Chapter 14: Firms in Competitive Markets

This chapter talks about how the competitive market is affected. It talks about how firms can't change the prices of goods in a competitive market because it would not be convenient to them. It also talks about how in order to maximize profit, firms must find where the marginal cost equals the marginal revenue. It mentions how the effects of single buyers are negligible. Total revenue is proportional to the total output. The chapter talks again about how a competitive market has many buyers and sellers, and the goods that are offered by various sellers are largely the same. Therefore, firms are price takers, not price makers. A shutdown refers to a short-run decision not to produce anything during a specific period of time due to current market conditions. On the other hand, an exit refers to the long-run decision to to leave the market. When shutting down temporarily, the fixed costs still have to be paid by firms. The fixed cost of land is said to be sunk cost when referring to the fixed cost of of a short-run shut down during a season of a firm. In contrast, if a producer decides to shut down completely, they have the opportunity to sell the land. When a firm shuts down, they obviously lose all revenue. The firm shuts down if the revenue that it would get from producing is less than its variable cost in production.

Chapter 13: The Costs of Production

This chapter mainly focuses on how producers decide whether or not producing an item is convenient.  It talks about how an accountant and an economist view profit differently. For example, an accountant only counts the explicit costs whereas an economist considers both the explicit and implicit costs in order to decide whether or not profit is worth investing. The chapter defines total revenue as the amount a firm receives for the sale of an output. The total cost is the market value of the inputs a firm uses in production. The profit is the total revenue minus the total cost. An economic profit is the total revenue minus total cost, including both explicit and implicit costs. Accounting profit is total revenue minus total explicit cost. A production function is the relationship between quantity of inputs used to make a good and the quantity of output of that good. Marginal products are the increase in output that arises from an additional unit of input. The diminishing marginal product is the property whereby the marginal product of an input declines as the quantity of an input increases. The chapter talks about fixed costs which are the costs that do not vary with the quantity of output produced. An example of this would be rent. Variable costs are the costs that do vary with the quantity of output produced. An example would be the water and gas bills which vary depending on how much of the supply is being used.

Article #4

The article begins by talking about how the focus has shifted from the economic well-being of monopolies to the crises that emerging economies may be facing. According to the author, the slowing down of China has affected many other countries. The author claims that another reason why the newly emerging economies of some countries are failing, is because of hidden debts. These debts are said to not appear on paper and just show up periodically, therefore going undetected. An example of this was the crisis in Mexico in 1994-1995 when the world learned that Mexico's private banks had taken a significant amount of currency risk through off-balance-sheet borrowing. Another example in the text is when banks in Thailand hadn't noticed that they were nearly empty. It also touches about the fact that China has been lending other countries a lot of money and how that can lead to another crisis.

I liked this article best because it is easier to understand. It is clear and to the point which helps the reader follow. Also, the writer doesn't seem to exaggerate and take one specific side/ argument.

Chapter 11: Public Goods and Common Resources

The chapter talks about excludability which is the property of a good whereby a person can be prevented from using it. It also talks about rivalry in consumption which is the property of a good whereby one person's use diminishes other people's uses. It talks about the importance whether or not people can be prevented from using a good. Private goods are goods that are both excludable and rival in consumption. Most private goods are controlled by monopolies. Public goods are goods that are neither excludable nor rival in consumption. Common resources are goods that are rival in consumption but not excludable. Free riders are people who receive the benefit of a good but avoids paying for it. This chapter also talks about the cost-benefit analysis. A study that compares the costs and benefits to society of providing a public good. The tragedy of commons is a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole.

Chapter 10: Externalities

This chapter talks about externalities, which are the uncompensated impact of a person's actions on the well being of a bystander. Producers use the intersection between supply and demand to determine the optimal amount of a good from the standpoint of society as a whole. The use of a tax is called internalizing the externality. Internalizing an externality means that there is an altering of incentives so that people take account of the external effects of their actions. In essence, people are paying for the cost of the damage created in order for their product to be produced. Although some activities impose costs on third parties, others yield benefits and are called positive externalities. The optimal quantity is found is found where the social value curve and supply curve intersect.  This externality encourages the development of and dissemination of technological advancements, leading to higher productivity and wages for everyone. An important positive externality is called a technological spillover which is the impact of one firm's research and production efforts on other firms' access to technological advance. The chapter also talks about the Coase Theorem which is the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own. The chapter also talks about transaction costs which is the costs that parties incur in the process of agreeing and following through in a bargain. A corrective tax is a tax designed to induce private decision makers to take account of the social costs tht arise from a negative externality.

