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Economics 308

Administrative Details. Second Exam.Cover Chapters 5 and 6.Thursday, Nov. 17thThe Exam will be based on the following articles:How Porsche Revived Itself (1996) Putting Porsche in the Pink (1996) Porsche's Big Bet: First New Model in Years (1997) A Boxster Built Anywhere is Still a Boxster (1997) Porsche Doubles Finnish Output of Popular Boxster (1998) There will be an in-class quiz on Thursday, Nov. 3rd based on the following article. Students are free to read the article before the qu1144

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Economics 308

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    1. Economics 308 Chapter 5 and 6 Production and Cost Market Structure

    3. Plan of Action: Production and Supply

    4. Efficient production in the multiple input case. If a firm is going to produce a certain quantity of a good, what is the best, i.e. most efficient method of production. Consider the two input case, where two inputs, capital and labor are used to produce a given quantity of a good. Will use three theoretical constructs— production function, iso-cost curve and iso-output curve.

    5. Production functions A production function specifies maximum output from given inputs:

    6. Returns to Scale Defined: The relation between output and a proportional variation of all inputs together. If the firm doubled all inputs would output double, less than double or more than double. Consider the following production function and ask the question: what would happen to output if inputs of K and L doubled? Increasing returns to scale (doubling inputs more than doubles output): Q=KL Q=1*1=1 Q=2*2=4 Decreasing returns to scale (doubling inputs less than doubles output): : Q=K1/3L1/3 Constant returns to scale (doubling inputs exactly doubles output): : Q=K1/2L1/2

    7. Returns to a Factor Returns to a Factor refer to the relation between output and variation in only one input while the amount of other inputs is kept constant. Can measure Returns to a Factor in different ways. Total product Given the amount of capital the firm has, how much output will the firm produce with different amounts of labor. Average product Q/L Marginal product ?Q/?L

    8. Iso Cost Curves An isocost curve shows combinations of two inputs (labor and capital) that can be purchased for a given amount. Similar to Budget Line.

    9. Isocost Curve: $10,000 budget, Price of Labor =$50, Price of Capital=$25

    10. Position of the Isocost curve represents Total Cost: Consider an increase in expenditures on inputs to $15,000. How will this shift the iso-cost curve?

    11. Slope of the iso-cost curve represents the Relative Price of Inputs: Consider an increase in the price of labor to $100. How will this shift the iso-cost curve?

    12. Iso output Curves An iso-output curve shows combinations of two inputs (labor and capital) that produce the same amount of the good. Similar to an Indifference Curve.

    13. Movement along the iso-output curve represents a change in the way goods are produced.

    15. Position of the iso output curve represents the amount of the good produced: the farther out from the origin, the greater the output produced.

    16. Slope of the iso output curve represents the how easily one factor can be substituted for another factor in the production process.

    17. Efficient Production. Once the firm has chosen how much to produce, it will produce that amount in the most efficient way. Efficient production can be described two alternative but equivalent ways: The firm is producing efficiently if the firm is producing at a point where the iso-output and iso-cost curve is tangent. The firm is producing efficiently if it is on the highest iso-output curve that has at least one point in common with an iso cost curve. Examine the intuition behind each way of describing efficient production.

    18. Efficient Production

    19. Efficient Production: Cost Minimization

    20. Efficient Production: Output Maximization

    21. Efficient Production Revisited. A firm is producing efficiently if it is: Minimizing costs for the amount of the good it is producing. Maximizing output for the amount it is expending on inputs.

    22. Using iso-cost and iso-output curves to analyze two changes. Suppose the price of an input changed. How would this affect the production decision of the firm? Suppose there was a change in technology. How would this affect the production decision of the firm?

    23. Analyzing a change in the price of inputs.

    24. Adjusting to a change in the price of inputs: Cost Minimization

    25. Adjusting to a change in the price of inputs: Output Maximization

    26. Analyzing a change in technology.

    27. Analyzing a different change in technology.

    32. Read the article about Mercedes production in Alabama. Consider the iso-cost and iso-output curves for Mercedes production in Germany shown below. The author of the article cites a 50% reduction in costs in Alabama vs. Germany as one of the prime reasons for Mercedes to establish a factory in the U.S. 1. Depict production in the Alabama plant if Mercedes uses the same combination of K and L used in Germany despite the fact that labor costs are lower in Alabama. Will the firm be producing efficiently? Depict and explain.

