Ch5 The Behavior of Firms

5.1

the equimarginal principle: firms will engage in any activity up to the point where marginal cost = marginal benefit

5.2 Firms in Marketplace

marginal costs 隨產量(Quantity) 增加而上升 bc 只產出一個時，一定都用最好最有效率的，產出第二個則用次好的，以此類推 (p.123)

The first two columns show the demand curve for Tailor dresses

fixed costs 改變不會影響 marginal costs
variable costs 改變會影響 marginal costs

demand curve 影響產品 quantity-price, therefor 影響 marginal revenue

因此，a change in variable costs or demand will affect the equilibirum point where marginal cost = marginal revenue

Problems

4.

Q: There is only one doctor in the town of Erewhon. Every time she treats a patient, she must use a pair of disposable rubber gloves, which costs her $1. She also finds it necessary to keep an X-ray machine in her office, which she rents for $500 a year. The town council has decided to help the doctor meet expenses and is undecided between two plans. Under Plan A, they will provide the doctor with unlimited free rubber gloves; under Plan B they will provide her with a free X-ray machine. Which plan is better for the doctor’s patients and why?

Ans: free unlimited rubber gloves → variable costs decrease → marginal cost = marginal benefit 的點後移 → price 降低 (bc quantity 上升) free X-ray machine → fixed costs decrease → marginal cost 不變 → 價格不改變

7.

Which of the following might affect the price of a hamburger at Waldo’s Lunch Counter and why?

(e) A new restaurant tax of $500 per year is imposed.

Ans: the tax may cause some other restaurants to quit, therefor affects the demand

(f) Word gets around that a lot of Waldo’s customers have been having stomach problems lately.

Ans: demand changes