Econ11Fall2007NotesForLecture_17Nov5

Econ11Fall2007NotesForLecture_17Nov5 - Lecture XVII...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture XVII November 5, 2007, Midterm Wednesday I. Subsidy: Constant, Increasing and Decreasing Cost Industries Begin Factor Markets - Demand for Labor, Land, Capital I. Demand & Marginal Revenue Product for Price Taker II. Going from Firm to Labor Market Demand Curves III. Is it “Fair” to pay Labor its Marginal Revenue Product? IV. “Normal” Unemployment and the Labor Market I. Subsidy: Constant, Increasing and Decreasing Cost Industries Constant Cost Increasing Cost Decreasing Cost S S S S’ S S S S’ S S S S’ S S* S S* S S* S L p p S L p p S S L p S p S S L* p L p L S L* S L* q q S q L qq S q L q q S q L A. Subsidy shifts short-run supply gross of subsidy, S S’ , down by the amount of the subsidy. 1.Price falls to p S along the demand curve by an amount that is less than the amount of the subsidy. Quantity rises to q S . 2. Firms earn economic profit because price has fallen less than the amount of the subsidy but average cost has fallen by the amount of the subsidy. – Therefore firms enter.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

Econ11Fall2007NotesForLecture_17Nov5 - Lecture XVII...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online