LO3 Average, Total, and Marginal Revenue • Total Revenue • TR = P X Q • Average Revenue • Revenue per unit • AR = TR/Q = (P*Q)/Q = P • Marginal Revenue • Extra revenue from 1 more unit • MR = ΔTR/ΔQ LO3 Average, Total, and Marginal Revenue $1179 TR 1048 0 $131 1 131 2 131 3 131 4 131 5 131 6 131 7 131 8 131 9 131 10 131 TR $0 131 262 393 524 655 786 917 1048 1179 1310 MR ] ] ] ] ] ] ] ] ] ] $131 131 131 131 131 131 131 131 131 131 917 Price and revenue QD P 786 655 524 393 262 D = MR = AR 131 2 4 6 8 10 Quantity demanded (sold) 12 Profit Maximization: TR-TC Approach The Profit-Maximizing Output for a Purely Competitive Firm: Total Revenue – Total Cost Approach (Price = $131) (1) Total Product (Output) (Q) (2) Total Fixed Cost (TFC) (3) Total Variable Costs (TVC) (4) Total Cost (TC) (5) Total Revenue (TR) (6) Profit (+) or Loss (-) 0 $100 $0 $100 $0 $-100 1 100 90 190 131 -59 2 100 170 270 262 -8 3 100 240 340 393 +53 4 100 300 400 524 +124 5 100 370 470 655 +185 6 100 450 550 786 +236 7 100 540 640 917 +277 8 100 650 750 1048 +298 9 100 780 880 1179 +299 10 100 930 1030 1310 +280 LO3 Profit Maximization: MR=MC Approach The Profit-Maximizing Output for a Purely Competitive Firm: Marginal Revenue – Marginal Cost Approach (Price = $131) (1) Total Product (Output) (2) Average Fixed Cost (AFC) (3) Average Variable Costs (AVC) (4) Average Total Cost (ATC) (5) Marginal Cost (MC) (5) Price = Marginal Revenue (MR) 0 LO3 (6) Total Economic Profit (+) or Loss (-) $-100 1 $100.00 $90.00 $190 $90 $131 -59 2 50.00 85.00 135 80 131 -8 3 33.33 80.00 113.33 70 131 +53 4 25.00 75.00 100.00 60 131 +124 5 20.00 74.00 94.00 70 131 +185 6 16.67 75.00 91.67 80 131 +236 7 14.29 77.14 91.43 90 131 +277 8 12.50 81.25 93.75 110 131 +298 9 11.11 86.67 97.78 130 131 +299 10 10.00 93.00 103.00 150 131 +280 Profit Maximization: MR =MC Approach Cost and revenue $200 MR = MC 150 P=$131 MC MR = P ATC Economic profit 100 AVC A=$97.78 50 0 LO5 1 2 3 4 5 6 Output 7 8 9 10 Loss-Minimizing Case Cost and revenue $200 MC 150 Loss A=$91.67 ATC AVC 100 P=$81 50 0 MR = P V = $75 1 2 3 4 5 6 Output LO5 7 8 9 10 Shutdown Case $200 MC Cost and revenue 150 ATC V = $74 100 AVC MR = P P=$71 Short-run shut down point P < minimum AVC $71 < $74 50 0 1 2 3 4 5 6 Output LO5 7 8 9 10 Cost and revenues (dollars) Marginal Cost and Short-Run Supply S MC e P5 d P4 P3 P2 P1 MR5 ATC c AVC b a Shut-down point (If P is below) 0 Q2 Q3 Quantity supplied LO6 Q4 Q5 MR4 MR3 MR2 MR1 3 Production Questions Output Determination in Pure Competition in the Short Run Question Answer Should this firm produce? Yes, if price is equal to, or greater than, minimum average variable cost. This means that the firm is profitable or that its losses are less than its fixed cost. What quantity should this firm produce? Produce where MR (=P) = MC; there, profit is maximized (TR exceeds TC by a maximum amount) or loss is minimized. Will production result in economic profit? Yes, if price exceeds average total cost (TR will exceed TC). No, if average total cost exceeds price (TC will exceed TR). LO6 Firm and Industry: Equilibrium Firm and Market Supply and Market Demand LO6 (1) Quantity Supplied, Single Firm (2) Total Quantity Supplied, 1000 Firms (3) Product Price (4) Total Quantity Demanded 10 10,000 $151 4000 9 9000 131 6000 8 8000 111 8000 7 7000 91 9000 6 6000 81 11,000 0 0 71 13,000 0 0 61 16,000 Firm versus Industry: Equilibrium S = ∑ MC’s s = MC Economic profit ATC d $111 $111 AVC D 8 LO6 8000 Fixed Costs: Digging Out of a Hole • Shutting down in the short run does not mean shutting down forever • Low prices can be temporary • Some firms switch production on and off depending on the market price • Examples: oil producers, resorts, and firms that shut down during a recession Competitive Market and Firm in the Long Run Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Competitive Market and Firm in the Long Run The Long Run in Pure Competition • In the long-run • Firms can expand or contract capacity • Firms can enter or exit the industry LO1 Profit Maximization in the Long Run • Easy entry and exit • The only long-run adjustment we consider • Identical costs • All firms in the industry have identical costs • Constant-cost industry • Entry and exit of firms do not affect resource prices LO1 Long Run Adjustment Process • Adjustment process in pure competition • Firms seek profits and shun losses • Firms are free to enter or to exit • Production will occur at firm’s minimum average total cost • Price will equal minimum average total cost LO2 Long Run Equilibrium • Entry eliminates profits • Firms enter • Supply increases • Price falls • Exit eliminates losses • Firms leave • Supply decreases • Price rises LO2 Entry Eliminates Economic Profits P P S1 MC ATC $60 50 S2 $60 MR 40 50 D2 40 D1 0 100 (a) Single firm LO2 q 0 80,000 90,000 (b) Industry 100,000 Q Exit Eliminates Losses P P S3 MC ATC $60 S1 $60 50 50 MR D1 40 40 D3 0 100 (a) Single firm LO2 q 0 80,000 90,000 (b) Industry 100,000 Q Long Run Supply Curves • Constant-cost industry • Entry/exit does not affect LR ATC • Constant resource prices • Special case. The long-run supply curve is horizontal. • Increasing-cost industry • Most industries • LR ATC increases with expansion • The long-run supply curve is upsloping. • Decreasing-cost industry • The long-run supply curve is downsloping. LO3 LR Supply: Constant-Cost Industry P P1 P2 $50 Z3 Z1 Z2 S P3 D1 D3 0 LO3 Q3 90,000 Q1 100,000 D2 Q2 110,000 Q LR Supply: Increasing-Cost Industry P S P2 $55 Y2 P1 $50 Y1 P3 $45 Y3 D2 D1 D3 0 LO3 Q3 90,000 Q1 100,000 Q2 110,000 Q LR Supply: Decreasing-Cost Industry P P3 $55 X3 X1 P1 $50 X2 P2 $45 D3 S D2 D1 0 LO3 Q3 90,000 Q1 100,000 Q2 110,000 Q Pure Competition and Efficiency • In the long run, efficiency is achieved Productive Efficiency • Producing where P = minimum ATC Allocative efficiency • Producing where P = MC Triple equality • P= MC= minimum ATC • Consumer surplus and producer surplus are maximized LO4 Pure Competition and Efficiency Single Firm P=MC=Minimum ATC (normal profit) Market MC Consumer surplus S Price Price ATC P MR P Producer surplus D 0 Qf Quantity LO4 0 Qe Quantity
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Economic assignment
1. The five lessons that have learned in this course this week include the following:
a)

Profit maximization- the profit maximization is normally derived from TR-TC.
The short-run profit maximizat...