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Chapter Objectives

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1. Key terms – matching and translation.

Read aloud the key term and its definition so that they make up a single sentence. (Remember about the agreement between the subject and the predicate!). Translate the sentences you have arrived at from English into Russian.

Set 1

1.MR = P a)Profit maximizing condition for all firms, regardless of market structure.
2.market period b)All aspects of production can be changed, given the technology.
3.MC above AVC c)Long-run equilibrium for competitive industry.
4.freedom of entry and exit d)A competitive firm’s short-run supply curve.
5.Long run e)Higher industry outputs cause greater resource costs.
6.MSC = MSB f)True only of price-taking sellers.
7. MR = MC g)At least one resource is fixed.
8.Increasing cost industry h)A condition assuring economic efficiency.
9.Short run i)When production cannot be altered.
10.P = minimum (LRATC) j)Assures the absence of long-run economic profits in competitive markets.


Set 2

1.Price maker a)Pure quantity adjuster.
2.Competitive markets b)When price equals the minimum of AVC.
3.Price taker c)As output expands, input costs decline.
4.Break-even point d)Where price equals ATC.
5.Constant cost industry e)P = MC.
6.Shut-down point f)Realized even when economic profit is zero.
7.Economic efficiency condition g)Characterized by a large number of potential buyers and sellers of a homogeneous product.
8.Zero economic profits h)Any firm with any monopoly power.
9.Normal accounting profits i)Long-run equilibrium condition for a competitive industry.
10.Decreasing cost industry j)Minimum AC is not influenced by the number of firms in an industry or by industry output.

Text translation.

Translate the text from English into Russian in writing paying particular attention to the translation of the economic terms in bold as well as words and phrases relevant to the subject of the text. Read out your translation in class andintroduce the necessary corrections.



Chapter Objectives

After you have read and studied this chapter, you should be able to state the differences between price-taking and price-making as well as the differences between competing and competition. You should be able to state and describe the output decisions of competitive firms and indicate how competitive firms adjust to profit signals in both the short and long run. You should be able to list some features of competitive markets and state why these features make them attractive from the vantage points of efficiency, equity, and prediction. Finally, you should be able to write a short paragraph in which you describe the differences between constant cost, increasing cost,and decreasing cost industries.


Chapter Review: Key Points.

1. Freedom of entry and exitis the hallmark of competition. A competitive market is comprised of numerous potential buyers and sellers of a homogeneous product, none of whom controls its price. All buyers and sellers are sufficiently small relative to the market so that none is a price maker.

2. A competitive buyer faces a perfectly elastic supply curve, while competitive sellers face perfectly elastic demand curves. In competition, all are price-takers orquantity adjusters.

3.A competitive firm maximizes profits by producing output up to the point where total revenues minus total costs (TR - TC), is maximized, which also occurs when marginal revenue equals marginal cost (MR = MC). Price must be greater than the minimum of the average variable cost curve, however, which is the shutdown point. Because competitive firms face perfectly elastic demands, price and marginal revenue are identical.

4.A competitive firm’s short-run supplycurveis its marginal cost curve above the minimum of its average variable costs. Horizontally summing the marginal costs from existing firms yields the short-run industry supply curve.

5. Firms cannot adjust output in the market period, so total supply is perfectly inelastic. In the short run (SR), existing firms in an industry can vary output, but at least one productive factor is fixed and entry and exit cannot occur. Total supply is at least somewhat elastic. Supply is much more elastic in the long run (LR), because all factors of production are variable and firms may enter or leave the industry.

6. Competition erases economic profitsthrough entry of new firms in the long run, and economic losses are eradicated by exit from the industry. Thus, competitive firms receive exactly enough revenue over the long run to pay the opportunity costs of resources used and realize only zero economic profit.

7.Short-run economic profits are ultimately eliminated because output will be expanded by new firms in a competitive industry or increased competition for profitable inputs will drive up resource
costs. The long run adjustments that eliminate short-run losses follow precisely reversed patterns.

8.In the long run, firms are forced by competitive pressures to adopt the most efficient (least costly) plant size and technologies. They operate at output levels where P = MR = SRATC = SRMC = LRATC = LRMC.

