Monday, February 14, 2011

Honors Business Economics: 14 February 2011

Beyond the Sound Bites:
Obama Rolls Out Budget Cuts Monday


Let's illustrate the magnitude of Obama's cuts.

Obama's cuts are difficult to view in this chart. Let's zoom in.

Blowing it up about ten times allows us to see a tiny little sliver: those are the cuts.


The Ch. 5 Sec. 1 Quiz is on Wednesday.

The Ch. 5 Sec. 2 Quiz is on Thursday.

Skip #16 and #35; do not answer on the Test.

The Chapter 4 Test Make-up is today.


The Ch. 4 Sec. 3 Quiz Make-up is today.

Standard feature:

The electronic edition of the Philadelphia Inquirer is available. We have the Sunday edition, available on Mondays, in addition to the Tuesday through Friday editions on the other days.

Please follow the steps below:

Click on the words "Access e-Inquirer" located on the gray toolbar underneath the green locker on the opening page.
Password: 10888

Chapter 7


Chapter 7: Market Structures

Student Web Activity

"Department of Justice - Antitrust Enforcement"

Today, government has the power to encourage competition and to regulate certain monopolies that exist for the public welfare. In some cases, government has taken over certain economic activities and runs them as government-owned monopolies. The United States Department of Justice Antitrust Division works to promote and protect fair business practices through the enforcement of antitrust laws. In this activity, you will learn more about the Antitrust Division.



Which Government is the Most Laissez-Faire?

In-class assignment, with a partner, answer the following questions.

Is there any government, past or present, that comes close to the idea of laissez-faire capitalism?
What nation was founded on individual rights?
In spirit, does the U.S. retain these ideas?
Will a nation founded on individual rights happen anywhere else?

market structure

Market Structures, 5:52

In-class assignment, with a partner, answer the following questions.

What will differ based on the market structure?
What is the continuum of Market Structures? (begin to draw the continuuum from left to right)
How do I recognize a perfectly competitive market?
How do you define market power?
What would happen if you tried to raise your price?
What characterizes a monopoly?
What are barriers to entry?
Are there other structures?
What are two more structures?
What characterizes Monopolistic Competition?
What characterizes Oligopoly?
What is mutual interdependence?
What product or products fit each?

perfect competition

Perfect Competition, 7:13

In-class assignment, with a partner, answer the following questions.

How would you recognize a perfectly competitive industry?
Do they have power to control price?
If the individual firm can not set the price, then where does the price come from?
What happens if they lower their price?
Is there anything you do have control over?
What is the formula for maximizing profit?
What about marginal costs?
Why are profits in the short run?
What is the effect of sharks entering the competition?
In the long run, how much does a perfectly competitive firm's profits equal?

imperfect competition

Animated diagram showing market failure due to imperfect competition, :30

monopolistic competition

product differentiation

nonprice competition




price fixing, 1:02

Price fixing defined and illustrated here by these three individuals.

(Conversation and Discussion: Business Readings, Duisburg-Essen University, winter term 2008-09)



natural monopoly

economies of scale

geographic monopoly

technological monopoly

government monopoly

Academic Vocabulary

Ch. 7 Sec. 1 Reading Strategy

In-class assignment, with a partner, complete the graphic organizer by identifying the characteristics of different market structures.

Issues in the News

Profits, Prices Spur Oil Outrage

Perfect Competition

Necessary Condition

Profit Maximization

Figure 7.1 Perfect Competition and Profit Maximization, p. 171


A Theoretical Situation

Imperfect Competition

Reading Check


Why does perfect competition serve as a theoretical market structure?


Market Researcher

Monopolistic Competition

Product Differentiation

Nonprice Competition

Profit Maximization

Reading Check


How is profit maximization in a monopolistic firm different from that of a perfect competitor?

The Global Economy and You

Poco, Heart, and Wisdom


Interdependent Behavior

Profit Maximization

Reading Check


Why do oligopolists frequently appear to act together?


Types of Monopolies

Profit Maximization

Reading Check


Why do natural monopolies sometimes result in economies of scale?

Profiles in Economics

Bill Gates
Bill Gates: How to Fix Capitalism, 5:41

In-class assignment, with a partner, answer the questions.

What is creative capitalism?
Who will benefit?
What should large corporations do?
What are two primal interests we have?
What kind of companies are young people looking to work for?
How has capitalism not worked now?
How have we benefited?
What example does the energy space provide?

In-class assignment, with a partner, summarize Perfect Competition and Profit Maximization based on the example.

Ch. 7 Sec. 1 Review

In-class assignment, with a partner, use the graphic organizer to identify the characteristics of imperfect competition.