    33. 2. If point A in the diagram shows the optimal combination of K and L used in Germany, what will happen to the combination of K and L used in the U.S. factory if Mercedes uses a cost minimization strategy to make production more efficient? Depict on your graph. 3. How will your answer change if Mercedes uses an output maximization strategy to make production more efficient? Depict on your graph. 4. In (2) and (3), what can you say about the unit cost of production? Explain.

    34.

    35. Production and Supply-Progress

    36. Variable and Fixed Costs Iso-cost and iso-output curves can be used to analyze the difference between fixed and variable costs. The short and long run. The short run is period so short that the amount of some inputs cannot be changed,i.e. some inputs are fixed. The long run is a period long enough that all inputs are changed i.e. all inputs become variable. Consider how a firm adjusts production to vary input in the short and long run. For the lecture examples, capital is the fixed input and labor is the variable input.

    37. Changing output in the short and long run.

    38. Changing output in the short and long run.

    39. Cost Curves and the Output Decision of the Firm To properly make the decision how much to produce (as opposed to the question of how to produce) the firm must measure the unit cost of production in four ways. Average Short Run Total Cost Average Long Run Total Cost Average Variable Cost Marginal Cost Each of these measures of unit cost can be derived using iso-cost/iso-output analysis. A firm can use these measures of unit cost to decide how much to produce in a competitive market.

    46. The Firm’s Unit Cost Curves

    47. Production and Supply-Progress

    48. Output Level The previous discussion has shown how the firm, once it has decided how much to produce, determines how (the combination of capital and labor) it will produce that output— efficient production. Turn now to a discussion of how the firm decides how much to produce. Will assume that the firm is a price taker in a competitive market i.e. it assumes that it can sell as much or as little as it desires at the prevailing market price. The firm is in a perfectly competitive market.

    49. Profit Maximization for the Competitive Firm The goal of a competitive firm is to maximize profit. The firm in a competitive market can maximize profits by applying the 3-part output rule of a price taking firm. Shutdown Decision: Should if produce at all? Short Run Output Decision: If the firm is going to produce how much should it produce in the short run? Long Run Entry and Exit Decision: In the long run, should the firm stay in business? Examine each of these three decision in detail.

    50. The Firm’s Shut Down Decision The firm should shutdown in the short run, i.e. produce nothing if the price is below the minimum AVC of production. If the price is below the min. AVC, the firm would lose less by shutting down. If the firm shutdown, it would lose only its’ fixed costs. If it produced, it would lose its’ fixed costs and a portion of its’ variable costs. Therefore, it would lose less in the short run by shutting down. If the price is between the min. AVC and the min. ATC, the firm should produce even though it loses money by doing so. The price it is getting is sufficient to cover its variable costs and a portion of its’ fixed costs. Therefore the firm will lose less by producing than it would be shutting down. If the price is above the min. ATC, the the firm can produce at a profit. The price it is getting is sufficient to cover all of its’ costs.

    51. Example of Shutdown Decision Gas Station: Cost of pumps, building, bullet proof cashiers station, etc--$500,000. Labor cost to keep gas station open-$10/hr. and gasoline has a wholesale cost of $1/ gallon. Gasoline sells for $1.50 per gallon. If the gas station is opened for one day (24 hours), they will sell 500 gallons. Should the shutdown? Compare shutting down vs. opening. Shutdown-Lose $500,000 Open-$750 revenue, $240 labor costs, $500 gasoline costs. Price exceeds the variable cost of producing so the firm loses less by producing—only lose $499,990. They are still producing at a loss, but lose less by producing than by shutting down. Suppose if the gas station opened for one day, they will sell 400 gallons. Should the station shut down? Shutdown-Lose $500,000 Open- $600 revenue, $240 labor costs, $400 gasoline costs-lose $500,040. The immigrant’s ladder of economic success. The immigrant’s ladder of economic success.