9.For constant-cost industries, the minimum LRATC for firms is the same no matter how many firms are in the industry. Costs increase for each firm as firms enter increasing cost industries and decrease for decreasing-cost industries. Thus, the long-run industry supply curveis positively sloped for increasing-cost industries, horizontal for constant-cost industries, and negatively sloped for decreasing-cost industries.

10. A competitive market is efficient in the sense that goods desired by consumers (society) are produced at the lowest possible opportunity cost. Every feasible bit of net gain is squeezed from the resources available; marginal social benefits and marginal social costsare equated by competitive forces of supply and demand (MSB = MSC), assuming the absence of externalities. This will be socially optimal and maximize social welfare if the distribution of income is deemed appropriate. A market system does not require that decision making power be vested in a central authority. This permits substantial personal freedom and the absence of coercion

3. Vocabulary practice: switching.

Get ready for an oral (written) translation exercise based on the economic terms in bold, as well as other relevant words and phrases from the text.

Отсутствие принуждения\насилия; adjust output; изменить производство; assure the absence of long-run economic profits; кривая средних переменных издержек; центральная власть; competitive market; отрасль экономики с неизменяющимися удельными издержками; deem sth appropriate; экономическая прибыль; erase; действовать согласно полностью противоположной модели; hallmark of competition; на конкурентных рынках; indicate; перечислить некоторые черты (характtристики) конкурентных рынков; LR; рыночная структура; монопольное право\власть; кривая отрицательного наклона; occur; в течение долгосрочного периода; permit substantial personal freedom; экономический субъект (агент), определяющий цену; produce output up to the point where; кривая предложения в краткосрочный период; quantity adjuster; оптимальный в социальном отношении; state the differences between; to ultimately eliminate short-run economic profits; выигрышные позиции с точки зрения эффективности; adjust to; наделять центральную власть полномочиями принимать решения; aspect of production; обеспечивать\гарантировать; be comprised of; принуждение (насилие); somewhat elastic; давление со стороны конкурентов; control the price; распределение доходов; equity; внешние эффекты экономической деятельности; freedom of entry and exit; однородная продукция; in the market period; объем произведенной предприятием продукции; условия равновесия в долгосрочном периоде; LRATC; максимально увеличивать общественное благополучие; MR; независимо от того; operate at output levels where; личная свобода; экономический агент (субъект) , не оказывающий влияния на цены на рынке; productive factor; приносить экономическую прибыль; shut-down point; достаточно небольших размеров относительно ч-то; TR; выигрышные позиции с точки зрения справедливости; yield; выбрать наименее затратный размер предприятия; assuming the absence of externalities; ATC; быть вынужденным; конкурирующие покупатели \продавцы; decision making power; economic efficiency condition; вырывать с корнем; from the vantage point of; сталкиваться с; identical; в том смысле, что; leave the industry; долгосрочное равновесие; marginal cost curve; MSB; нормальная учётная (бухгалтерская) прибыль; MC; решение об объеме производимой продукции; кривая абсолютно эластичного спроса; кривая положительного наклона; price-taking seller; условие максимизации прибыли; regardless of; пособия по социальному обеспечению; squeeze а feasible bit of net gain from sth; суммировать по горизонтали; верный для (соответствующий в отношении к-либо); vantage points of prediction; нулевая экономическая прибыль; assure economic efficiency; применить технологию; AVC; точка безубыточности; competitive industry; заключать в себе; decreasing cost industry; убытки; erase economic profits through; практически осуществимый; given the technology; при наличии конкуренции; increasing cost industry; перечислить; long-run industry supply curve; рыночный период; минимальное\максимальное значение средних переменных издержек; MSC; количество фирм, работающих в отрасли; output decisions of competitive firms; кривая абсолютно эластичного предложения; прогнозирование; profit signals; производить при возможно наиболее низких альтернативных издержках; short-run industry supply curve; общественное благосостояние; SR; выгодная\выигрышная позиция; TC; изменять объем произведенной продукции.

4. Translation from page.

Translate from page the passages expanding on the subject of the text.


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