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3-4-09 - Microeconomics Class Notes...

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Microeconomics – Class Notes – 3/4/09 Structure-Conduct-Performance Perfect Competition: 1. Lots of buyers and sellers 2. Full information Zero transaction costs 3. Few barriers to entry 4. No product differentiation Conduct: 1. Price = Marginal Cost (P=MC) Performance: 1. Profit = 0 (an outcome/implication, not an assumption) iPod and Zune and Sansa differentiated products (monopolistically competitive Porter’s 5 forces 1. 2. 3. 4. 5. CHAPTER #6 Consumer Choice Started here (individual’s behavior) Production Processes of Firms Theory of the Firm How firms behave and how markets act
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We think of firms as black boxes: Black box theory – we are not looking too carefully at exactly what is going on inside the firm We are going to view firms as a conduit by which inputs are converted to outputs through unknown processes Question: Why do firms exist? Insourcing versus outsourcing resources o There are decisions that firms make to either hire employees/acquire resources internally, (insourcing-within/part of the firm) or to hire people or acquire resources outside of the firm (outsourcing)
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3-4-09 - Microeconomics Class Notes...

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