    52. The Economic Ladder of the FOB Immigrant

    53. The Firm’s Decision to Shut Down

    54. Short Run Output Decision Once the firm has made the shutdown decision and decided not to shutdown, the next decision the firm must make is how much to produce. The firm can determine the profit maximizing (or loss minimizing) level of output by setting P=MC. An alternative way of determining the profit maximizing level of output is to use the following rule: If P>MC increase output. If P<MC decrease output. If P=MC leave output unchanged.

    55. Profit Maximization for the Competitive Firm

    56. Profit Maximization for the Competitive Firm

    57. Profit Maximization for the Competitive Firm

    58. Profit Maximization for the Competitive Firm

    59. Profit Maximization for the Competitive Firm

    60. Profit Maximization for the Competitive Firm

    61. Profit Maximization for the Competitive Firm

    62. An Application of the Short Run Output Rule and the Importance of Marginal Thinking Many “business problems” can be solved by using a specific type of logic—marginal thinking or thinking at the margin. Thinking “at the margin” means asking and answering the following question: Given what has already happened, what will happen if a firm engages in one more unit of an activity. This type of logic can be applied to most “business problems.” Simple cost/benefit analysis is an example of marginal thinking. How late should a store stay open? Should an amusement park build an additional ride? Should carmakers provide additional options on a car-4 doors/2doors/targa top/hatchback.

    63. Thinking at the Margin in Action. While the idea of Thinking at the Margin principle can be stated simply, applying it in real life can be quite complex and involved. In some lines of business, hundreds of employees and the MIS of the company are designed around the implementation of the equimarginal principle. Example: The comping system at Las Vegas casinos. What is the goal of the casino? Maximize profits. What is the main source of casino revenue? Player losses. Profits=Player Losses-Costs How does the casino get players to come to their casino and gamble, e.g. lose? Attractions, entertainment, restaurants, etc Giving away free stuff. Rooms, airplane tickets, shows, food, etc. Business problem: who gets the free stuff an how much?

    64. Making the Comping Decision: An Example of Marginal Thinking or the Equimarginal Principle in Action.

    65. The Rating Slip

    66. Computing the Player’s Rating Lexicon of Gambling RFB Comp Run of the House Black player Green player Whale

    67. Computing Player Rating (2) Casino will give back in comps roughly 50% of the expected loss. $50 rating-$240 expected loss ?$120 of comps. $100 rating-$480 expected loss?$240 of comps. $200 rating-$980 expected loss? $480 of comps. How much must you bet to get a room comp at a various casinos. A-Hotels--$200+ rating: MGM, Bellagio, Treasure Island, Mirage. B-Hotels--$100+ rating: Luxor, Venetian, Monte Carlo, New York, New York. C-Hotels---$50+ rating: Excalibur, Circus Circus, Stardust.

    68. How to get a free weekend in Las Vegas? The job of the Casino Host. How do you establish yourself on a casino VIP list? Comp City by Max Rubin

    69. Getting a free weekend in Las Vegas?

    70. The Long-Run Decision to Enter or Exit an Industry The long-run is period of time long enough that a firm can control/avoid both its’ variable and fixed costs, i.e. they can exit or enter an industry. In the long-run, the firm exits if the revenue it would get from producing is less than its total cost. Exit if P<min ATC. New firms will enter the industry if such an action would be profitable. Enter if P >min ATC

    71. The Competitive Firm’s Supply Curve

    72. Profit as the Area Between Price and Average Total Cost

    73. Profit as the Area Between Price and Average Total Cost

    74. Profit as the Area Between Price and Average Total Cost

    75. Loss as the Area Between Price and Average Total Cost

    76. Loss as the Area Between Price and Average Total Cost

    77. Loss as the Area Between Price and Average Total Cost

    78. Review: The 3-part output rule of firm in a competitive market. Once the firm knows it’s unit costs (ATC, AVC, and MC) at each level of output and the prevailing market price, a price taking firm can determine the profit maximizing level of output by applying the 3-part output rule. Shutdown if the P < min AVC. Explain. If the firm is going to produce in the short run, produce the Q where P=MC even if it means losing money. Explain. In the long run, exit if P < min ATC. Explain.

