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ECON 203 Project Description (Term Paper) Select at least three news articles that discuss the economic concept that you chose as a topic for your term paper. At least one news article should be dated within the previous two months. Please note that the goal of this assignment is to read, understand, and discuss recent news using microeconomic terminology. The articles should be from an on-line newspaper or magazine. Materials posted on educational websites, like www.thebalance.com, www.khanacademy.org , and so on, are not considered news articles even if they were recently updated and contain material related to the term paper topic. The Term paper should have the following structure: 1. Abstract (0.5 of a page) – the short description of the concepts, problems, questions discussed in the Term paper. 2. Introduction (0.5 of a page) (optional) 3. Literature Review (about 2 pages) – please compare and contrast the opinions of the authors of the articles, present the important information, data, statistics to support your conclusions. It is important that the Literature review is written in your own words with small quotes from the article. All quotes must have references in accordance with the 7th Edition APA Style. 4. Discussion (about 2 pages) - Your task for this part of the Term paper is to analyze the issue described in the articles using the economic concepts and theory learned in this class. You can talk about Consumer Choices. Cost and Industry Structure, Four Market Model. Perfect Competition. Monopoly, Monopolistic Competition and Oligopoly. Monopoly and Antitrust Policy, Government and Market Failure. Public Choice and Economics of Taxation. (Use attached references as well) The articles you choose may not use these exact terms; therefore, it is incumbent upon you to convert the article language into economic language as is appropriate. Include at least one graph developed in our course. (Use attach reference to convert the article into economic language) 5. Conclusion (0.5 of a page) The Term paper should be the title page and sub-titles that correspond to the structure described above. Please note the Term paper should be written in your own words. You can use short quotes from the article(s) to support your statements. However the size of these quotes should be reduced to minimum. No more than 20% of the text of the term paper should be made up of quotes. (less is better!!!). Please also avoid copying the materials from any textbooks, including our textbook. Please be aware that Wikipedia, Investopedia, and other on-line dictionaries and encyclopedias are not verifiable sources of reliable information, and should not be used in the Term paper. Acceptable sources of the information are: research papers, newspaper articles, and books. Please note that this is the course of microeconomics, so you should choose the concepts related to microeconomics (not macroeconomics). Possible concepts include: · taxes and consumer or producer surplus · elasticity on a particular product · perfect competition · imperfect competition, such as monopolies · monopolistic competition · oligopoly · labor market, · wage determination · income inequality · poverty and public policy · another topic selected by the professor Format of the Paper: Written projects: 1. Must be typed, double-spaced, in 12-point Times New Roman or Arial font, with one-inch margins 2. Must have the title page in APA-7th style 3. Must have in-text citations in APA-7th edition style 4. Must have reference list in APA-7th edition style. Please note that you must reference the data you are using for the project 5. Must be prepared using word processing software (Microsoft Word preferred) The Term Paper should be about 4-5 double-spaced typewritten pages (plus tables and graphs) Please note that Use of 7th Edition APA Citation Methodology is required for the assignment Chapter 8: Perfect Competition in the text Principles of Microeconomics by OpenStax is available under a Creative Commons Attribution 4.0 license. © Feb 25, 2016 OpenStax. UMGC has modified this work and it is available under the original license. 8 | Perfect Competition Figure 8.1 Depending upon the competition and prices offered, a wheat farmer may choose to grow a different crop. (Credit: modification of work by Daniel X. O'Neil/Flickr Creative Commons) A Dime a Dozen When you were younger did you babysit, deliver papers, or mow the lawn for money? If so, you faced stiff competition from a lot of other competitors who offered identical services. There was nothing to stop others from offering their services too. All of you charged the “going rate.” If you tried to charge more, your customers would simply buy from someone else. These conditions are very similar to the conditions agricultural growers face. Growing a crop may be more difficult to start than a babysitting or lawn mowing service, but growers face the same fierce competition. In the grand scale of world agriculture, farmers face competition from thousands of others because they sell an identical product. After all, winter wheat is winter wheat. But it is relatively easy for farmers to leave the marketplace for another crop. In this case, they do not sell the family farm, they switch crops. Take the case of the upper Midwest region of the United States—for many generations the area was called “King Wheat.” According to the United States Department of Agriculture National Agricultural Statistics Service, statistics by state, in 1997, 11.6 million acres of wheat and 780,000 acres of corn were planted in North Dakota. In the intervening 15 or so years has the mix of crops changed? Since it is relatively easy to switch crops, did farmers change what was planted as the relative crop prices changed? We will find out at chapter’s end. Chapter 8 | Perfect Competition 179 Download for free at http://cnx.org/contents/
