Comments on Problem Set #4

Some tips and answers:

I think if you try to graph out the diagrams things might not turn out really pretty. But you don't have to graph anything in problems 1-3. You can just do calculations on a table (or schedule). Calculate TR and TC and then subtract to find profit. That will give you the proft maximizing P and Q.

Whenever you're asked for "efficient price", that refers to the perfectly competitive outcome. Namely,

price = marginal cost

or

P = MC

Something to remember: only in competition does it deterministically move to P = MC. When you have market power, where MC = MR, P is greater than MR.

That means: P = MC makes society best off. MR = MC makes the firm best off.
Both are "best" only when P = MR = MC which happens only in perfect competition.
All the rest are P > MR = MC (for all you profit maximizers out there).

Here's an answer to a question some others might find helpful.

Derek10310: hey dr julian im having some trouble with the homework. when figuring out the TR and MR what do u do with the cost of like 4 dollars in the first problem and 6 in the second problem?
CinciDood: for 1, the cost comes into play for part C... calculating profit. the other options are all revenue or quantity focused, not cost and profit. You have to calculate profit from that table for each level of output. then you'll pick the quantity that has the highest profit.
Derek10310: so part a in both u dont need to use them
CinciDood: problem 2 B and C is the same thing.
CinciDood: no, not for a and b in #1
Derek10310: ok thank you
CinciDood: can I exerpt this with your screenname and paste it in my blog? I think it could be helpful to others.
Derek10310: yea thats fine
CinciDood: thanks
CinciDood: good luck

Test 3 results

This is approximate. This is only a guide.

A: 33+
B: 28-32
C: 24-27
D: 20-23
F: below 20

mean approx. 27 (70%)

Remember to file your taxes.

Answer Key to Study Questions for Test #3

Here's what I came up with. IM me if you think I got anything wrong.

1-C, 2-A, 3-C, 4-B, 5-A, 6-C,
7-A, 8-A, 9-D, 10-B, 11-B, 12-B,
13-B, 14-D, 15-A, 16-A, 17-B, 18-A,
19-B, 20-B, 21-D, 22-A, 23-A,
24-B, 25-B, 26-B, 27-A, 28-A, 29-A, 30-B, 31-A,
32-A, 33-D, 34-B, 35-A, 36-C, 37-B,
38-D, 39-A, 40-C, 41-B, 42-D,
43-C, 44-B, 45-C,
46-C, 47-C, 48-D, 49-C, 50-C, 51-D, 52-D.

Sorry about the delay. It has been one h*** of a day.

Alternative Assignment for Class 4-7 READ THIS UPDATE

The links to the article at the New York Times is gone. Their stories become "archives" after one week. You must pay for archive access.

That is unless you have Lexis Nexis access, which we do from the University's Library.

So a copy of the article is available on my I-drive. It is a Microsoft Word document. If you have trouble accessing it I can send it to you upon request. Or you can search the Lexis Nexis archive via IUP's electronic resources (I think a direct link would require some log in info but try this link.)

Anyway, I apologize for the inconvenience. I'd go off on a big rant right now against the NYT if their reporting wasn't so high quality.

Alternative Assignment for Class 4-7

This assignment is open to ALL students in my Econ 122 classes. (Both MWF 11:45 and 1:00)

There is no class on Friday, April 7, 2006. As part of the collective bargaining agreement between faculty and "management", when a class is cancelled for any reason, we are required to offer some type of alternative assignment so that you, dear students, get your full money's worth.

If you do this assignment below you will NOT have to do the written problem on the test. Moreover, it will be worth a total of six points on the next test, Wednesday April 12, 2006, whereas the written problem on the test will be worth the standard five points.

Read the following article in Monday's New York Times. (These are hotlinked on the word version of this available on the I-drive as well as on my weblog.)

Labor Shortage in China May Lead to Trade Shift

http://www.nytimes.com/2006/04/03/business/03labor.html

You may have to register to access the New York Times. If you can't or don't want to register I can email a link to the article for you. (I will be out of town and will be unable to do this Thursday afternoon until Monday morning.)

Assignment:

1. One paragraph: summarize the article. Be sure to mention the key problems and what Chinese businesses and the government are trying to do to counter the labor shortage.

2. Draw a diagram of a “typical” firm in a competitive market in China in an initial long-run equilibrium (zero profit). Then show what happens when there is an increase in wages. Show how this will affect marginal cost, average total cost, and profit. (Assume the price of the good does not change.)

Explain your diagram and find a quote in the article that reflects what is going on in the diagram.

Try to fit this all onto one sheet of paper. Preferred presentation: Type out the summarization. Print it. Draw and explain the diagram on the lower half or back side of the paper.

Be sure to check the weblog for any comments or modifications.

This assignment is due Wednesday April 12 in class before the test. Only in class. No sliding under the door. No email. In class.

Comments on Problem Set #3

People have been having issues with problem 4.

Here are the steps:

1. find MC for this "typical" firm.

2. make a table of MC and Q.

3. multiply Q by 100

4. change MC to P (Price).

Once you have P and Q (x 100) you have the industry supply. OK, for those who read this it should look like this:

P = MC	Quantity supplied
11	600
9	500
7	400
5	300
3	200

Now, plot the demand curve and this supply curve you've derived. You'll notice these prices are all odd but the demand curve prices are all even. So be careful.

You will have to "eyeball" the equilibrium. I'll tell you now, that equilibrium price will be less than 11 and more than 9.

Oh, and to find VC, you need to figure out FC. Then subtract FC from TC.

How do you find FC? Well, when output is zero you still have some TC, don't you? That would be your FC.

Try that.

Yeah, it is kind of difficult, but if you think of it as a puzzle you won't be so irritated. I'll go over it in class and give you the opportunity to fill in some details. Don't sweat it, but give it a shot.

Good luck.

Mitigating those China fears

If you find yourself a product of conventional wisdom, the Chinese will not be taking over our world by exploiting its cheap labor. They'll have to do it by paying them a better wage.

Read this NYT article on the Chinese labor shortage. (NYT registration is required. Registration is free, you just have to give up some private information. If someone really wants it contact me and I can email you a temporary link from the Times.)

http://www.nytimes.com/2006/04/03/business/03labor.html