Lecture19 2012 PC Output and InputsVerD

Lecture19 2012 PC Output and InputsVerD - QuickTime and a...

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Unformatted text preview: QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. Northwestern University ECON 310-1: Microeconomic Theory Profs. Hornsten and Braeutigam Winter 2012 CONGRATULATIONS! Youve just been promoted! In chapters 7 and 8 the boss told you how much to produce. As production manager, you made production decisions, choosing inputs to minimize cost given a production target. Now YOU are the boss. You oversee competitive market operations. You are making higher level decisions. You -- choose the level of output that maximizes profit. (Todays discussion) -- decide whether the firm should enter a market or a line of business. (Next time) --- decide whether the firm should exit a market or a line of business. (Next time) Choosing Outputs and Inputs in a Perfectly Competitive Market Notes for Lecture #19 From Learning Objective 7: You will be able to apply the appropriate cost concepts to analyze the optimal production choices of a profit maximizing firm in a competitive market. QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. Northwestern University ECON 310-1: Microeconomic Theory Profs. Hornsten and Braeutigam Winter 2012 Characteristics of Perfectly Competitive Markets Industry is fragmented (many buyers and sellers) Firms produce undifferentiated products (commodities) Consumers have perfect information about prices Freedom of access to the resources needed to operate in the industry Transactions between buyers and sellers take place at a common market price Sellers and act as price takers. Firms take market price as given when making volume decisions Buyers take market price as given when making purchase decisions Industry is characterized by free entry Economic Fundamentals Implications ... QuickTime and a TIFF (Uncompressed) decompressor are needed to see this picture. Northwestern University ECON 310-1: Microeconomic Theory Profs. Hornsten and Braeutigam Winter 2012 3 Conditions Leading to Market Failure: Examples Concentrated Structure Monopoly (1 Producer), Oligopoly (a few big sellers), Monopsony (1 Buyer), Oligopsony (a few big buyers), Cartels Differentiated Products, Brands Barriers to entry Size-related cost advantage (like very significant economies of scale) Control of key inputs not available to all producers Intellectual property (patented or trade secret-protected technology), Exclusive rights, and more Externalities ( networks or pollution) Public Goods (See Chapter 17) Nonrival goods (like public broadcasting). Consumption by one person does not affect the quantity that can be consumed by another person....
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Lecture19 2012 PC Output and InputsVerD - QuickTime and a...

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