econ notes Feb 19

# econ notes Feb 19 - Output has increased for each firm,...

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Sample test 15-20 multiple choice + problems similar to problem sets internal If Q of a firm goes up AC goes down number of firms S= industry size n = # of firms Q = S/n cQ = variable cost AC = F + cQ F/Q + c = AFC + MC AC = P = 0 because of entry and exit. C and P must intersect in order to have production. Total size of sales S changes in international case because market has expanded. Price doesn't shift the demand curve. Changing I that is not on the axis represents shift in the curve. Change in price and q doesnt. Points on diagram slide 22 1. Autarky 2. free trade in free trade,more firms, lower price b is demand parameter Ph, nh pf, nf Pft, nft P= c + 1/bn AC= nf/S + c because p must equal AC, 1/(bn) = (nF)/s => n^2 = S/(bf) solve for P and AC, then set them equal and solve for n. Foreign will have lower prices because they have more firms. Integrated market- add up total sales. Use number S = Sh + Sf to find the total sales. Now, solve for Acft. Check for this result on slide 6-25.

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Unformatted text preview: Output has increased for each firm, average cost has decreased. Firms will hire more workers. Average wage has decreased because zero profit and prices have gone down. Real wage- we dont know. 4 firms out of business. Equilibrium produces number like 10.6 firms. Conclusion- at 10.6, price = ac there are 10 or 11. 11 is negative profits. So that firm has no incentive to enter the market. Entry is free. 10 firms. Each firm makes a profit. Market operates at 10. Ratio of inter industry trade. Zero intraindustry trade for footwear, 99% from inorganic chemicals. Capital and technology required for inorganic chemicsals, power generating machinery, etc. But not the case for footwear. If the US has 100 times the wages, must have 100 times the technology of China. Chapter 6 explains similar country trade, not trade between US and China. Productivity grows for both countries. Internal economies of scale. 10 10.6 11...
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## This note was uploaded on 06/10/2010 for the course ECON EMBA taught by Professor Cyrilchang during the Spring '08 term at University of Mississippi Medical Center.

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econ notes Feb 19 - Output has increased for each firm,...

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