ECON 1051 1nd Edition Lecture 28 Outline of Last Lecture I. Technological Changes II. Implicit vs. Explicit III. EquationsIV. Economies of ScaleV. The Four Market StructuresOutline of Current Lecture I. ExampleII. Perfectly Competitive Markets III. The Three Key Characteristics Current LectureI. Example a. Refer to page 380 in the bookb. Costs:i. MC = $15ii. TC = $30,0001. TC = ATC x Q = $30 x 1000 2. Average total cost is TC/Qiii. VC= $20,0001. VC = AVC x Q = $20 x 10002. AVC = VC/Q iv. FC = $10,000 1. FC = ATC – AVC or AFC x Q = 30-20c. What is the average fixed cost of producing 500 units? i. Answer: 10,000/500 = $20II. Perfectly Competitive Marketsa. Characteristicsi. Firms in perfectly competitive industries are unable to control the prices of the products they sell and are unable to earn an economic profit in the long run because: 1. Firms in these industries sell identical products2. It is easy for new firms to enter these industries 3. Agriculture commodities are sold in perfectly competitive markets These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. Examplei. Market for cornii. Wheatiii. Milkiv. Orange juiceIII. The Three Key Characteristics a. Most industries are not perfectly competitive. In particular any industry has threekey characteristics, which economists use to classify into four market structures:i. The number of firms in the industry, each is very small compared to overall market ii. Homogeneity of the good or service produced by the firms in the industryiii. The ease with which new firms can enter the
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