Section 2: Market Failures

There are five common forms of market failures. The first is inadequate competition, which can lead to oligopolies or monopolies. The second is inadequate information, which denies people an awareness of better prices or opportunities in other markets. The third is resource immobility, which occurs when factors of production cannot or refuse to move to other markets. The forth is the failure of the market to provide public goods. The fifth is the presence of externalities, positive or negative economic side effects to uninvolved third parties.

Section Preview

Content Vocabulary

market failure

Introduction to Market Failure, 5:07

In-class assignment, with a partner, answer and fill in the following.

When does a market failure occur?
The mnemonic device may aid your memory.
Remember: PIMM FACED
Define each of the following parts of the mnemonic.
P-ublic good
M-erit good

F-actor Immobility
C-yclical Instability
D-emerit Good

public goods

Public Goods, 3:38

In-class assignment, with a partner, answer or define the following.

What are private goods?
Define excludibility.
Define rivalry.
What are public goods?
Define nonrivalry.
What example illustrates a public good?
Who pays for a public good?
What is free ridership?
What is the government's role?
What happens when you can't prevent people from consuming a commodity, even if they haven't paid for it? Who ends up providing these kinds of goods and services?


In-class assignment, with a partner, answer the following questions.

When do externalities occur?
What do they involve?
What is involved in negative externalities?
What does the example of a cell phone demonstrate?
Are there any costs to others when a cell phone is used while driving?
Do users consider all the costs?
What entity is involved as a result?
What is the government solution to negative externalities?
What about positive externalities?
What field is an example of positive externality?
What is the government solution to a positive externality?

Externalities, 7:39

negative externality

positive externality

Academic Vocabulary

Ch. 7 Sec. 2 Reading Strategy

In-class assignment, with a partner, complete the graphic organizer about why maintaining adequate competition is a worthwhile goal. Use the graphic organizer to list some of the effects of competition.

Companies in the News


Types of Market Failures

Inadequate Competition

Inadequate Information

Resource Immobility

Did You Know?

Expensive Memories

Sherman Antitrust Act

Public Goods


Reading Check


What type of market failure do you think is most harmful to the economy?

Dealing With Externalities

Correcting Negative Externalities

Correcting Positive Externalities

Reading Check


If externalities are positive, why should they be corrected?

BusinessWeek Newsclip

Lord of the Rings

Ch. 7 Sec. 2 Review

In-class assignment, with a partner, use the graphic organizer to identify and describe both types of externalities.


Section 3 The Role of Government

The role of government has expanded to preserve competitive markets. This has taken the form of antitrust legislation that outlaws trusts and various forms of price discrimination. As a result, the economy has been modified so that it is now a mixture of different market structures, different forms of business organizations, and some degree of government regulation.

Ch. 7 Sec. 3 Reading Strategy

In-class assignment, with a partner, complete the graphic organizer by describing how governments try to avoid market failures.

Ch. 7 Sec. 3 Review

In-class assignment, with a partner, use the graphic organizer to identify how the federal government can maintain competition and improve economic efficiency.


Ch. 4 Prep


Multiple Choice Quiz


Crossword Puzzle




Ch. 5 Prep

Chapter 5 Supply Multiple Choice Quiz


Chapter 5 Puzzle


Chapter 5 Supply Flashcards


Ch. 6 Prep

Chapter 6: Prices and Decision Making
Multiple Choice Quiz


ePuzzle Concentration


Academic, Glossary, People/Places/Events


I'm in Love with Friedrich Hayek, 2:54

Original song by Dorian Electra.
Filmed by Clara Lee, Madeline Scholl, and Ciaran Finlayson.


Hey there Freidrich Hayek, ya lookin really nice
Your methodology is oh so precise
You break down social science to the fundamentals
Rules and social order are the essentials

The use of knowledge in society
by each of us we make the economy
It's not magic that somehow our plans all align
The result of human action, not of human design

Tell me your thoughts on resource misallocation
Distorted price signals and misinformation
Interest rates that are made artificially low
Telling producers where resources should go


Since these low interest rates, like you said, are lies
Malinvestments come as no surprise
Soon these mistakes will all be revealed
and then corrected, unless they're concealed


Sometimes I dream all day 'bout bein' Mrs. Hayek
We'd share milkshakes, watch sunsets, and kayak
We'd work together on that business cycle theory
Oh darlin' you've been workin' hard, you must be weary

Come to my couch, on which you can rest
I'll make tea, we'll talk credit and interest
Then I can talk about my interest in you
Of course we'll talk 'bout the economy, too

Just me and you (x2)
Me and You
Oh, oh
Me and You

Email (or hand in hard copy) to

Monday HW
1. p. 168, How might you benefit from the mall? How might it negatively impact your life?
2. How are competition and the profit motive related?