Agenda:Monday, 4/16• Test Review:

– Graph the MI minimum wage • Natural monopoly & Economy of Scale • Test Review: Graph practice, terms/ concepts…

Minimum Wage

Costs– Less workers employed– Business expenses rise– Less hours for workers– Workers advance

slower– Harder to get a job– Shortage of jobs– Greater unemployment– Inflation of prices

Benefits

•Higher wage for employed unskilled, entry-level workers

Purpose of raising minimum wage: Raise the standard of living of the poor. Did it work? Who actually benefits?

Monopoly & Economy of Scale

Unrestricted monopoly is bad for consumers & competition!

Allowed when best for consumers— Natural Monopoly (then a Gov. Monopoly)

When is a monopoly good?

Economies of scale—p. 157 review

–This determines the market structure of an industry! Diminishing Returns—apply?

–http://apecon.us/naturalmonopoly.gif

Economy of scale & Natural Monopoly

• Economy of scale operates differently than a normal business—more output =more efficiency opposite of helicopter simulation

• EOS examples: Power plant, land line phones, cable TV…

• Therefore, governments sometimes step in and allow natural monopolies to develop for economies of scale then regulate

Output (law of dim returns)

Cost

Normal business (No EOS)

Cost

Output (DMR not applicable)

Economy of scale

Market: Diamonds

• Factor # 1: new technology emerges to make diamond mining more efficient

• Factor # 2: popular documentary shows the enslavement of diamond miners

1.Construct a market graph and draw the appropriate shifts in Supply & Demand

2.Explain what happens to price & quantity?

Market: hamburgers

• Factor # 1: Price of corn used for feed drops• Factor # 2: Reputable new study shows beef is

now healthy for you—refuting earlier studies

1. Construct a market graph and draw the appropriate shifts in Supply & Demand

2. Explain what happens to price & quantity?