MicroEconomics 5e by besanko braeutigam chapter 07

... Wiley & Sons, Inc for forthe thefirm firm Chapter Seven Isocost Line w = $10/hour r = $20/hour TC = $1 million Or more generally: TC K= r − (w / r ) L Chapter Seven 10 Copyright (c)2014 John Wiley ... w r Chapter Seven 15 Long-Run Cost Minimization MPL w > MPK r • At point E • This implies the firm could spend an additional MPL MPK (or ) > w r dollar on labor and save more than a dollar...

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... Chapter One Overview 1 Defining DefiningMicroeconomics Microeconomics 2 Who WhoShould ShouldStudy StudyMicroeconomics? Microeconomics? 4 The TheTypes TypesofofMicroeconomic ... Example: C Chapter One 12 Copyright (c) 2014 John Wiley & Sons, Inc PFF + PCC = I The Constraint Optimization Example – Consumer Purchases F Example: 1/2 (FC) = S0 C Chapter One 13 Copyright (c) 2014 ... the l...

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... slope of supply by a shift in demand We can “identify” the slope of demand by a shift in supply This technique only works if one or the other of the curves stays constant Chapter Two Chapter Two ... prices Chapter Two Supply Curve for Wheat Chapter Two The Law of Supply Defined: The Law of Supply states that the quantity of a good offered increases when the price of this good incr...

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... utility Chapter Three 29 Marginal Rate of Substitution The Marginal Rate of Substitution 2 Example: U = Ax +By ; MU =2Ax; MU = 2By x y (where: A and B positive) = MU /MU x y = 2Ax/ 2By = Ax /By Copyright ... indifferent And thus a contradiction And thus a contradiction Chapter Three 21 Copyright (c)2014 John Wiley & Sons, Inc to C by transitivity to C by transitivity Indifference...

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... the commodity being considered Chapter Four Some Concepts Chapter Four Some Concepts Chapter Four Some Concepts Chapter Four Some Concepts Chapter Four Some Concepts Chapter Four Duality The mirror ... in the marketplace.” Chapter Four Interior Consumer Optimum Y • B Preference Direction • •C Optimal Choice (interior solution) IC BL Chapter Four X Interior Consumer Optimum Ch...

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... words, words, market market demand demand isis obtained obtained by by adding adding the the quantities quantities demanded demandedby bythe theindividuals individuals(or (orsegments) segments)atateach ... Chapter Five Copyright (c)2014 John Wiley & Sons, Inc as aspoints pointson onaashifting shiftingdemand demandcurve curve 11 Copyright (c)2014 John Wiley & Sons, Inc Income Consumption C...

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... L, K ) Chapter Six The Production Function & Technical Efficiency Chapter Six Labor Requirements Function • Labor requirements function L = g (Q) Example: L=Q for production function Q= L Chapter ... single input increases Chapter Six Total, Average, and Marginal Products L 12 18 24 30 Q 30 96 162 192 150 APL Chapter Six MPL 11 11 -7 Total, Average, and Marginal Products Chapter S...

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... varies and w and r are fixed? Chapter Eight Long Run Total Cost Curve An Example Chapter Eight Long Run Total Cost Curve Chapter Eight Long Run Total Cost Curve Chapter Eight Long Run Total Cost ... TC(Q) = 2Q Chapter Eight A Total Cost Curve TC(Q) = 2Q TC ($ per year) $4M Q (units per year) Chapter Eight A Total Cost Curve TC(Q) = 2Q TC ($ per year) $2M Q (units per year) M Chap...

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... maximization condition for a price-taking firm is P = MC Chapter Nine 11 Copyright (c)2014 John Wiley & Sons, Inc The Profit Maximization Condition Chapter Nine 12 The Profit Maximization Condition ... Wiley & Sons, Inc “firm demand" = P (sells as much as likes at P) “firm supply" defined by MC curve? Not quite: Chapter Nine 13 Short Run Equilibrium For Forthe thefollowing, following,...

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... good at the point of sale (The amount paid by the demanders exceeds the total amount received by the sellers by amount T) Chapter Ten Policy: Excise Tax Chapter Ten Policy: Excise Tax With No Tax ... by which the price paid by buyers, Pd, rises over the non-tax equilibrium price, P*, is the incidence of the tax on consumers; the amount by which the price received by sellers,...

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... analogous to exit by higher cost firms and an increase in entry by low-cost firms in the perfectly competitive model in entry by low-cost firms in the perfectly competitive model 3 Chapter Eleven ... analogous to exit by higher cost firms and an increase This is analogous to exit by higher cost firms and an increase in entry by low-cost firms in the perfectly competitive model i...

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... Two steps: (1) maximize the benefits to the consumers by charging r = MC = 10 (2) capture this benefit by setting F = consumer benefits = 4050 Chapter Twelve Two Part Tariff Any higher usage charge ... Discrimination 100 70 Single Price Monopoly 100 Demand Demand 450 55 450 40 2700 1 012. 5 2025 450 10 P 30 60 100 Q Chapter Twelve 1 012. 5 45 MR MC 100 Q Block Pricing If the monopolis...

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... price,taking takingasasgiven giventhe theprice(s) price(s)set setby byother other firm(s), firm(s),sosoasastotomaximize maximizeprofits profits Chapter Thirteen 16 Setting Price • Homogeneity implies ... whereby the dominant firm keeps its price below the level that maximizes its current profit in order to reduce the rate of expansion by the Copyright (c)2014 John Wiley & Sons, Inc fringe...

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... first player Chapter Fourteen Sequential Move Games – Game Tree Game Tree 1: Toyota and Honda, Revisited Chapter Fourteen Sequential Move Games – Game Tree Game trees often are solved by starting ... (four, each represented by one cell of matrix) Payoffs: The benefit that each player gets from each possible outcome of the game (the profits entered in each cell of the matrix) Chapter...

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... anotherparty party Chapter Fifteen 32 Adverse Selection & Moral Hazard Definition: Definition: Adverse AdverseSelection Selectionisisopportunism opportunismcharacterized characterizedby byan aninformed ... characterizedby byan aninformed informedperson's person'staking takingadvantage advantageofofaaless less informed informedperson personthrough throughan anunobserved unobservedaction acti...

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