Calendar13+-+Theory+of+the+Firm

NOTES

Cost, Revenue and Profit:



Market Structure:



Study Guide



__**Week 1**__**:** Costs of production in the short-run (Syllabus Section 1.5)
Notes: Production


 * __Homework Due__: Yr. 2 only: your final commentary is due on the 20th of Feb.
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 * media type="youtube" key="TI5lbZrUbyA" height="315" width="560"
 * __ Khan Academy __
 * [|Fixed, variable, and marginal costs]
 * [|Visualizing average costs and marginal costs as slopes]
 * [|Marginal cost and average total cost]
 * [|Marginal revenue and marginal cost]
 * [|Marginal revenue below average total cost]


 * __Assessments and A__ __ ctivities __ : Lecture (PDF below)
 * [[file:1 - Costs of Production in SR.pdf]]


 * __Practice Quiz__: [|Click here to download the practice quiz and then watch the video below for the solution].
 * media type="youtube" key="sZHz6WFcRFc" height="315" width="560"


 * __Related Readings__
 * [|Corporations]
 * __[|Corporate Financial Structure]__
 * [|Corporate Governance]
 * [|Corporate Income Tax]

__**week 2**__**:** Costs of production in the long-run (Syllabus Section 2.3)

 * __Homework Due__: Read Mankiw (Chapter 13) and watch the following video.
 * media type="youtube" key="68-vmWJQqlo" height="315" width="560"


 * __Assessments and Activities__: Free-response/problem and lecture.

>>> explaining the relationship in the short-run between them.
 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Outline the factors that determine the shape of a firm's marginal and average total cost curves, while


 * __//Lecture//__: Costs of production in the long-run (PDF below)
 * [[file:1 - Costs of Production - LR.pdf]]


 * __Related Readings__
 * __[|Productivity]__

__**Week 2-3**__**:** Short-run equilibrium in perfect competition (Syllabus Section 2.3)
__Homework Due__
 * __Final Draft__: Commentary #3
 * Read Mankiw (Chapter 13) and watch the following videos.
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 * media type="youtube" key="_-OWuxR0-V8" height="315" width="560"
 * __Khan Academy__
 * [|Economic profit vs Accounting profit]
 * [|Depreciation and the opportunity cost of capital]


 * __Assessments and Activities__: Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * When examining how the costs of a firm behave as output increases, economists distinguish between the short-run and long-run. Explain why.


 * __//Lecture//__: Short-run equilibrium in perfect competition (PDF below)
 * [[file:2 - Perfect Competition - Short Run.pdf]]


 * __Related Readings__
 * [|Industrial Concentration]

__**week 3**__**:** Long-run equilibrium in perfect competition (Syllabus Section 2.3)

 * __Homework Due__: Read Mankiw (Chapter 14) and watch the following videos.
 * media type="youtube" key="krUu_u63MiA" height="315" width="560"
 * media type="youtube" key="wnmhUpx63kE" height="315" width="560"


 * __Khan Academy__
 * [|Effect of economic profit and loss on supply in the long-run]
 * [|Perfect competition]


 * __Assessments and Activities__: Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Draw a diagram of a perfectly competitive firm in short-run equilibrium. Assume this firm is earning economic profits. Be sure to identify all relevant cost and revenue curves and the area of profit.


 * __//Lecture//__: Short-run equilibrium in perfect competition (PDF below)
 * [[file:2 - Perfect Competition - Long Run.pdf]]


 * __Related Readings__
 * [|Competition]
 * [|Creative Destruction]
 * [|Bankruptcy]
 * [|Profits]
 * [|Innovation]

__**)**__**:** The demand and marginal revenue curves in monopoly (Syllabus Section 2.3)

 * __Homework Due__: Watch the following videos.
 * media type="youtube" key="n175XrDoVls" height="315" width="560"
 * disadvantages of monopoly
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 * __Khan Academy__
 * [|Monopoly basics]


