| | A smart economist might observe that Shakespeare was expressing the undesirability of transaction costs caused by lawyers nearly 200 years before Adam Smith discovered the invisible hand, and over 350 years before Ronald Coase discovered and criticized transaction costs. Perhaps Shakespeare understood economics before it was even recognized as a field of study!<ref>Believe it or not, lawyers claim that Shakespeare was actually ''complimenting'' them, because the line was spoken by an enemy of freedom. See http://www.johnlocke.org/news_columns/display_story.html?id=962</ref> | | A smart economist might observe that Shakespeare was expressing the undesirability of transaction costs caused by lawyers nearly 200 years before Adam Smith discovered the invisible hand, and over 350 years before Ronald Coase discovered and criticized transaction costs. Perhaps Shakespeare understood economics before it was even recognized as a field of study!<ref>Believe it or not, lawyers claim that Shakespeare was actually ''complimenting'' them, because the line was spoken by an enemy of freedom. See http://www.johnlocke.org/news_columns/display_story.html?id=962</ref> |
| − | But many careers in addition to lawyers create transaction costs. Real estate brokers, stock brokers, accountants, waiters and waitresses, and countless other occupations live off of transaction costs. One student who took this course in 2004 is paying her way through college by working as a waitress in a fancy New York restaurant, where the tips can be very profitable! Waiting on tables is a service, and some develop the skills to be much better at it than others. There will always be restaurants, even when the economy is not doing well, and there is nothing wrong with developing a skill as a good waiter or waitress. People are going to pay transaction costs in many different ways, and it is better to be successful at improving delivery of those services than unsuccessful at complaining about them! | + | But many careers in addition to lawyers create transaction costs. Real estate brokers, stock brokers, accountants, waiters and waitresses, and countless other occupations live off of transaction costs. One student who took this course in 2004 is paying her way through college by working as a waitress in a fancy Manhattan restaurant, where the tips can be very profitable! Waiting on tables is a service, and some develop the skill much better than others. (That student first learned how to wait on tables first in Hackettstown.) There will always be restaurants, even when the economy is not doing well, and there is nothing wrong with developing a skill as a good waiter or waitress. People are going to pay transaction costs in many different ways, and it is better to be successful at improving delivery of those services than unsuccessful at complaining about them! |
| | Answer questions 8 and 9, and then write a brief essay about one of the other questions. | | Answer questions 8 and 9, and then write a brief essay about one of the other questions. |
| − | 8. (challenging problem, try at least to earn partial credit) Recall from the last Lecture that a firm increases its output as long as its marginal revenue exceeds its marginal cost. Suppose there is an increase in market price for the firm's widget, such that its marginal revenue is greater than its marginal cost. The firm will hire more employees to produce more output until the value of its marginal product of labor equals _____________. | + | 8. Recall from the last Lecture that a firm increases its output as long as its marginal revenue exceeds its marginal cost. Suppose there is an increase in market price for the firm's widget, such that its marginal revenue is greater than its marginal cost. The firm will hire more employees to produce more output until the value of its marginal product of labor equals _____________. |
| | 9. Answer and discuss: Your firm seeks to produce a certain level of output in the most efficient way (the lowest cost). It should use its resources in which of the following ways: | | 9. Answer and discuss: Your firm seeks to produce a certain level of output in the most efficient way (the lowest cost). It should use its resources in which of the following ways: |