Long Run Costs

Reading Assignment:

1.Textbook,Microeconomics, Chapter 7

2.Textbook,Microeconomics, Chapter 1 on the Smith and the Division of Labor

1.What happens to the firm's LAC if there are economies of scale?Diseconomies of scale? Constant Returns to Scale?

2.What is MOS? The size of MOS is dependent on the existence of ___________

3.Why will sub-MOS firms incur cost penalties?

4.How can contract producers help Sub-MOS firms survive?

5.Identify the economy of scale in beer packaging (i.e., bottling and canning).

6.Sam Adams Brewery uses two strategies to cope with its sub-MOS size. Identify both strategies.

1. _______________________________________________
2. _______________________________________________

7.How does Rolls-Royce's production volume compare to that of General Motors? __________. Does this make Rolls-Royce a sub-MOS firm? ______________

8.Why have Rolls Royce luxury automobiles never been assembled on a moving assembly line? __________ How has Rolls Royce compensated for this? ___________

Finding Economies of Scale

9.Why did Ford get involved in the Kingsford Charcoal Company?

10.How do scale and the efficiency of large equipment often create economy of scale?

11.How can capital indivisibility create economy of scale?

12.Adam Smith claimed that he had discovered the most important factor affecting productivity. What was he referring to?

13.What is craft production?

14.What type policy did Adam Smith advocate in order to realize this economy of scale?

15.Large firms can often buy inputs in large quantities. This often creates an ________.

Diseconomies of Scale - Sources and Possible Remedies

16.What are the most important diseconomies of scale at the plant level?_________. What is the solution to this problem?___________

17.What is the most important diseconomy of scale at the firm level? _________ How have firms addressed this issue? _______

US Steel was created to monopolize the steel industry. It had a 64% market share. What happened next? Did US Steel find a solution to its diseconomy of scale?

Downsizing?

"Taylorism?"How have workers usually reacted to Taylorism? Why did the Soviet leader V.I. Lenin think that Soviet workers would embrace "Taylorism?" Did Soviet workers like Taylorism?

Creating residual claimants?

Antitrust and Regulation

Reading Assignment:

Textbook,Microeconomics, Chapter 11

Antitrust Laws and Cases, Canvas Readings

18.What is statute law? _____ What is case law? ______

19.What was the first federal antitrust law?

20.How is the Clayton Act different from the Sherman Act? What did the Clayton act outlaw?

21.What had Alcoa done that made the judge find it guilty of being a monopoly? ____________. Did the judge rule that Alcoa was a "dirty" firm? ___________

22.Why did the verdict in the U.S. Steel antitrust case confuse everyone?

23.Bill Gates took a very aggressive approach to dealing with the Justice Department in the Microsoft case even though Microsoft had an "Alcoa Problem." What was Microsoft's "Alcoa Problem?"