    79. Production and Supply-Progress

    80. Market Supply in a Competitive Market Market supply equals the sum of the quantities. supplied by the individual firms in the market. Market Supply with a Fixed Number of Firms (Short Run Supply Curve). For any given price, each firm supplies a quantity of output so that price equals its marginal cost. The market supply curve reflects the individual firms’ marginal cost curves. Market Supply with Entry and Exit (Long Run Supply Curve). Firms will enter or exit the market until profit is driven to zero. In the long-run, price equals the minimum of average total cost. The long-run market supply curve is horizontal at this price (constant cost industry).

    81. Initial Condition: Long Run Equilibrium

    82. Short-Run Response to an increase in Demand

    83. Short-Run Response to an increase in Demand

    84. Short-Run Response to an increase in Demand

    85. Increase in Demand in the Long Run Over time, the short-run supply curve shifts as profits encourage new firms to enter the market. Price falls as new firms enter the market In the new long-run equilibrium profits return to zero and price returns to minimum average total cost. The market has more firms to satisfy the greater demand.

    86. Long-Run Response

    87. Long-Run Response

    88. Long-Run Response

    89. Increase in Demand in the Short and Long Run

    90. Shape of the LR Supply Curve The nature of the industry determines the shape of the long run supply curve. Is the min. ATC of potential entrants higher, lower, or the same as existing firms? Slope of the long run supply curve. Upward sloping-increasing cost industry. Downward sloping-decreasing cost industry. Flat-constant cost industry.

    91. Market for Fatburgers. What is takes to own a Fatburger. Net Worth of $250,000 with $150,000 in liquid assets. $30,000 franchise fee. $370,000-$730,000 startup costs. 25% of startup costs funded from personal resources. Pay 5% of net sales. Example of business in a box. Invest $500,000 and earn $200,000 in first year profits.

    92. Long Run Supply Curve in Fatburger Market.

    93. Basics of Oil Exploration

    101. Long Run Supply Curve in Fatburger Market.

    102. Shape of the LR Supply Curve The shape of the long run supply curve is determined by the min ATC of potential entrants. If potential entrants have higher costs than existing firms, the LR supply curve will be upward sloping (oil industry example). If potential entrants have the same costs as existing firms, the LR supply curve will be flat (business in a box example). A constant cost industry is an industry where potential entrants face the same unit costs as existing firms. Example: Business in a box. An increasing cost industry is an industry where potential entrants face higher unit costs than existing firms. Example: Oil Industry

    103. Production and Supply-Progress

    107. Example outsourcing. Example outsourcing.

    108. Example outsourcing. Example outsourcing.

    110. COLUMN ONE Telecom's Fiber Pipe Dream  Upstart firms saw riches in circling the globe with high-capacity optic cable. Instead, they were laying the foundation for their own downfall. By JON HEALEY, TIMES STAFF WRITER   The world's phone calls, faxes and e-mails zip through strands of glass no thicker than a human hair, riding across countries and continents on pulses of multicolored light. The strands are bundled in cables that run beneath city streets, through mountain passes and under the seas. The cables were laid by a band of upstart companies that spent $50 billion or more in the last few years to wire the planet. These massive networks will serve the public for years to come, delivering the electronic goods of the Digital Age. But the companies that built them are not celebrating. Many are in financial ruin. The recent collapses of Global Crossing Ltd. and other communications firms have roiled financial markets and cost investors and employees tens of billions of dollars. How did such a triumph of engineering leave so much corporate wreckage? News reports of Global Crossing's meltdown have dwelt on accounting sleight of hand and extravagant executive pay. But what actually drove the company and others like it into the ground was an epic miscalculation. These upstarts bet that if they built communications networks with far more capacity, or bandwidth, than had ever been available before, customers would rush to use them. The network builders employed new technology that crammed much more data onto each strand of glass. This enabled them to slash prices for long-distance data transmission well below the rates charged by established networks, such as those of AT&T Corp. and British Telecom, that used older equipment.

