Assignment:
Please upload your 3 to 4 page paper (in .doc or .docx but not PDF format) to me on the course website at NYU Classes.
Explain how the insights of Friedrich Hayek, Joseph Schumpeter, and Adam Smith regarding business competition can be used to critique both perfect and monopolistic competition. What is problematic about the MR = MC pricing formula deployed in neoclassical theory? A good essay will highlight the key theoretical aspects of each of these models of competition drawing on the above authors.
Explain in what sense actual business enterprises differ from the textbook neoclassical models as discussed in Dean, Erik et al. 2016. Principles of Microeconomics: Scarcity and Social Provisioning. OpenStax Economics, Principles of Economics. OpenStax CNX. May 18, 2016.
Consider a new business that invests $20 million into a plant to manufacture loaves of bread. The market for bread is say around 100 million loaves and the new firm expects that it will be able to obtain a market share of around 5%. At that level of production, the total cost of production is $10 million. Let us say that it targets a 20% return on its investment. What should the price of a loaf of bread be? Use the principle of target rate of return pricing. If the mark-up rate is 10% what will the full-cost price be?
Readings:
1. A NOTE ON THE HISTORY OF PERFECT COMPETITION
By PAUL J. McNULTY
2. An Alternative Approach to Business Competition
By Jamee K. Moudud