You've Just Received a Frantic Phone Call from One of Your

question 24

Essay

You've just received a frantic phone call from one of your cousins whose son will soon be "graduating" from elementary school. Your cousin has to make a decision about where to send the boy next year and, of course, wants him to have the best education possible-within her financial constraints. Knowing you are studying adolescent development, she asks you what type of school you think is best and asks about school vouchers, wondering if they could help defray the potential costs of private schooling. How can you help her? What advice would you give your cousin about where to send her son to school, based on research findings?

Understand the effects of entry and exit of firms on market equilibrium in monopolistic competition.

Know the characteristics of demand and marginal revenue curves facing a monopolistically competitive firm and the implications for output and pricing decisions.

Evaluate the efficiency and outcome of monopolistic competition in both the short and long run.

Grasp the implications of changes in firm strategy, such as price adjustments, on market share and profitability in monopolistically competitive markets.

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Definitions:

Efficiency Losses

Reductions in economic well-being, reflected by the inability of a market to allocate resources optimally.

Standard Costs

The predetermined expenses for the production of a product or operation of a service, used as a baseline to measure performance.

Direct Labor Wage Variance

The difference between the expected cost of direct labor for production and the actual cost incurred.

Direct Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected, multiplied by the standard labor rate.