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Cards In This Set
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Clark talks about LR demand curves as being more elastic than commonly represented, Is there a distinction between SR and LR demand curves in the traditional treatment of market adjustments or just SR and LR responses to a given change in demand conditions?
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Demand shifts and assumed to stay there and we look at the LR and SR responses to the shift in the demand curve compared to PC, costs are higher and less utilization but thats with an inelastic demand curve. if demand curve was very elastic it becomes less of a problem, less of a deviation from PC. we assume we max profits with a SR demand curve and if there are profits entry drives them to 0. good reasons for excess capacity.
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Do you see the same sort of objections from Clark that you saw in H?
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PC is an unreal standard. What if the LR elasticity of demand is high but SR elasticity of demand is low, what if you're looking at a longer time frame. difference between model and reality is huge.
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What differences would it make if a firm produced a supply and then placed it on a market for what it will bring versus quoting a price and seeing how they can sell at that price? Does the nature of a firms equilibrium change between these two situations? Does uncertainty have different effects as a result?
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Graph about uncertainty and P and Q. equilibrium changes between these results and uncertainty can mean excess capacity, inventories, etc as was of dealing with variable demand.
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Is there any room in the PC model for any deviation from its results to be an improvement?
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No room for improvement because everything is optimal, deviations look worse because you see the cost but not the benefit of fixing the problem.
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Given all the conditioning factors for the character of C that Clark lists, how would he react to an approach that separates the analysis into either PC or some variable of monopoly?
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There are so many variables it depends on it cant be done. some of variables include standardized, price cutting, differentiation, etc. none of them fit into PC so they're M.
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How does face to face selling introduce a large number of additional variables to the analysis that are not considered in PM models?
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As soon as you know who someone is, even if product is the same there is a reason to prefer him over others recessions, timeliness of payment, better reputation, quality... IDENTITY matters
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Would you expect a different industry structure to arise in the case of economies of scale over the entire range of output verses the case where some firms have lower, but increasing costs than other firms?
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If economies to scale up to 20% of market you'd end up with 5 large firms, not a tendency towards monopoly because no gains after that point. if increasing economies of scale can turn out to be monopoly.
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How, on an OE is the price making literally done by market machinery? Whose self interest does this market clearance arise from? Outside of OE trading, does anyone have incentives to attempt to clear the market?
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Person picks Q and the market automatically sells it. middlemen clear the market because they want to maximize number of transactions. outside OE no incentive because agents are worries about future effects of prices.
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Why in Clarks description of Pc does it not make a difference whether prices are quoted by sellers or supply governed by an exchange?
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If every other aspect of PC was true doesn't matter if you sell through agents because you'd have an infinite number of alternate sellers that you'd be forced towards a market clearance result assume there are 6 characteristics of PC, currently 3 in market, would 4 give you better results? no necessarily, not about making it more descriptively close.
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Why do firms face horizontal demand curves in the case of quoted prices, std products and few produces if other prices remain unchanged? Why would such a situation likely result in secret, downward departures from quoted prices?
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Everyone is a perfect substitute, if you raise price lose all customers if you decrease price you'll take most. big diff between taking price as given and fight to sell at that price. open price reductions mean people can match, but if you do it secretly you can steal some customers.
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In monopolistic C, why does the competitive element hinge largely on the extent to which quality differences are open to free imitation? If a firm's product and services could not be closely duplicated by rival firms would there be a reason to question whether free entry would drive a firms profits to zero as the model assumes?
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Profits move to 0 only if you can freely imitate, but typically you cant like restaurants. people stop entering when they think new entrants will barely make profits. if cant perfectly imitate some people will make a lot of money and others will be failing.
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Why does Clark say LR forces serve to mitigate the seriousness of the effects of imperfect competition? In std. economic models, are are LR effects assumed to appear? If a firm wanted to max the FV of profits, would max SR profits be appropriate strategy? What if made on OE?
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Businesses are concerned about LT consequences when they're looking at very elastic demand. dont assume you max in SR and let entry and exit happen we assume you max SR and entry and exit will drive SR profits to 0. tie in with time preference rates, 2% vs 6%, 2% would set lower prices. on non-OE if you're selling at lower price, you can force others to do the same.
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Why does the exaggerated steepness of firm demand curves in the monopolistic competition model (what the reference to Chamberlin relates to) lead Clark to conclude that the excess capacity result of the model is far less serious in fact?
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Chamberlain, inelastic demand curve--only seller of a brand of product with many substitutes makes it look worse than it is because its more elastic. excess capacity can be used to explain search costs in a world of fluctuating demand, i.e. restaurants.
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What is Clark's criticism of economic models=treatment of the time dimensions of demand curves? Would it be in a firm's interest to increase prices if they faced a relatively inelastic short run demand curve, if it would lead to a progressive slowing of the expected growth of demand in the future, or even a progressive erosion of demand over time?
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Model assumes that there are no future effects on demand, costless re-contract. inelastic SR demand curve, but can lead to progressive slowing of growth. raise price today, more revenue today but this could slow growth rate more than the increase of profits today. for antitrust we need to know time preference rates to tell.
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Clark talks about demand curves in terms of price minus optimum selling expenses. How do economic models typically make the issue of selling expenses disappear by assumption?
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The model assumes that we already market at optimum but if we dont know how to optimally market we cant just to P minus optimum selling prices. we typically do it on a per unit basis. ex, agent costs $100,000 we dont know how many units we'd sell.
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