WORKSHOP AGENDA FOR ADM470.3

JANUARY 2006/ WORKSHOP 470.3

DR. WILLIAM SHINGLETON

 

REVIEW QUESTIONS

          P270-271     8-1 8-7

          P392-393     12-4 12-8

 

PROBLEMS AND EXERCISES

          P271-272     8-1 8-7A

 

REVIEW ANSWERS TO PREVIOUS EXAM

 

TONIGHT  CH 8 AND 12

 

REVIEW PRICE TAKER

 

PRICE SETTING FIRMS (EVERYONE ELSE)

          DEFINITION

                   DOWNWARD SLOPING DEMAND CURVES

                   MARGINAL REVENUE

   NO PRICE DISCRIMINATION

   USUALLY LARGER

   MORE INTERNATIONAL MARKETING

 

MARGINAL REVENUE

          USE STRAIGHT LINE DEMAND CURVES

          CONSTRUCTION OF MR CURVE

          WHAT DOES NEGATIVE MR MEAN?

          MR = PNEW MINUS ( QOLD * PRICE REDUCTION)

          ELASTICITY REVIEW

                   EXAMPLE: SELLING BASEBALL CARDS

 

 EXAMPLE

         Q=1   P=$50  SALES = 1*50 =  $50   MR = $50

         Q=2   P=$45  SALES = 2*45 =  $90   MR = $40

         Q=3   P=$40  SALES = 3*40 = $120   MR = $30

 

 

OPERATING RULES FOR PRICE SETTING FIRMS

   CASE 1... P  <  AVC FOR EACH QUANTITY

      SHORT RUN

         BEST Q = 0

         NO SHUT DOWN PRICE

         LOSS = FIXED COST

      LONG RUN

         LIQUIDATION

 

   CASE 2... P > AVC FOR SOME QUANTITY

          BUT P < ATC FOR EACH QUANTITY

      SHORT RUN

         CHOOSE Q SUCH THAT MR = MC

         LOSS < FIXED COST

         SHOW LOSS AREA

      LONG RUN

         LIQUIDATION

 

   CASE 3... P = ATC FOR ONE Q, P < ATC FOR ALL OTHERS

      SHORT RUN AND LONG RUN

         CHOOSE Q SUCH THAT MR = MC

         PROFIT MARGIN = P - ATC

         NO PROFIT AREA/NORMAL PROFIT

 

   CASE 4...   P >  ATC FOR SOME QUANTITY

      SHORT RUN AND LONG RUN

         CHOOSE Q SUCH THAT MR = MC

         PROFIT MARGIN = P - ATC

         MAXIMUM PROFIT MARGIN IS NOT MAXIMUM PROFIT

         SHOW PROFIT AREA

         PROFIT = P*Q - ATC*Q

 

 EFFECTS OF ENTRY AND EXIT

          MONOPOLY

          MONOPOLISTIC COMPETITION

          OLIGOPOLY

 

THERE IS NO SUPPLY CURVE FOR FIRM OR FOR INDUSTRY

 

REVIEW QUESTIONS

          P270-271     8-1 8-7

 

PROBLEMS AND EXERCISES

          P271-272     8-1 8-7A

 

 

CHAPTER 12: MACRO MEASURES

THIS BACKGROUND MATERIAL IS USED IN 523 PAPER

 

MACROECONOMICS/POLICY GOALS

 

          GROWTH OF REAL GDP

                   DOWN TO 1.1 IN LATEST REPORT

                   3.5 for 2005

                   3.3 20 YEAR AVERAGE

 

          REAL VS NOMINAL DATA

                    NOMINAL ALSO CALLED CURRENT DOLLAR

                    REAL ALSO CALLED 1998 DOLLAR

 

          INFLATION

                   3.4 IN LATEST REPORT

                   3.0 20 YEAR AVERAGE

 

          UNEMPLOYMENT

                   4.9 IN LATEST REPORT

                   5.6 20 YEAR AVERAGE

 

UNEMPLOYMENT

          REAL VS NATURAL

          REAL ALSO CALLED CYCLICAL

          NATURAL INCLUDES

                   FRICTIONAL, SEASONAL, STRUCTURAL, ...

                   POSITIVE AND NEGATIVE FEATURES

          TARGET IS NOT ZERO

 

REVIEW QUESTIONS

          P392-393     12-4 12-8

 

 

          EXCHANGE RATE/VALUE OF THE DOLLAR

          EXCHANGE RATE

                   $1.22 PER EURO/$1.30 LAST YEAR

                   116.28 YEN PER DOLLAR/103.70 LAST YEAR

 

 

EXPENDITURE MODEL FOR GDP

          C + I + G + X

          EQUILIBRIUM

          ADJUSTMENT

          ROLE OF INVENTORIES

          EFFECTIVE DEMAND

 

FINAL EXAM

YOU WILL CHOOSE 2 OUT OF 3 QUESTIONS. 

1. SIMPLE SUPPLY AND DEMAND (MAX = 90)

2. TWO-PANEL SUPPLY AND DEMAND (MAX = 100)

3. PRICE SETTING FIRM (MAX = 100)

ALL QUESTIONS ARE OPEN-NOTE/OPEN BOOK