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microeconomic theory

Please answer the following three questions from the perspective of basic microeconomic theory as applied to the world of buying and selling goods and services. Keep in mind that business are both sellers of goods and services and buyers of goods and services such as labor services and goods and services supplied by other business firms. Also remember that successful firms know how to satisfy those to whom they sell and know how to manage their own costs of production. Firms which fail in these activities do not survive for very long.
1. Chapter 3 of your textbook discusses Principles of Rational Behavior. In Part II of that chapter the issue of â??opportunistic behaviorâ? is raised, specifically an issue described as â??The Last Period Problem.â? In Part II of Chapter 5 the issue of honesty in business is addressed. Here is your assignment: Starting with the so-called Last Period problem, analyze honesty in business with special attention to incentives, transparency, and rewards and punishments.
2. In the beginning of Chapter 9, which deals with costs in the short run and long run, I want you to discuss the issue of costs---what they are and the purpose they serve in allocating resources from the perspective of the company and the entire economy. Also, discuss costs in the short run (make certain you understand the difference between short run and long run in production) and the long run. What lesson having to do with the size and structure of a firm can enter the picture in the matter of costs in the â??long run?â?
3. Part II of Chapter 4 deals with the practical applications of the various issues in what is called â??The Logic of Group Behavior.â? One practical application addresses â??the value of tough bosses.â? In the full context of basic microeconomic theory (also known as the â??theory of the firmâ?) discuss in depth the argument about the â??value of tough bosses,â? specifically about the issues which deal with possible worker behavior in large groups such as a business firm, and the various kinds of effects of worker behavior on the goals of the firm.

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The Book that we are using to find the answer is Microeconomics for MBAs the Economic Way of thinking for Managers by Richard B. McKenziie and Dwight R. Lee

Please answer the following three questions from the perspective of basic microeconomic theory as applied to the world of buying and selling goods and services. Keep in mind that business are both sellers of goods and services and buyers of goods and services such as labor services and goods and services supplied by other business firms. Also remember that successful firms know how to satisfy those to whom they sell and know how to manage their own costs of production. Firms which fail in these activities do not survive for very long.
1. Chapter 3 of your textbook discusses Principles of Rational Behavior. In Part II of that chapter the issue of â??opportunistic behaviorâ? is raised, specifically an issue described as â??The Last Period Problem.â? In Part II of Chapter 5 the issue of honesty in business is addressed. Here is your assignment: Starting with the so-called Last Period problem, analyze honesty in business with special attention to incentives, transparency, and rewards and punishments.
The last period problem is one of opportunistic behavior. In a contract if there is well defined last period there is a high chance of cheating. The reason is that during the last period there is hardly any penalty for cheating. Empirically cheating has been seen more likely in the last period than at any other time in the relationship. During the commencement of a contract there is little incentive to cheat, the contracting parties do not want to break the contract because the punishments are high for breaking the contract. For instance, if the contract is broken at the beginning the other party will refrain from carrying out their side of the contract and the punishment will be high. On the other hand complying with the terms of the contract has high rewards. Further, during the beginning of the contract the level of transparency is likely to be high
From the perspective of buying and selling if there is a clause in the buyer seller relationship that clearly marks the end of the relationship, the buyer or the seller are likely to cheat when they reach the end of the relationship. In the initial period of contract there is a preference among both the buyers and seller to be honest and maintain the relationship. The marginal utility of being dishonest during opportunistic periods may be high and may tempt businesses to ...

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