    111. The newcomers believed that the combination of low prices and abundant bandwidth would unleash a frenzy of activity on the Internet. Consumers and businesses would pay for all kinds of services that previously had been too expensive. People would watch Web movie channels on their TV sets. Doctors would diagnose illnesses via the Internet. Corporations would hold video conferences with employees around the world. The problem was that too many companies had the same dream, and they built too many digital toll roads to the same destinations. The prices commanded by long-distance networks did drop--but much more steeply than the newcomers expected. And the demand for their services did rise--but not nearly as much as they had banked on. As a result, many of the upstarts couldn't bring in enough cash to pay interest on the money they borrowed to lay all that cable. Their plight is a textbook example of the boom-and-bust cycle of high-tech capitalism. It illustrates how technological innovation, plowing relentlessly forward, can make companies and then break them. The financial outlook is not universally bleak--many network operators remain healthy, and some regions are not overloaded with fiber. But on many of the routes that drew the heaviest investment, such as those between the United States and Europe, the bandwidth glut is likely to remain for five years or more. "People have laid huge amounts of fiber in the ground," said Internet analyst Tony Marson of Probe Research Inc., "and there is a distinct possibility that quite a lot of that will never actually see any traffic." Explosion of Internet Traffic Fueled Demand If any one person inspired the burst of network building, it would be an English computer scientist named Tim Berners-Lee.

    112. The expert in storing and retrieving data invented the World Wide Web in 1989 while working at a European nuclear research laboratory. Before then, Internet users had to type arcane computer commands to search for and view files on the network. Berners-Lee devised a way to present documents, pictures and graphics on electronic pages that could be retrieved with the click of a mouse. The new technique transformed the Internet from a hard-to-use research tool into a communications medium for the masses. Two developments in the early 1990s aided that transformation. First, in 1992 Congress lifted the ban on commercial uses of the Net. Then, in 1993 and late 1994, the first easy-to-use browser programs were released, simplifying the task of viewing or building a Web site. Up to that point, Internet use had doubled every year or so. Afterward, traffic exploded, increasing tenfold in 1995 and again in 1996, according to researchers at AT&T Labs. "People thought it could double every quarter forever," said analyst Paras Bhargava of BMO Nesbitt Burns, a Canadian investment bank. As people and businesses began buying, selling and chatting online by the millions, it seemed that no amount of Internet bandwidth would be enough. "All these [dot-com] companies were cropping up, it seemed weekly, and there was no end to that in sight," said Glenn Jasper of Ciena Corp., a telecom equipment manufacturer in Maryland. "So the conventional wisdom was we've got to grow the capacity of our networks not for the traffic that's out there now or even next week but for a year from now."

    113. For years, those networks had been operated in the U.S. by a handful of giant phone companies and abroad by government monopolies. These companies relied on a small number of equipment suppliers, such as AT&T's Western Electric subsidiary. They lost their chokehold on the industry, however, just as Web traffic was exploding. Governments around the world started prying open their telecommunications markets to competition. At the same time, advancing technology gave birth to a litter of new equipment suppliers that specialized in fiber-optic gear. Long frozen out of the telecommunications business, investors suddenly had a chance in the mid-to-late 1990s to crash the party. Venture capitalists opened their checkbooks to bankroll new networks and equipment companies. Investors jumped on board as soon as shares were offered to the public. "There was a lot of money available," said Todd Brooks, a general partner at Mayfield Funds, a venture capital firm in Menlo Park. "You had billion-dollar IPOs, and the gold rush mentality set it." Before long, engineers were stringing glass around the globe--a "new economy" version of the race to build railroads across America in the 19th century. Global Crossing and other companies tunneled under streets, carved trenches and sent ships across the oceans, laying hundreds of thousands of miles of fiber-optic cable. Many of the network builders were so sure of the growth to come that they packed the cables with extra fibers that were left inactive--"dark," in industry vernacular--for future use. But all the while, technology was advancing in a way that would delay the need for those extra fibers--and, paradoxically, lure more competitors into the fray. Fiber-optic networks use lasers to transmit light in split-second flashes. Think of them as tiny, high-speed versions of the blinking semaphore signals that ships use to communicate at sea.

