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Producer or outsource.docx

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ECON 101
Wokia Kumase

Nov 1 *****Review practice( technological efficiency and economic efficiency) If you can produce the same amount of output but use less labor or capital(make one constant to analyze),then it is technological inefficient. Labor Capital A 1 10 B 5 8 C 20 4 D 50 1 E 2 8 They both produce Q=100. Then B is technological inefficient,because we can use 3 less units of labor to produce the same Q=100.(compared with E) (i) W Y 1 100 The total cosA: 1001 B:805 C:420 D:150 So the lowest cost is D.. So D is the economic efficient.. (ii) 50 5 The total cost: A:100 B:290 C:1020 D:140 Then the lowest cost is A... So in this case, A is the economic efficient.. Measures of concentration (1) the four-firm concentration ratio The ratio=0 then it is a perfect competitive market The ratio=100 then it is a monopoly market 0< ratio< 60 more competitive 60< ratio <100 it is a oligopoly market (2) the herfindahl-hirschman index(HHI) <1000 -> competitive >1800 -> uncompetitive (nearly monopoly) (3) limitations of a concentration measure (i) the geographical scope of the market (ii) barriers to entry and firm turnover If there is only one producer in the market, then there is little or no competition. If you can enter or quit the market freely, then there is little barrier. (iii) the correspondence between a market and an industry A particular can produce more than one product, so it can be
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