Menu_02_Mar_11

Menu_02_Mar_11 - TODAYS MENU Wednesday 02 March 2011 I BUSINESS A Practice Problems 1 Chapter 14 1-5 7 8 10 11 13-15 20 2 Chapter 15 1-3 6-8 11-14

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TODAY’S MENU: Wednesday 02 March 2011 I. BUSINESS A. Practice Problems 1. Chapter 14: 1-5, 7, 8, 10, 11, 13-15, 20 2. Chapter 15: 1-3, 6-8, 11-14 B. Second exam: Two weeks from Monday (21 March) II. SUBSTANCE A. Perfect competition 1. Firm behavior in the short run: How much to produce? Firm is trying to maximize profit a. Case 1: P > ATC b. Case 2: P = ATC c. Case 3: ATC > P ≥ AVC i. Equilibrium quantity Q* >0 ii. Profit < 0 d. Case 4: P < AVC i. Equilibrium quantity Q* > 0 ii. Profit < 0 e. Conclusions in the short run anything can happen 2. Graphically 3. Firm behavior: short run to long run a. Case 1: P > ATC i. Entry -over time attract entry into profit -as we get entry into market supply is increasing ii. Change in output/profit -profit decrease in long run - PROFIT = 0 - no barriers to entry b. Case 2: P = ATC (both short run and long run) i. Entry/Exit -neither ii. Change in output/profit -none c. Case 3: ATC > P ≥ AVC (negative) i. Exit -supply number of sellers is going to decrease ii. Change in profit -profit = 0
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This note was uploaded on 02/14/2012 for the course ECON 2030 taught by Professor Bong during the Fall '07 term at LSU.

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Menu_02_Mar_11 - TODAYS MENU Wednesday 02 March 2011 I BUSINESS A Practice Problems 1 Chapter 14 1-5 7 8 10 11 13-15 20 2 Chapter 15 1-3 6-8 11-14

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