Econ 103

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Econ 103

• Professor Norman Aitken

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Second Hour Exam

• Exam will be Tuesday April 6TH.
• Make up exams for conflicts will be on Wed. April
  7, 9am-1pm. If you have a conflict, email the
  course website with the time you would like to
  take the exam and the reason you need to take the
  makeup.
• econ103n_at_acad.umass.edu

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Second Hour Exam

• You must bring to the exam  1)   2 lead
  pencil.  (opscan scanners don't read ink)
• 2)   Picture ID 
• Location  Exam Room Assignments according to
  first letter of last name. 
• Last Name            Exam Room
•     A-L                    Bartlett 65 (Lecture
  Hall)
•    M-O                   Bartlett 61
•     P-S                     Bartlett 119
•     T-Z                     Bartlett 301

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TODAY

• Off-Shore Tax Havens--Video
• John Kerrys Tax Plan
• Review of Market Structures
• Long Run Costs and Outcomes
• PRS Quizzes

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Off Shore Corporate Tax Havens Video
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John Kerrys Tax Plan
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• Features of Kerrys Tax Plan
• Closing loop holes on tax breaks to companies
  exporting jobs (companies would pay same tax rate
  for money earned overseas and in the U.S.
• A jobs credit giving companies considering
  outsourcing jobs a break on payroll taxes for
  each new worker hired in the U.S.
• 25 tax credit for small businesses to provide
  health care for workers.
• Reduce corporate tax rates by 5
• Enforce provisions in current trade agreements
  that protect American jobs

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Long Run Costs and Outcomes
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Long Run Equilibrium Conditions Achieved under PC

• Efficient Production (Firms produce at minimum
  Average Total Cost)
• Firms earn normal profit
• Market Price Marginal Revenue Marginal Cost
• Firms can change cost but not demand or market
  price

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Comparing Market Structures in Long-Run
Equilibrium
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Long-run Equilibrium
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LONG RUN CHARACTERISTICS

• All factors are variable.
• LR can be viewed as the future planning of the
  business firm (s).
• Long Run Cost Curves can be
• Increasing
• Decreasing
• Constant
• (These terms used with Returns to Scale)

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LR COST OVERHEADS
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FIGURE 12.11 Long-run Changes in Price and
Quantity
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Concentration Ratio and HHI Index
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Four Firm Concentration Ratio

• The percentage of the value of sales accounted
  for by the four largest firms in an industry
• Monopoly100
• Oligopoly40 or over
• Monopolistic Competitionless than 40

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Herfindahl-Hirschman Index (HHI)

• The square of the percentage market share of each
  firm summed over the largest 50 firms (or less if
  fewer)

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Herfindahl-Hirschman Index (HHI)

• 1 Firm HHI 1002 10,000
• 4 Firms 3 _at_ 10
• 1 _at_ 60
• HHI 100 100 100 3600 3900

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Herfindahl-Hirschman Index (HHI)

• HHI lt 1000 - Competitive
• HHI between 1000 and 1800 -
• Moderately Competitive
• HHI gt 1800 - Uncompetitive

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PRS Quizzes

• Four-Firm Concentration Ratio
• HHI

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Review
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Review for Exam Understanding the Business Firm

• The firms production function (total and
  marginal product of labor)
• Short run cost curves of the firm (total fixed,
  ATC, AVC, AFC and MC)
• Long run cost curves
• Models and economic conditions for firms in
  different market structures Perfect Competition,
  Monopolistic Competition, Oligopoly and Monopoly.
• Long run outcomes for firms in the different
  market structures

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PRS Quizzes