Article 3

 Due to all the free money in the market as ZIRP and other policies Stockman holds to be dumb is brought up again in the article. He disagrees with Ben Bernanke who created ZIRP and other Keynesian policies. Stockman consistently quotes Bernanke throughout the article, while counterattacking the facts Bernanke states. The global economy has been messed up due to the central banks who are trying to prevent another financial bubble from popping. He also makes pointed remarks at commentators on the current state of the economy. He addresses how the policies set by the Feds have made little to no impact on the job market. Also, the Feds either have a really misleading number of job growth or they have a bad accountant. He analyzes how the economic state in relation to the US’s and points out how the differences in their improvement and ours does not lie in the arguments stated by Bernanke. For example, Germany has a balanced budget and a slightly better real GDP than the US, but Bernanke criticizes their government for rejecting the Keynesian playbook. On the other hand, Bernanke praises Britain for their “solid recovery, in large part because the Bank of England pursued monetary policies similar to the Red’s in both timing and relative magnitude” even though their real estate prices are up by 50%.What really annoys me is how all he uses all the acronyms. After looking them up, two results end up occurring. I get more confused by the definition of the term or I cannot find the correct phrase for the acronym like BM economics. This writing was a bit difficult to follow because it appears that it was not read over after having been written with many grammar and spelling errors. It is interesting to see how the government continues to botch up numbers and statistics to make the public feel safe when we are headed towards an economic bubble burst. 

Chapter 8: The Costs of Taxation

This chapter talks about how taxes help to raise revenue. Taxes raise prices for buyers and lowers the amount of money that sellers receive. The amount of tax collected by the government stays the same no matter whether it is levied on the producer or the consumer. When a tax is put on the buyers, the demand curves shifts down and when it is imposed on the producer, it shifts the supply curve. The chapter also talks about deadweight loss which is the fall in total surplus that results form a market distortion, such as a tax. The price elasticities of the supply and demand curves help measure the deadweight loss. In general, when one of the curves are relatively elastic, the deadweight loss of a tax is large. On the other hand, when one of the curves is relatively inelastic, the deadweight loss of a tax is small. Deadweight loss comes to be because a tax induces buyers and sellers to change their behavior. The chapter also talks about how labor is taxed, such as Social Security tax and Medicare tax.

Article 2

This article talks about how the economy had been falling and it doesn't seem to be heading towards recovery. The article talks about the current conditions of China's economy that is very unbalanced and falling rapidly into debt. The author talks about China's overproduction of steel and how it has caused a huge decrease in prices. China has also been increasing their production of commercial malls and retail centers which is not a good move due to its citizens having no money. The author says that such an event is creating deflation in China. He also talks about how the United States' heavy investment in Brazilian goods is becoming an issue because shipment from Brazil has decreased 20% and is still going down. This article is an analysis of the global economy and a strong expression of concern due to ensuing deflation as the world economy transitions from a bull market to a bear market. The prices of commodities have been steadily falling for about three years or so, yet it is only now that the falling markets significance and effects are taking shape. China, which had been considered a ‘great hope’, is now becoming subject to rampant deflation. The steel industry is over developed and has seen large price reductions in recent years. 

Chapter 7: Consumers, Producers and the Efficiency of Markets

The chapter talks about welfare economics which is the study of how the allocation of resources affects economic well-being.  It talks about the willingness to pay for a good, or the maximum price that they a buyer is willing to pay for a good. Each consumer can receive a consumer surplus when the amount the consumer is paid is greater than the amount actually paid. It kind of reminds me of when someone buys something that they really wanted, for a way cheaper price since it was on sale. So, I think of it as how much I saved from the original price. To calculate the total consumer surplus, one can find the are of the region under the price and above the supply. Each person may have a different set price that they are willing to pay for a good which is what makes it tricky to decide whether or not the equilibrium price is fair.
The chapter also talks about the producer surplus which is the amount that a seller is paid minus the sellers cost for providing the good or service. I like to think of the surplus as the amount that the producer is profiting from the good or service. The consumer surplus is related to the demand curve whereas the producer surplus is related to the supply curve. Together, by adding the consumer surplus and the producer surplus, one gets the total surplus. Another way to calculate is by taking the value to the buyers and subtracting the cost to the sellers from it. A price of a good can either be efficient or work in equity. In order for it to be efficient, the allocation of the resource should maximize the surplus. In order for there to be equity, there should be fairness in the distribution among all the members in society.