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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.
- Spring '08