    114. Equipment makers improved that technology in two ways: by speeding up the flashes of light and by using different colors to send multiple signals at the same time over a single fiber. These innovations greatly expanded the capacity of fiber-optic networks. Statistics illustrate the magnitude of the change. In 1994, the entire global communications network could transmit about 1 trillion pieces of data a second, said economist, author and technology pundit George Gilder. Today, a single fiber strand has more than 1 1/2 times that capacity if it uses the best optical equipment on the market. In the U.S., 10 of the largest networks had a total of about 40 such fiber strands in service in 2000, according to a study by Probe Research, based in Cedar Knolls, N.J. The networks also had 570 dark fibers waiting in reserve. And since then, two emerging national data networks, Touch America Inc. and Velocita Corp., have added more than 100 fibers to the total. The increase in bandwidth is even more dramatic between the U.S. and the rest of the world. For example, the capacity of networks linking the United States and Europe has multiplied nearly 80 times since 1997, said Richard Elliott, co-founder of the Band-X technology research group in London. By the end of 2002, capacity is expected to nearly double again--and that's just counting the fibers that are in service, not those left dark to accommodate hoped-for growth. Marketing to Businesses A catalyst in this explosion of capacity was Global Crossing. Unlike AT&T and other established long-distance companies, Global Crossing showed little interest in consumers' phone calls. Instead, company executives wanted to sell bandwidth wholesale to other long-distance companies and corporations, which would use it for their own communications needs.

    115. Global Crossing's founder was financier Gary Winnick, a onetime furniture salesman and investment banker who worked alongside junk-bond king Michael Milken in Beverly Hills. Trumpeting the opportunities presented by telecommunications deregulation and fiber optics, Winnick raised $750 million in 70 days in 1997 for the first leg of his network: an 8,700-mile cable from the United States to Britain, Germany and the Netherlands. No single company had ever built an undersea cable with private investors' money before. But when Global Crossing quickly found buyers for all that new capacity, "any doubts about the need were quieted," said Elliott of Band-X. Winnick soon had plenty of company on the fund-raising circuit. A host of other entrepreneurs dazzled investors with charts showing the skyrocketing growth of the Internet and the plummeting cost of doing business. For example, James Q. Crowe, chief executive of Colorado-based Level 3, boasted that his company's state-of-the-art fiber network would undercut its older rivals' prices by 15% to 20%. Crowe raised a reported $6.5 billion before Level 3 had activated its first strand of fiber. "There were a lot of companies sort of going at this in parallel," said Dave Passmore, research director at Burton Group, a network analysis firm. "They all got in when they viewed this as an unexploited market." Ron Kline, an analyst for the telecommunications research firm RHK Inc. in South San Francisco, said it wasn't necessarily wrong for a new carrier to think it could win the battle for customers. "The problem was there were too many people thinking about it." The greatest advantage went to the carrier with the newest technology and highest capacity. It spent less to push data through its network than its competitors did, which meant it could charge lower prices. So companies kept building networks even as the supply of bandwidth grew well beyond demand. And as technology kept improving, the upstarts soon had to compete with newer, more advanced players. No network could hold on to its advantage for long.