 * __Assessments and Activities__: Lecture on the demand curve and marginal revenue curves of a monopolist (PDF below)
 * [[file:Demand and MR Curves for Monopolist.pdf]]


 * __Related Readings__
 * __[|Monopoly]__


 * __Date__:** Equilibrium in monopoly (Syllabus Section 2.3)


 * __Homework Due__: Read Mankiw (Chapter 15) and watch the following videos.
 * media type="youtube" key="0GA_QBUXUbw" height="315" width="560"
 * __ Khan Academy __
 * [|Monopoly equilibrium (Part 1)]
 * [|Monopoly equilibrium (Part 2)]
 * [|Monopoly equilibrium (Part 3)]
 * [|Calculus proof of slope of marginal revenue and demand curves]
 * [|Review of revenue and cost graphs for monopoly]


 * __Assessments and Activities__: Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Explain why marginal revenue is equal to price in perfect competition but less than it in monopoly.
 * //__Lecture__//: Equilibrium in monopoly (PDF below)
 * [[file:4 - Price and Output in Monopoly.pdf]]


 * __Related Readings__
 * __[|Monopoly]__

**:** Regulating monopoly (Syllabus Section 2.3)

 * __Homework Due__: Read Mankiw (Chapter 15) and watch the following video.
 * media type="youtube" key="LhiyJlI5xa0" height="315" width="560"


 * __Assessments and Activities__: Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.


 * Compare and contrast monopoly and perfect competition in regard to each of the following: price, quantity, and efficiency.


 * __//Lecture//__//://Regulating monopoly (PDF below)
 * [[file:Regulated, Natural Monopoly.pdf]]


 * __Related Readings__
 * __[|Monopoly]__
 * [|Antitrust]
 * [|Electricity and Its Regulation]
 * [|Regulating Natural Gas as a Natural Monopoly]

__**)**__**:** Monopolistic Competition (Syllabus Section 2.3)


 * __Homework Due__: Read Mankiw (Chapter 16) and watch the following video.
 * media type="youtube" key="d57jftLwi4s" height="315" width="560"
 * __ Khan Academy __
 * [|Oligopolies and monopolistic competition]
 * [|Monopolistic competition, profit, and equilibrium]


 * __Assessments and A__ __ ctivities __ : Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.


 * Explain the dilemma of regulation and how governments solve it.


 * __//Lecture//__: Monopolistic competition (PDF below)
 * [[file:Monopolistic Competition.pdf]]


 * __Related Readings__
 * __[|Brand Names]__

Collusive oligopoly (Syllabus Section 2.3)


 * __Homework Due__: Read Mankiw (Chapter 17) and watch the following videos.
 * [|Collusive Oligopoly]
 * __Khan Academy__
 * [|Oligopolies, duopolies, collusion, and cartels]

> > >
 * __Assessments and A____ctivities__: Free-response/problem and lecture.
 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * "Consumers are better off when industries are monopolistically competitive than when they are pure monopolies or perfectly competitive." Evaluate this statement.
 * __//Lecture//__: Collusive Oligopoly (PDF below)
 * [[file:Characteristics of Oligopoly.pdf]]

>
 * __Related Readings__
 * [|Game Theory]
 * [|Prisoner's Dilemma]


 * The prisoner's dilemma and oligopoly (Syllabus Section 2.3)


 * __Homework Due__: Read Mankiw (Chapter 17) and watch the following videos.
 * media type="youtube" key="qlEBGYD7LUo" height="315" width="560"
 * [|Video on the prisoner's dilemma]
 * [|Video on Nash equilibrium]


 * __Assessments and A____ctivities__: Free-response/problem and lecture.


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.


 * Explain how price and output are determined in an industry that is a collusive oligopoly and evaluate whether this industry is efficient.


