Chapter 14

Chapter 14 goes over Firms in Competitive Markets. First it recaps competitive markets which are basically markets where firms have a negligible impact on the market. If a market is not competitive it is because a firm has market power. It then delves into the revenue of a competitive firm. The chapter introduces to us profit maximization and with that a new line on the graph. A marginal revenue line which stays constant. As long as the firms marginal cost is underneath the marginal revenue it is good  and operating at a benefit and if the marginal cost is above the marginal revenue it is operating at a loss. The maximization of the profits is when the marginal cost and marginal revenue are equal.

Chapter 13

I rate chapter 13 a 2 out of 3 because there were all the different graphs and how they worked together which made the chapter quite confusing. Chapter 13 was about the different costs of production. There were 4 total cost curves and all of them had their own features and shapes. There is the average total cost curve that takes into account both variable costs and fixed costs. Fixed costs are things that don't change because of quantity and the variable costs change as quantity changes. and then the only linear line was Marginal Cost. That graph gave me a little trouble. I understand the equation to determine it but I don't understand why its the only graph with a linear shape. I also marginal product was hard to understand for me. Other than that I understood everything, it was a detailed breakdown of the supply curve.

Chapter 11

This chapter talked about the types of goods there are 4 types of goods; private goods, natural monopolies, common resources, and public goods. These goods are combinations of excludability and rivalry in consumption. The chapter then proceeds to go more in depth with public goods and common resources. Public goods are not excludable and not rivals in consumption. Some examples are national defense and basic research. A drawback with public goods is there are free riders who mooch on the goods without paying back. Common resources are not excludable and they are rivals in consumption such as clean air and water and congested roads.. A drawback with common resources is the tragedy of commons which is since everyone uses the good it is used up for everybody. I give this chapter a 1.5 out of 3. The types of goods and they're specifications were easy to understand they may just be hard to remember.

Chapter 10

Chapter 10 talked all about externalities. In a two party market the invisible hand moves the price to an efficient price. However a third party can be involved when there are external effects of the market. In that case the invisible hand can no longer move the price to make the market efficient because it is not taking into account the well being of a third party. To solve the problems of externalities parties can meet an agreement to fix the situation. However if they cant the government must step in to solve the problem through corrective taxes or tradable permits. I would give this chapter a 2/3 for difficulty. We talked about externalities previously and I understood the basic concept, but once they added the new line of the demand and supply graphs I became confused.

Chapter 8

Chapter 8 goes over the affects of taxes on welfare, the market, and deadweight loss. Welfare depends on how to consumers, producers, and the government are better off. Without taxes the consumers and producers are better off, but with tax the consumers and producers are worse off, but the government is better off. If the losses of the buyers and sellers outweighs the revenue raised by the government there is a deadweight loss. When a tax is imposed the market becomes smaller because the quantity sold and demanded decreases. Therefore more people leave the market. Taxes cause deadweight loss because they prevent buyers and sellers from realizing the gains of trade. The quantity of deadweight loss depends on the elasticities of supply and demand. I'd give this chapter a 1 in difficulty. The graphs made the whole concept of deadweight loss very easy to understand and I do not have any questions yet.

Chapter 7

Chapter 7 goes over consumer surpluses and producer surpluses and evaluating the market equilibrium. A consumer surplus is how much consumers are willing to pay minuses what they did pay. Consumers are satisfied with the surplus because they didn't have to pay as much as they thought they would have to. A market with a high consumer surplus reflects economic well being. A producer surplus is the willingness to sell minus the cost to do something. Sellers are satisfied with a producer surplus because they are left a profit. A market with a high producer surplus reflects economic well being. An allocation of resources that boosts both surpluses is said to be efficient. AT the equilibrium price of supply and demand both surpluses are maximized. I'd give this chapter 1.5/3. It was not to hard to understand except I have one question. Wouldn't sellers want a small consumer surplus because that would mean they would get more money that the consumers are willing to pay?