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Lecture 8

ECO100Y5 Lecture 8: Entry and Exist

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Department
Economics
Course
ECO100Y5
Professor
Lee Bailey
Semester
Fall

Description
ECO100: Lecture 8 5.1 ENTRY AND EXIST: PIE AND N 5.2 Industry Supply: P= mc Deriving the Industry Supply curve R = .25, w = 1, F = 4 Q= K^1/4L^1/4 D=80-10p MRTS = K/L OCOSTL= W/R = 4 OcostL= W/r = 4 TAN: K = 4L^2 = Q^4(L=1/2Q^2) =: Q^2+4 = AC: q+4/2 = MC = 2q Suff: KL = q^4 FIRMS P= MC  P = 2q  Q^3 = 1/2p  S = nq^5  N==?  MES: pie = 0, P = AC, n* o If P = 4, d = 80-10P, q = 40 o N=40/2= 20, s = 20X1/2P o S = 10P 5.3 Demand Shifts 1. MES(Slope), AC (Average cost) = MC (Marginal cost) 2. Po = MC, mc = 2q, Po =4 3. Qo, No= Qo/qo=20 4. q^s= 1/2p, S = 10p 5. P1: D1= So, P1 =8, Q1 = 80, n1 = no, q, q4=4 6. Pie1= R-c=32-(16+4)=12 Pie > O therefore number of entries(n) would go up Increase in n means P(price) goes down until pie is 0, P2 = 4, q2=2 7. S2, n2= 120/2 = 60, S2 = 30P, q^s=1/2P Therefore competitive industry would mean industry is in good use Example: Do = 80-10p D1 = 60-10p ICI(Increasing Cost Industry)  Happens because there is scarcity in input markets  n increases, w incr
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