 * __//Lecture//__: The Prisonner's Dilemma (PDF below)
 * [[file:8 - Collusive Oligopoly and Game Theory.pdf]]

__**February 21 (Block A); February 22 (Block F)**__**:** The kinked demand curve and non-collusive oligopoly (Syllabus Section 2.3)


 * __Homework Due__: Extract due in hard copy for IA Commentary #4. Read section on the kinked demand theory in Mcgee (page 206-209). **Please bring your laptop to class, as you will have part of the period to work on the first draft of Commentary #4.**Watch the following video.
 * media type="youtube" key="gM1rbI64uec" height="315" width="560"


 * __Assessments and Activities__: Free-response/problem and lecture


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * A case study in the chapter describes a phone conversation between the presidents of Braniff Airways and American Airlines. Suppose each company can charge either a high price or low price for tickets. If one company charges $100, it earns low profits if the other company company charges $100 too. It earns high profits, if the other company charges $200. On the other hand, if the company charges $200, it earns very low profits if the other company charges $100 and medium profits if the other company charges $200 too. The same set of choices applies to the second company.
 * 1) Draw a payoff matrix/decision box for this game.
 * 2) What is the Nash equilibrium in this game? Explain.
 * 3) Is there an outcome that would be better than the Nash equilibrium for both airlines? How would it be achieved? Who would lose, if it were achieved?


 * __//Lecture//__: The kinked demand theory and non-collusive oligopoly (PDF below)
 * [[file:9 - Kinked Demand Curve.pdf]]


 * __Related Readings__
 * __[|Cartels]__
 * [|OPEC]

__**February 23 (Block A); February 26 (Block F)**__**:** The theory of contestable markets (Syllabus Section 2.3)


 * __Homework Due__: Read the section on the theory of contestavle markets in McGee (page 210).


 * __Assessments and Activities__: Free-response and lecture


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Explain how a tacit agreement on the price in an oligopolistic market might be reached using game theory. Then, show how the established price is relatively stable using the kinked demand theory.


 * //Lecture//: Theory of contestable markets (PDF below)
 * [[file:10 - Contestable Markets.pdf]]

__**February 27 (Block A); February 28 (Block F)**__**:** Price discrimination (Syllabus Section 2.3)


 * __Homework Due__: First draft of Commentary #4 due. Read the sections on price discrimination in Mankiw (326-332) and McGee (211-217) and watch the following videos
 * media type="youtube" key="1kSk1Hu3TVM" height="315" width="560"
 * __ Khan Academy __
 * [|First degree price discrimination]


 * __Assessments and Activities__: Free-response/problem and lecture


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Explain the main assumptions made in the models of perfect competion and contestable markets and their relevance to the market outcome in regard to price, quantity, and efficiency.


 * __//Lecture//__: Price discrimination (PDF below)
 * [[file:11 - Price Discrimination.pdf]]

__**February 29 (Block A); March 1 (Block F)**__**:** Abuse of monopoly power as market failure (Syllabus Section 2.4)


 * __Homework Due__: Nothing due but you should be working on the first draft of Commentary #4.


 * __Assessments and Activities__: Free-response and review of the monopoly power as market failure.
 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * "Oligopolies and monopolies are both good and bad for consumers." Evaluate this statement. Be sure to address the issue of price discrimination as part of your answer.

__**March 4 (Block A); March 5 (Block F)**__**:** Review for test on the theory of the firm and make final revisions/edits on Comentary #4. No homework due.

__**March 6 (Block A); March 7 (Block F)**__**:** Review for test the theory of the firm.


 * __Homework Due__: Final draft of Commentary #4.

__**March 8 (Block A); March 11 (Block F)**__


 * **__HL__:** Test on Perfect Competition and Monopoly (Paper 1)
 * **__SL__:** Test on Sections 1 and 2 and 3 (Intro, Micro, and Macro) of the IB Economics syllabus (Paper 1)

__**March 12 (Block A); March 13 (Block F)**__


 * **__HL__:** Test on Monopolistic Competition and Oligopoly (Paper 2)
 * **__SL__:** Test on Sections 4 and 5 (International and Development) of the IB Economics syllabus (Paper 2)