    116. "In some bizarre movie about the telecom industry, you would have guys from the carriers going out and killing guys in the labs to prevent them from coming up with new technologies," said Ron Banaszek of TFS Telecom, a Swiss consulting and investment firm for communications and energy companies. Today, about 16 advanced transcontinental fiber networks are competing in the U.S. long-distance business, said Larry Roberts of Caspian Networks in San Jose, which supplies communications equipment. That's three times as many as there were two years ago. The increase in capacity and competition drove prices to the floor. Wholesalers such as Global Crossing typically sell companies a certain amount of capacity from one city to the next--for example, enough to transmit 155 million pieces of data a second from New York to London. A bank with offices in those two cities might use that capacity to connect its computers. In 1997, that capacity cost about $14 million upfront, plus annual fees of $250,000 to $380,000, said Elliott of Band-X. Today, the same bandwidth could be bought for $350,000 upfront and $15,000 a year. Industry Forecasts Were Too High So what happened to the burgeoning demand that was supposed to be the industry's lifeblood? The extreme growth rates in Internet traffic seen in 1995 and 1996 were just a blip, reflecting the advent of Web browsers, said Andrew Odlyzko, director of the Digital Technology Center at the University of Minnesota. Since then, he said, the amount of data flowing over the Net has reverted to its previous rate of increase, roughly doubling every year. That's a lot of bits to move--but not nearly enough to fill the networks built during the boom.

    117. One reason demand failed to mushroom as expected was the shortage of bandwidth in local fiber-optic networks. Before consumers start downloading symphonies or watching pay-per-view events online, they need a high-speed connection to the Internet. But in the U.S., fewer than 10% of all homes have one. There may be a data fire hose running from coast to coast, but the typical consumer is still connecting through a straw. Many consumers are unwilling to pay the extra cost of a high-speed line because, in their view, the Internet is not compelling or important enough to justify it. The entertainment companies that could make the Net more appealing to consumers, including most movie studios and TV networks, are staying on the sidelines until more homes have high-speed connections. Some analysts and equipment makers argue that demand is growing faster than the prevailing estimates indicate, increasing 2 1/2 to three times a year on the main U.S. Internet pipelines. They argue that networks are getting so jammed in some areas that long-distance companies will be ordering more within a few months to a year. But even those growth estimates fall well short of the giddy projections of a few years ago. And the situation may get worse before it gets better, if Bankruptcy Court allows Global Crossing and other insolvent carriers to write off their debt and stay in service. "That will launch a whole 'nother round of price wars that will cause pain for everybody in the industry," said Russ McGuire, chief strategy officer for telecommunications consultant TeleChoice Inc. "It will get worse for everyone, and in the end, Global Crossing will still go away."

    118. Sample Exam Problem Part One. 1. Using short and long run supply curves and market demand curves depict the effect of the anticipated change in demand. 2. If they act passively, i.e. do not try to anticipate the future, graphically show the short run adjustments firms will make on the iso-cost/iso-output graph if demand changed as anticipated. 3. Using unit cost curves, show the situation of fiber cable companies, if demand changed as anticipated. Part Two. Suppose, as described in the article, firms anticipated a change in future demand, planned ahead, and demand changed as expected. 1. On the iso-cost/iso-output graph show the firm increasing output in response to the anticipated increase in demand if the firm planned ahead. 2. What effect would correctly anticipating the future have on the unit costs of production and the profitability of the firms if demand had changed as anticipated? Show on the firm’s unit cost graph. Part Three. 1. Depict using short and long run demand curves and iso-cost and iso-output curves what actually happened. 2. Show the effect of incorrectly anticipating the future on unit costs and profits.

    119. The Fiber Optic Transmission Market

    120. Unit Costs With/Without Planning Shelves and cubicles-Work Environment and Management Control Techniques-Group vs. Superior Pressure.Shelves and cubicles-Work Environment and Management Control Techniques-Group vs. Superior Pressure.

    121. The Fiber Optic Transmission Market

    122. Unit Costs With/Without Planning Shelves and cubicles-Work Environment and Management Control Techniques-Group vs. Superior Pressure.Shelves and cubicles-Work Environment and Management Control Techniques-Group vs. Superior Pressure.

    123. Second Exam. Second Exam. Cover Chapters 5 and 6. Thursday, Nov. 17th The exam will be based on the following articles: How Porsche Revived Itself (1996) Putting Porsche in the Pink (1996) Porsche's Big Bet: First New Model in Years (1997) A Boxster Built Anywhere is Still a Boxster (1997) Porsche Doubles Finnish Output of Popular Boxster (1998)

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