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From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-...

Question

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.



Answers

The first principle of economics discussed in Chapter 1 is that people face trade-offs. Use a production possibilities frontier to illustrate society's trade-off between two "goods"$-$a clean environment
and the quantity of industrial output. What do you suppose determines the shape and position of the
frontier? Show what happens to the frontier if engineers develop a new way of producing electricity
that emits fewer pollutants.

So here, have a growth being profit. Sure. Uh, measuring dollars. Oh, uh oh. The profit made by selling here. Number X represents my girl units, so Oh, so, well, as you can see, their profit increases their respective units. So we're asking about I was, uh, which one is bigger profit? Is he here? Uh, when production goes through, production goes from four 100 from 400 401. Or when the production goes from, Uh, from 900 from my till morning 100. And what also these, uh, as a main miccoli's. That's cool, baby. Marginal. Drop it on, uh, this union that, uh, he's won. Yeah, this is more within these scales, it is because it's gonna be well, 400 of those want units should feed or a piece fresh. Also, that's a good approximation. What, You mean that one Next? This is more then, uh, off these marginal profit. Let's call these m of 900 to death. There was things would be different. The profit from 400 201 it's called up himself 400 that him be approximated to be the over function because, well, if your step this is more. That step should be very approximate to, but it's his local good times in life. So if he is a good approximation, these well, roughly be why they at that point. So should be this. That it's probably a portion 900 that will not only you see that the properties actually be here on those points, but that leaves are dis lope in. These is greater. That's called. These is low is too. I'm Baron is low. This one will period from the picture. You can see that is, too his being here. That is one this through both that line, Mrs Steeper has big ears open this life. So then these one, uh, this one is, uh the difference will be I'll be there because he can't be approximated by very ready. I'm doing the right thing there. It's bigger there. So prime on 900. Let's be here. P prime. Uh, 400. Bigger. So, uh, yeah, the guy should be here

As we know the man curb shoes, your addition between prices on the quantity demand at those price. So this demand crow shows, for example, for this point issues. At this point, the price will be this mess press p quantity minds. Well, b Q. Which means those amount off goods well be we'll be. We'll be waiting to buy buy while we're waiting to balls by some some potential consumers as this press. Now, if consumers believe the price will be raising the future, for example, they believe the gas fried the grass and impressed will be everything. Why, month later wasn't gonna do you're gonna have to fear a tank right now, right? You don't want to pay a higher price, right? So this is because of bias, the most meat by the price that lowers toe possible press. No one wants to pay a higher price. So in price I low today and they were up by more stay. So they were accumulated. The stock, Therefore, that's showing the graph. The demand will shift to the right, which means that this price, the quantity money is no longer curious, is here is Q class This Easton's so the quantity mind for sure increase. This makes us right

So the question here is to answer why we think the average in marginal cost curs have the same shape. Well, the marginal cost curve. It's going to look huge shape because when you start production, you're going to have increasing returns to production. But at some point diminishing marginal productivity's gonna kick him and give you this kind of increase in marginal cost curve. The average total costs, however, has going to start decreasing. And that's going to be due to, uh, the average marginal, uh, rule. Okay, so as long as the average variable cost, it's above your marginal cost curve, you're going to have that the average is going to decrease. So a song that's this blue Linus apothecary line. The blue line should be decreasing. However, the moment the green line rises up off the blue line, it's going to make the blue line go up. So by this law, right, because marginal cost is going to increase at some point in average parable costs, it's gonna keep decreasing until it meets the marginal Coster. You necessarily get that. They're both going to have to be. You curse right? So that's the recent away. The market across curve and the average bear will cost curve half several similar

All right, let's look at the file blowing grass. If you were talking about here, we're talking about a lickle Carly got ballistic industry morrow over here. We're going to assume the fixed costs, or Ciro. Now, let's suppose that everyone in this oligopoly is able to collude successfully. What would be the price and quantity off this? Well, if they're acting like a monopolist, well, we know just by the simple fact that they are market structure that they will want to produce whenever Amaar equals M. C. And that's this point right here. The question is, what be with charge. So if they're acting like Monopoly and again, this comes from successfully colluding with one another, then they're going to rape charge the price that touches that the man Kirk at that quantity. So they're going to be charging here. This would be the price under collusion, and this would be the quantity under collusion. Okay, Now suppose that the people or the firms in this coat and this cartel can no longer work with one another, and they start to decrease prices left and right, trying to beat them. Now, what would be the industry quantity in price here. Well, again, the quantity is not going to change because that is the profit maximizing, uh, quantity. Right, So this is not gonna change. Is this gonna be cute? However, the price will change. People are gonna keep, uh, cutting, sizing their prices. And this is going to become very similar to perfectly competitive market. Unless we know the perfectly competitive markets gonna have that m r equals P. Right. So they're going to charge exactly whenever the price equals emcee or this price right here, huh? No. What are the profits of the cartel? Well, if they were able to collude successfully, they would have positive profits. Right? We know this. Um, however, if he can cooperate in this test slicing prices off and competing with one another, they'll get to the point in which the profits become zero for all of them, right To be very similar to a perfect competition. Um but we do see that prices are going to be lower if they can collude. However, the quantity will remain the same


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