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Econ1-Fall2010-08B-InvisHand-handout - Readings Economics1...

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Economics 1 Principles of Microeconomics 8. The Invisible Hand in Action (B) Fall 2010 Herb Newhouse 1 Readings Ch. 7: The Invisible Hand in Action (p. 208 – 214, 216 226) Response to Profits and Losses The Importance of Free Entry and Exit The Invisible Hand in Action The Distinction Between an Equilibrium and a Social Optimum We’re completely skipping Economic Rent versus Economic Profit (p 215 – 216) Economic Profit (p. 215 216). Know the idea of discounting, but I won’t ask you to do any numerical calculations (p 218 – 219) any numerical calculations (p. 218 – 219). 2 Outline Some different possible shapes for long run supply. The invisible hand in action The invisible hand in action. “No cash on the table.” Discounting. 3 Number of Firms and Cost Constant cost industry : input prices do not change as the number of firms in the market increases (above examples) in the market increases (above examples).
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