TOPIC 6: Theory of Producer Behavior
Required Readings:
- Hall and Lieberman, Chapter 7
- The Wall Street Journal
STUDY QUESTIONS FOR TOPIC 6:
- What is a producer equilibrium?
- What level of output and what price will firms charge in the short run if they want to maximize their profits?
- How does the behavior of firms in the long run, in terms of the level of output they supply, the price they charge, and any other activities of firms, differ from the short run?
- What is the process by which firms return to long run equilibrium after some disturbance?
- Why do firms enter or exit an industry?
- What is the significance of “zero economic profits”?
