chp. 24

This chapter examines how economist measure the overall cost of living by using the Consumer price index (CPI) which is a measure of the overall cost of goods and services bought by a typical consumer. It monitors changes in the cost of living over time. A rise in the consumer price index means that the typical family has to spend more dollars to maintain the same standard of living.The inflation rate is the percentage change in the price level from the previous period. When the Bureau of labor calculates the consumer price index and the inflation rate it uses data on the prices of thousands of goods and services. The first step would be to determine which prices are the most important to the typical consumer. The next step is to find the price of the products in three different periods. Quantity is kept the same to isolate the effect of price changes from the effect of any quantity changes. After that a base year is chosen and the index is calculated. The index is calculated by taking the price of the basket of goods and services over the price of the basket in the base year multiplied by 100. The index is always 100 in the base year. Lastly the inflation rate is calculated which is the percentage change in the price index from the preceding period and is calculated by
[(CPI in year 2  -- CPI in year 1)/ CPI in year 1] x 100. The BLS also calculates the producer price index which is a measure of the cost of a basket of goods and services brought by firms.

Chp 23

 This chapter is the first chapter that deals with macroeconomics. Maccroeconomics is defined as the study of economy-widee phenomena, including inflation (rate at which prices rise), unemployment, and economic growth, or simply the study of the economy as a whole. Often times a nations overall economy can be judged by looking at the Gross Domestic Product (GDP). GDp measure the total income of everyone in the economy and the total expidenture on the economy's output of goods and services. Another definition that focuses GDP as a measure of total expenditure would be that GDP is the market value of all final goods and services produced within a country in a given period of time. For an economy as a whole, income must equal expenditure. An economy's income is the same as its expenditure because every transaction has two parties: a buyer and seller. GDP can be computed in one of two ways: by adding up the total expenditure by households or by adding up the total iincome (wages, rent, and profit) paid by firms. Measuring GDP can at times be difficult because assumptions are made, illicit items or items consume/produced at home are excluded, and GDP only includes the value of final goods. GDP (y) is divided into four components: Consumption (C), Investments (I), Goverment purchase (G), and net exports (NX): y= c + I + G + NX. Consumption is spending by households on goods and services with the exception of purchases of new housing. Investment is spending on capital equipment, inventories, and structures, including purchases of new housing. 

Chp. 18

Chapter eighteen is about the markets for the factors of production. The factors of production are the inputs used to produce goods and services (which are land, labor, and capital). Thee demand for a factor of producction is a deprived demand. A firms demand for a factor of producrtion is derived from its decision for supply a good in another market. Labor is the most important factor of production (workers receive the most of total income in the United States of America). The demand for laber: labor markets are governed by the forces of supply and demand. A competitive firm is a price taker. Hiring decisions take into consideration how the size of the workforce affects the amount of output produced. For example, how does the number od apple pickers affect the quantity of apples produced if it can harvest and sell the apples. Production function is the relationship between the quantity of inputs used to make a good and the quantity of output of that good. As  the quantity of the input increases the production function gets flattre reflecting the property of diminishing marginl product. Marginal product of labor is the increase in the amount of output from an additional unit of labor. Firms consider how much profit each worker would bring in. Because profit is total revenue minus total cost the profit from an additional worker is the workers contribution to revenue minus the workers wage. 

chp 17

Chapter 17 discusses an in between when it comes to monopolies and perfect competition which is referred to as imperfect competition. Firms in this in-between have competitors but at the same time do not face so much competition so as to be price-takers. The particular type of firm examined is the Oligopoly. An oligopoly is a market structure in which only a few sellers offer similar or identical products. The actions of any one seller in the market can have a large impact on the profits of all the other sellers. Economist measure a markets domination by a small number of firms with a statistic called the concentration ratio, which is the percentage of total output in the market supplied by the four-largest firms. A key feature of Oligopoly  is the tension between cooperation and self-interest. Sometimes a collusion may occure in an oligopoly which is an agreement among firms in a market about quantities to produce or prices to charge. A group of firms acting in unison is referred to as a cartel. Often times Anti-trust laws prohibit explicit agreements among oligopolies. A Nash equilibrium is a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen. Oligopolies would be better off cooperating and reafching the monopoly outcome yet because they pursue their own self-interest, they do not end up reaching the monopoly outcome and maximizing their joint profit. When firms in an oligopoly individually choose production to maximize profit, they produce a quantity of output greater than the level produced by monopoly and less than the level produced by competition. The oligopoly price is less than the monopoly price but greater than the competitive price. 