[email protected] In the meantime, let's consider the topic of this chapter—the perfectly competitive market. This is a market in which entry and exit are relatively easy and competitors are “a dime a dozen.” Introduction to Perfect Competition In this chapter, you will learn about: • Perfect Competition and Why It Matters • How Perfectly Competitive Firms Make Output Decisions • Entry and Exit Decisions in the Long Run • Efficiency in Perfectly Competitive Markets All businesses face two realities: no one is required to buy their products, and even customers who might want those products may buy from other businesses instead. Firms that operate in perfectly competitive markets face this reality. In this chapter, you will learn how such firms make decisions about how much to produce, how much profit they make, whether to stay in business or not, and many others. Industries differ from one another in terms of how many sellers there are in a specific market, how easy or difficult it is for a new firm to enter, and the type of products that are sold. This is referred to as the market structure of the industry. In this chapter, we focus on perfect competition. However, in other chapters we will examine other industry types: Monopoly and Monopolistic Competition and Oligopoly. 8.1 | Perfect Competition and Why It Matters By the end of this section, you will be able to: • Explain the characteristics of a perfectly competitive market • Discuss how perfectly competitive firms react in the short run and in the long run Firms are said to be in perfect competition when the following conditions occur: (1) many firms produce identical products; (2) many buyers are available to buy the product, and many sellers are available to sell the product; (3) sellers and buyers have all relevant information to make rational decisions about the product being bought and sold; and (4) firms can enter and leave the market without any restrictions—in other words, there is free entry and exit into and out of the market. A perfectly competitive firm is known as a price taker, because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors. When a wheat grower, as discussed in the Bring it Home feature, wants to know what the going price of wheat is, he or she has to go to the computer or listen to the radio to check. The market price is determined solely by supply and demand in the entire market and not the individual farmer. Also, a perfectly competitive firm must be a very small player in the overall market, so that it can increase or decrease output without noticeably affecting the overall quantity supplied and price in the market. A perfectly competitive market is a hypothetical extreme; however, producers in a number of industries do face many competitor firms selling highly similar goods, in which case they must often act as price takers. Agricultural markets are often used as an example. The same crops grown by different farmers are largely interchangeable. According to the United States Department of Agriculture monthly reports, in 2015, U.S. corn farmers received an average price of $6.00 per bushel and wheat farmers received an average price of $6.00 per bushel. A corn farmer who attempted to sell at $7.00 per bushel, or a wheat grower who attempted to sell for $8.00 per bushel, would not have found any buyers. A perfectly competitive firm will not sell below the equilibrium price either. Why should they when they can sell all they want at the higher price? Other examples of agricultural markets that operate in close to perfectly competitive markets are small roadside produce markets and small organic farmers. 180 Chapter 8 | Perfect Competition This content is available for free at http://cnx.org/content/col11627/1.10 Download for free at http://cnx.org/contents/
[email protected] Visit this website (http://openstaxcollege.org/l/commodities) that reveals the current value of various commodities. This chapter examines how profit-seeking firms decide how much to produce in perfectly competitive markets. Such firms will analyze their costs as discussed in the chapter on Cost and Industry Structure. In the short run, the perfectly competitive firm will seek the quantity of output where profits are highest or, if profits are not possible, where losses are lowest. In this example, the “short run” refers to a situation in which firms are producing with one fixed input and incur fixed costs of production. (In the real world, firms can have many fixed inputs.) In the long run, perfectly competitive firms will react to profits by increasing production. They will respond to losses by reducing production or exiting the market. Ultimately, a long-run equilibrium will be attained when no new firms want to enter the market and existing firms do not want to leave the market, as economic profits have been driven down to zero. 8.2 | How Perfectly Competitive Firms Make Output Decisions By