Firm Supply Decisions, Market Equilibrium, and Monopoly Power
Firm’s Short-Run Supply Curve
The firm’s decision to produce in the short run depends on whether the price covers average variable costs.
- Below point 2 (minimum Average Variable Cost, AVC), the price does not cover variable costs, so the firm shuts down and produces nothing. There are no profits, and losses equal fixed costs.
- From point 2 upwards, the firm’s short-run supply curve corresponds to its Marginal Cost (MC) curve above the minimum AVC.
- Between point 2 (min AVC) and point 1 (minimum Average
Small Business Essentials: Structure, Franchising, Location
Defining Business Types
Entrepreneurial Venture
The principal objectives of the owner are profitability and growth.
Small Business
A small business is independently owned and operated and is not dominant in its field.
Profit Motive
Expecting to make a profit is the reward for taking the risk of starting and running the business.
Contribution of Small Business
Small businesses contribute significantly by:
- Encouraging innovation and flexibility
- Maintaining close relationships with customers and the community
- Keeping
Applied Economics: Country & Industry Case Analyses
Section A: Ecuador’s Oil Analysis
Question 1: Economic Concepts for Ecuador
(a) Price Elasticity of Supply (PES)
The Price Elasticity of Supply (PES) is calculated as 0.16$. This indicates that the supply of Ecuador’s oil is relatively inelastic.
(b) Fundamental Economic Questions
The fundamental economic questions addressed are: What to produce? and How to produce?
(c) Opportunity Cost of Sunshine
Sunshine has no opportunity cost because it is a free and abundant resource. It is not scarce and does not
Read MoreSpain’s Economic Transformation: From Autarky to Autonomy
Economic Development: Regional Governments. The governments of the development era, starting with Franco’s government in 1957 and continuing through the 1960s, marked a significant shift in direction. This period transitioned from an early stage dominated by Falangist principles to one where technocrats held sway. These young economists and technicians, often linked to Opus Dei, were seen as key to economic growth and social stability. Their approach was more technical than ideological, focusing
Read MoreEconomics: Resource Markets, Price Controls, and Consumer Choice
Chapter 4: Resource and Product Markets
The Link Between Resource and Product Markets
- The markets for resources and products are closely linked.
- Changes in one will affect the other.
Economics of Price Controls
Price Ceilings
- A price ceiling is a legally established maximum price that sellers may charge.
- The direct effect of a price ceiling below the equilibrium price is a shortage: quantity demanded exceeds quantity supplied.
Secondary Effects of Price Ceilings
- Reduction in the quality of the good.
- Inefficient
Funding Options: Short-Term & Long-Term Business Finance
Short-Term Financing
Overdraft (Banking)
Extending an upper limit of credit tells you the current balance. The bank accepts the overdraft depending on the solvency of the company.
Credit Account Policy
The bank offers a company account and a term. As long as you do not incur charges, you do not pay interest.
Factoring
Several companies offer factoring services:
- Buyer investigation and risk classification management.
- Bill collection.
- Coverage of commercial risk.
- Invoice finance up to a maximum of 85%.
- Sales