Chp 16

This chapter covers a separate type of market whic has characteristics of a monopoly and a competitive market and is simply referred to as Monopolistic Competition. Monopolistic competition is a market structure in which many firms sell products that are similar but not identical. There are many sellers, product differentiation, and also free entry.  Each fimr produces a product that is at least slightly differnt from those of other firms. Thus rather than being a price taker, eaceh firm faces a downward-sloping demand curve. A monopolistic competitive firm can choose the quantity at which marginal revenue equals marginal cost and then uses the deman curve to find the price consistent with that quantity. In the short run a monopilistic competition and monopoly are similar because both choose the quantity and price. In the long run the process of exit and entry continues until firms are at zero-economoic profit. Zero economic profit is not always at the minimun of ATC; it's where price meets ATC. Also, long run equilibrium is characterized by price exceeding marginal cost and price being equal to average total cost. Zeero economic profit would be a difference between a monopilistic competition and a monopoly since monopolies can earn positive economic profit in the long run. There are two noteworthy differences between a monopolistic competition and a perfectly competitive market: excess capacity and the mark-up. Under monopolistic competition fimrs produce on the downward-sloping portion of the ATC whereas free entry in perfectly competitive markets drive firms to produce at the minimum of ATC. 

Chp 15

Chapter 15 coveres the behavior of different types of monopoly firms. A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes. Monopoolies are said to be price-makers because there are no close competitors. The price set are often times higher than if it were a perfectly competitive firm however monopolies cannot achieve the level of profit they want because high prices reduce the amount that costumers buy. The fundamental cause of monopoly is barriers of monopoly. Barriers in entry have three main sources, a key resource is owned by a single firm, the govermenet gives a single firm the exclusive right to produce some good/service, and the cost of production make a single producer more effiecient than a large number of producers. The simplest way for a monopoly to arise is for a single firm to be own a key resource, in practice however, there are few firms that own a resource for which there are no close substitutes. In many cases monopolies arise because the goverment has given one person or firm exclusive right to sell some good or service. Patent and copyright laws are two important examples of how the goverment creates a monopoly to serve the public interest. Patents and copyright laws have benefits and costs. One benefit of patent and copyright laws are increased incentive for creative activity. An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. A natural monopoly often arises when there are economies of scale over the relevant range of output. 

Chp 14

Chapter 14 examines the behavior of Competitive firms, which is a market where there are many buyers and sellers and the goods offered by the various sellers are largely the same; which means that buyers/sellers have a small influence on price.  A third characteristic being that Firms can freely enter or exit a market. In a typical firm the total revenue is proportional to the amount of output. Average Revenue is simply total revenue divided by the quantity sold. The Average Revenue is used to tell us how much a firm receives for a typical unit sold (aka the price of the good). Tbh Mr. Waller I'm just typing random definitions and sentences that are italized. But I mean that illustrates the point of this chapter, right? Along with Average Revenue is also Marginal revenue which is the change in total revenue from an additional unit sold and is *gasp* equal to the price of the good. When trying to maximize profit is the marginal revenue is greater than the marginal cost  then production should increase, if it marginal revenue is less than the marginal cost then production should decrease. This would be an example of thinking at the margin. By making incremental adjustments to the level of production then firms are naturally led to produce the profit-maximizing quantity. The firm maximizes profit by producing the quantity at which marginal cost equals marginal revenue. When looking at the graphs of all these curves, because the firm's marginal cost curve determines the quantity of the good the firm is willing to supply at any price, the marginal cost curve is also the competitive firm's supply curve. When it comes to stopping production a shortdown refers to not producing anything during a specific period of time whereas an Exit refers to leaving the market for a long period of time.