Scot Wick Blog

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5 th Ed. PART 5   Firm Behavior and the Organization of Industry Chapter 14 of 36 – Firms In Competitive Markets Section 17 of 24 … Figure 5 here … Figure 5 - Profit as the Area between Price and Average Total Cost The area of the shaded box between price and average total cost (ATC) is the firm's profit, or loss · height of this box is price (P) minus average total cost, P - ATC · width of the box is the output quantity, (Q) Panel (a), P is above ATC, the firm has profit. Panel (b), P is below ATC, the firm has loss. … In Figure 5 Panel (a) shows a firm with a profit · a firm maximizes profit by producing the Q at which P = MC · the area of the rectangle (P - ATC) x Q is the firm's profit Panel (b) shows a firm with a loss · here the firm wants to minimize losses · this is also achieved by producing the Q where P = MC ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5 th Ed. PART 5    Firm Behavior and the Organization of Industry Chapter 14 of 36 – Firms In Competitive Markets Section 16 of 24 … Figure 4 here … Figure 4 - The Competitive Firm's Long-Run Supply Curve In the long run for the competitive firm · supply curve is its marginal cost (MC) curve above average total cost ( ATC) curve · i f the price falls below ATC, the firm is better off exiting the market … If the firm’s product price falls and stays below ATC, the firm exits the market This exit is caused by · fall in price including due to competition · increase in ATC including due to rising labor costs If the firm permanently closes down and exits the market · it will lose all revenue from the sale of its product · it will save fixed costs as well variable costs of production … The firm exits the market in the lon...

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 14 of 36 Firms In Competitive Markets Section 15 of 24 … Why does an almost empty restaurant stay open? It might seem the revenue from the few customers does not cover the cost of running the restaurant. A restaurant owner makes a distinction between fixed and variable costs. Many of a restaurant's costs are fixed, including rent, kitchen equipment, tables, plates, and silverware. Shutting down during lunch would not reduce these fixed costs, they are sunk in the short run. … When the owner is deciding whether to serve lunch only the variable costs are relevant, including the costs of the additional food ingredients and staff wages. The owner shuts down the restaurant at lunch time only if the revenue from the few lunch time customers does not cover the restaurant's variable costs incurred serving them. … An owner of a miniature golf course ma...

 

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  Shot the Kral Puncher Synth Bullpup 12 yards today. Bad weather this week mostly shooting indoors. First time any gun to shoot four zeros both targets of day, moved up to 5 th place. Kral guns are a great value. Tomorrow forecast no rain but strong wind here in metro Chicago. Rotate through guns, day one shoot 12 yards inside, weather allowing day two 30 yards outside.

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5 th Ed. PART 5   Firm Behavior and the Organization of Industry Chapter 14 of 36   Firms In Competitive Markets Section 14 of 24 … Figure 3 here … Economists say a cost is a “sunk cost” · when it is committed and cannot be recovered · because nothing can be done about sunk costs · a firm can ignore them when making decisions A firm cannot recover its fixed costs by temporarily stopping production. Regardless of the quantity of output supplied, even if zero, the firm still has to pay its fixed costs. As a result, fixed costs · are sunk in the short run · are ignored when deciding how much to produce Per Figure 3 the firm's short-run supply curve · is the part of the marginal cost (MC) curve · that lies above its average variable cost (AVC) curve … Consider you place a $15 value on seeing a newly released movie, you...