Mankiw 6e. Experience it.
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Chapter 14: Firms in Competitive Markets

Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)

 

February 14

Happy Valentine's Day

A valentine only an economist could conceive.

Textbook References:

Pages 286-287 “Spilt Milk and Other Sunk Costs”

January 2

Natural Resources and the Limits to Growth

John Tierny explains how high oil prices encourage more exploration, which in turn reduce energy prices.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 300-306 “The Supply Curve in Competitive Markets”

November 29

P < AVC

Mankiw provides a real-world example of firms that shut down when price is below average variable cost.

Textbook References:

Pages 295-298 “The Firm's Short-Run Decision to Shut Down”

Dec. 13

Interview with Marty

There is a video of an interview with Martin Feldstein. Martin addresses the auto bailout, Fannie Mae and Freddy Mac, and real interest rates.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 298-300 “The Firm’s Long-Run Decision to Exit or Enter a Market”
Pages 348-351 “Competition with Differentiated Products”
Chapter 26 “Saving, Investment, and the Financial System”
Page 821 “Bernanke’s Challenges”


Dec. 11

Stiglitz on the Auto Industry

There is a link to an article by Joseph Stiglitz that argues that the U.S. automakers should be allowed to fail and go through chapter 11 bankruptcy

Textbook References:

Pages 298-300 “The Firm’s Long-Run Decision to Exit or Enter a Market”
Pages 348-351 “Competition with Differentiated Products”
Chapter 26 “Saving, Investment, and the Financial System”


Dec. 10

Bail-out, Italian Style

Italy is buying up Parmigiano cheese in order to support cheese prices. Mankiw suggests that if the government did not do so, a few firms would fail. That would reduce supply and increase price. That would help the remaining firms without any expense for the government. The same logic applies to other industries.

Textbook References:

Pages 118-121 “How Price Floors Affect Market Outcomes”
Pages 295-297 “The Firm’s Short-Run Decision to Shut Down”
Pages 301-304 “The Long Run: Market Supply with Entry and Exit”


Dec. 7

Goodbye Auto Industry

Paul Krugman argues that the U.S. Auto Industry will disappear.

Textbook References:

Pages 298-300 “The Firm’s Long-Run Decision to Exit or Enter a Market”
Pages 348-351 “Competition with Differentiated Products”

Chapter 14: Firms in Competitive Markets
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