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| | If you are the owner of a firm, do you like competition? No, not when other firms are competing against you, because that competition will cause you to lower your prices and lose profit. But you do want want perfect competition among your suppliers, because that will help keep your costs lower. | | If you are the owner of a firm, do you like competition? No, not when other firms are competing against you, because that competition will cause you to lower your prices and lose profit. But you do want want perfect competition among your suppliers, because that will help keep your costs lower. |
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| − | '''''Exam tip''''': On a typical Economics exam, "perfect competition" or "perfectly competitive" will be in nearly 20% of the questions. When you see that in a question, it means that prices are at their lowest possible point. The competition causes everyone to lower their prices down to their minimum. Profits are zero. If the labor market is perfectly competitive, then everyone is making the lowest possible wage. These is no excess or surplus or "fat" in a perfectly competitive market. | + | '''''Exam tip''''': On a typical Economics exam, "perfect competition" or "perfectly competitive" will be in nearly 20% of the questions. When you see that in a question, it means that prices are at their lowest possible point. The competition causes everyone to lower their prices down to their minimum. Profits are zero. If the labor market is perfectly competitive, then everyone is making the lowest possible wage. These is no excess or surplus or "fat" or inefficiencies in a perfectly competitive market. |
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| | == Example of Perfect Competition: Sports == | | == Example of Perfect Competition: Sports == |
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| | <discuss [[Gresham's Law]], and ask if good discussion can drive out bad? E.g., start discussing the Bible and watch atheists disappear.> | | <discuss [[Gresham's Law]], and ask if good discussion can drive out bad? E.g., start discussing the Bible and watch atheists disappear.> |
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| | + | == Exam Tips == |
| | + | |
| | + | We will have our midterm exam in two weeks (during class #9). Here are the topics that will be on the exam, with a weighting similar to the CLEP exam for college credit: |
| | + | |
| | + | * 10%: The basics (defining economics, also scarcity and opportunity cost) |
| | + | * 20%: Supply and demand |
| | + | * 15%: Elasticity, also utility, indifference curves |
| | + | * 15%: Decisions by a firm (cost measures, marginal product) |
| | + | * 15%: Short and long run, returns to scale |
| | + | * 10%: Miscellaneous, such as charity |
| | + | |
| | + | <discuss test-taking tips> |
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| | == More == | | == More == |
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| | Read and, if necessary, reread the above lecture. | | Read and, if necessary, reread the above lecture. |
| − |
| |
| − | ===Introductory===
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| | 1. The best friend of free enterprise is ___________. | | 1. The best friend of free enterprise is ___________. |
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| | 3. Until Conservapedia.com began, Wikipedia.com did not have any competition. What often happens to a firm or service when there is no competition? Why? | | 3. Until Conservapedia.com began, Wikipedia.com did not have any competition. What often happens to a firm or service when there is no competition? Why? |
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| |
| − | ===Intermediate===
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| | 4. Suppose you own a widget factory having fixed costs of $10,000. In addition to the $10,000, you have variable costs of $2,500 for each widget you make. Worse, the factory can make only 3 widgets in an entire year! Your widget sells for $5,000. Someone offered to buy your factory for $10,000. Should you sell it? | | 4. Suppose you own a widget factory having fixed costs of $10,000. In addition to the $10,000, you have variable costs of $2,500 for each widget you make. Worse, the factory can make only 3 widgets in an entire year! Your widget sells for $5,000. Someone offered to buy your factory for $10,000. Should you sell it? |
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| | 7. Suppose you are running a dinner event at a free facility that has 24 tables seating 8 apiece. Your marginal cost (MC) is $15 per person. Suppose your speaker costs $3500 in fees and expenses. Suppose your demand curve is this: at price P=$15, quantity Q=200; at P=$35, Q=120; at P=$50, Q=70; at P=$60, Q=40; at P=$150, Q=7. How would you price and market your tickets? | | 7. Suppose you are running a dinner event at a free facility that has 24 tables seating 8 apiece. Your marginal cost (MC) is $15 per person. Suppose your speaker costs $3500 in fees and expenses. Suppose your demand curve is this: at price P=$15, quantity Q=200; at P=$35, Q=120; at P=$50, Q=70; at P=$60, Q=40; at P=$150, Q=7. How would you price and market your tickets? |
| | + | |
| | + | new questions: |
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| | ===Honors=== | | ===Honors=== |
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| | 11. The account of the multiplication of the loaves by Jesus is unique in the way it is included in all four Gospels, and is even mentioned twice in Mark. Read the account, as in Matthew 14:13-21. Does that account change your view about scarcity, and whether scarcity really exists? Even if it does exists, is its significance exaggerated by a lack of [[faith]]? | | 11. The account of the multiplication of the loaves by Jesus is unique in the way it is included in all four Gospels, and is even mentioned twice in Mark. Read the account, as in Matthew 14:13-21. Does that account change your view about scarcity, and whether scarcity really exists? Even if it does exists, is its significance exaggerated by a lack of [[faith]]? |
| | + | |
| | + | new questions: |
| | + | |
| | + | build on MC mathematics in lecture |
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| | + | prove law of demand |
| | + | |
| | + | question about perfectly competitive labor market |
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| | == References == | | == References == |