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# ECON 200: Week 7 (Oct 5) ECON 200

Marketplace > University of Arizona > Economcs > ECON 200 > ECON 200 Week 7 Oct 5
UA
ECON 200
Steven Reff

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Individual Firms
COURSE
ECON 200
PROF.
Steven Reff
TYPE
Class Notes
PAGES
4
WORDS
CONCEPTS
Economics, Econ
KARMA
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## Popular in Economcs

This 4 page Class Notes was uploaded by Nadia on Monday October 12, 2015. The Class Notes belongs to ECON 200 at University of Arizona taught by Steven Reff in Summer 2015. Since its upload, it has received 25 views. For similar materials see ECON 200 in Economcs at University of Arizona.

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Date Created: 10/12/15
ECON 200 Basic Economic Issues Week 7 5 9 October Costs Short Run looking at a period with at least one fixed and one variable cost 0 A machine fixed cost breaking is a hidden cost that decreases revenue since it reduces production output How many workers should be hired To answer this we need to know wage rate and price of product The price is used to determine the marginal revenue product revenue generated from an additional unit of labor and wage gives us the marginal factor cost cost of one additional unit of labor For this example we ll say wage is 7 an hour and the price of the product is 4 Q workers TProduct MProduct MRP MFC 1 2 2 6 7 2 5 3 12 7 3 10 5 2O 7 4 16 6 24 7 5 23 7 28 7 6 26 3 12 7 7 25 1 4 7 It seems that a firm may want to add a machine when the marginal product stops increasing but fixed costs should be held off for as long as possible A MFC should be hired if MRP 2 MFC From the information given above 6 workers should be hired At the seventh worker MRP is less than MFC Forms of Competition 1 2 3 4 Perfect Pure Competition 0 many buyers and sellers 0 products are identical homogenous 0 firms are price takers o no barriers to enter market 0 information is perfect o FARMING is an example of perfect competition though not so much anymore since the use of GMOs makes products different Monopolistic Competition Oligopoly Monopoly How to Draw a Firm s Graph 1 NFDFJ PP N Draw P at market price label the line MR 2 D 2 AR 2 P Draw MC like a swoosh Label the intersection of MR and MC point A Draw a line from A to the xaxis label it q Draw ATC like a smile Label the intersection of ATC and q point C Draw a line from C to the yaxis label it B 9 x P j T IVsz AQCP Firm Individual MarketIndustry Individual firms are price takers which is why P is maintained at market price Total Cost ATCXq can be found by finding the area of OBCq Economic Profit is found in the area of BPAC In the LONG RUN economic profits attract firms to enter increase and Q to decrease Supply shifts right causing P to market causing Supply in the market to increase 0 This then causes the individual firm s Q to decrease AVC MR 9 Ct Q A firm will produce at the market price and they will maximize profit by producing at a quantity q where MRMC AFC is not graphed as a curve because you can find it by ATCAVC Allocative proficiency when the price paid by consumers equals the additional cost of the last produced unit 0 Occurs where PMC Creates the BEST producer and consumer surplus by maximizing profit at MRMC Productive efficiency when firm produces at its lowest point on the ATC curve 0 Occurs where ATCMC Diminishing marginal returns when a firm adds more and more variable input to a fixed input 1 Output goes down 2 Additional costs rise

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