ChapC17 - 1 How to Study for Chapter 17 Perfect Competition...

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1 How to Study for Chapter 17 Perfect Competition in the Long Run (This chapter will take at least two class periods to complete.) Chapter 17 introduces the main tools for analyzing industry behavior. It brings in the long run and considers the three possible changes that can occur. It is very a technical chapter and needs to be studied slowly and carefully. 1. Begin by looking over the Objectives listed below. This will tell you the main points you should be looking for as you read the chapter. 2. New words or definitions and certain key points are highlighted in italics and in red color. Other key points are highlighted in bold type and in blue color. 3. There are a few new words in this chapter. Be sure to spend time on the various definitions. There are also many calculations. Go over each carefully. Be sure you understand how each number was derived (do the calculations for yourself). Then, plot the calculations on graph paper to see how the graphs are derived. Check your graphs against the ones in the text. The calculations of this chapter continue the same case from the calculations of the previous chapters (the case of the construction company). The case of the change in a variable cost is especially involved and needs to be analyzed on a step-by-step basis. 4. The teacher will focus on the main technical parts of this chapter. You are responsible for the cases and the ways by which each case illustrates a main principle. 5. When you have finished the text, the Test Your Understanding questions, and the assignments, go back to the Objectives. See if you can answer the questions without looking back at the text. If not, go back and re-read that part of the text. Then, attempt the Practice Quiz for Chapter 17. Objectives for Chapter 17 Perfect Competition in the Long Run At the end of Chapter 17, you will be able to: 1. Explain how purely competitive companies adjust in the long-run when they are making economic profits and economic losses and show this on the graph. 2. Explain what is meant by "long-run equilibrium" ? 3. Explain how perfectly competitive companies will adjust in the short-run and in the long-run if there is an increase or decrease in demand and show the adjustments on the graph. 4. Explain the long-run industry supply curve ? 5. Explain what is meant by a constant-cost industry and why is its long-run industry supply curve horizontal (perfectly elastic)? 6. Explain how perfectly competitive companies adjust in the short-run and in the long-run when there is an increase or decrease in a fixed cost and show the changes on the graph s. 7. Explain how perfectly competitive companies adjust in both the short-run and in the long-run if there is an increase or decrease in a variable cost and show the changes on the graph.
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