Assignment:
Please Read the following chapters are given below: The Firm: Production and Cost and Market Structures, The Firm: Pricing and Market Power
1. How does the productivity of labor differ between production techniques that experience diminishing returns and those that experience fixed proportions? Why?
2. In the space below draw two graphs: one showing the typical behavior of the average and marginal product of labor for a firm or industry experiencing fixed proportions; and another one showing the typical behavior of the average and marginal product of labor for a firm or industry experiencing diminishing returns.
3. The productivity of labor, a p, is dependent on two variables: the intensity of work and the efficiency of work. Explain what these two variables mean and how they affect the productivity of labor. Which variable is a function of technology and which one is a function of social relations? Elaborate.
4. Explain the difference between fixed cost and variable cost. What accounts for the difference between the two forms of cost.
5. Write the definitions (equations) for average cost, ac, average variable cost, aye, average fixed cost, afc, and marginal cost, mc.
6. In the space below draw the unit cost curves (ac, avc, and mc) for a firm experiencing fixed proportions. Be sure to properly label all the axis and curves.
7. In the space below draw the unit cost curves (ac, aye, and mc) for a firm experiencing diminishing returns. Be sure to properly label all the axis and curves.
8. Be prepared to answer numerical questions on productivity and cost like those posted in the "Course Documents" section of Blackboard.
9. Explain what is meant by constant returns to scale. Draw a diagram showing this idea. Be sure to properly label all the axis and curves.
10. Explain what is meant by increasing returns to scale. Draw a diagram showing this idea. Be sure to properly label all the axis and curves.
11. In the space below draw the profit maximizing choice of price and quantity for a price setting firm experiencing fixed proportions. Be sure to properly label all the axis and curves.
12. In the space below draw the profit maximizing choice of price and quantity for a price setting firm experiencing diminishing returns. Be sure to properly label all the axis and curves.
13. Write the equation for mark-up pricing, as well as the equation for the mark-up.
14. Explain what's meant by the price elasticity of demand.
15. What is the relationship between a firm's revenue and the elasticity of demand for its product? What, in other words, happens to revenue when price is increased for a firm with an elastic demand curve, or for a firm with an inelastic demand curve.
16. Consider a firm in a very competitive environment, where it has no control over the price of the product. If the price is just equal to the firm's average cost, does this mean that the firm's owners are not making money? Explain.
17. Explain the long-run outcome, in terms of price and quantity, of purely competitive markets. Draw a diagram showing this outcome. Be sure to properly label all the axis and curves.
18. Explain the long-run outcome, in terms of price and quantity, of monopolistic markets. Draw a diagram showing this outcome. Be sure to properly label all the axis and curves.
19. Explain the long-run outcome, in terms of price and quantity, of monopolistically competitive markets. Draw a diagram showing this outcome. Be sure to properly label all the axis and curves.