Russ Roberts spins a tale of a local bread market and wonders about the power of such a market. He hypothesizes the trouble that could occur if one person were given supreme power and became a bread czar. You can read the poem online as well, with commentary!
A CIA agent creates a fake Hollywood production in order to fool Iranian terrorists into releasing a group of U.S. diplomats based on the 1979 Tehran hostage crisis. In this scene, Tony (Ben Affleck) presents the concept of Argo. The CIA will eventually grant the proposal, but they want to know if there are any other bad ideas that could be better.
The concept of “the best bad idea” helps explain why some firms may operate in the short-run despite suffering a loss. While firms would love to earn a positive profit, there are a few loss situations available as well:
- (WORST) Firms can produce below AVC and lose both their fixed costs and some of their variable costs
- (BAD) Firms can shut down when prices are below AVC and lose their fixed costs
- (BEST OF THE BAD) Firms can produce as long as prices are above AVC and lose a little bit of money
Some students always want to divert to shutting down if firms face losses, but there’s a “better bad idea” as long as prices are above average variable costs.
Thanks to Darren Grant for the clip suggestion!
Darren also has a new book out entitled Methods of Economic Research!
This Wendy’s commercial picks fun at Soviet economics that were notorious for limiting options available to consumers in the name of efficiency, but monopolistic competition in a capital market thrives on product differentiation and the ability to cater to people’s preferences.
Thanks to Rob Szarka for the find!
Superior products can provide companies with a short term barrier to entry in a market, but they aren’t usually long lasting. Beyond technological superiority, some companies may have service or quality superiority, as is the case with the Soup Nazi in Seinfeld. Offering a superior product allows the owner to treat customers rudely, offer high prices, and restrict output as he desires.
This clip is available thanks to Economics of Seinfeld.
In this Stossel segment, we learn about the history of the De Beers diamond corporation and their control of the diamond market. Stossel interviews guests and asks them to identify diamonds from knock-off rings, but most can’t tell the difference despite claiming to be capable.
One of the textbook examples of monopoly power comes from De Beers Diamond Corporation and their control over the diamond markets since the end of the Great Depression. In this short scene, Adam Conover covers the history on engagement rings and discusses the monopoly power that the De Beers company had in the market.
Adam Ruins Everything is a half-hour informational comedy were host, Adam Conover, debunks popular myths. Each episode is divided into 3 segments with some common theme. In the Spring of 2018, James Tierney and I sat down to go through all three seasons of Adam Ruins Everything to pick out examples in each episode that could be used in an economics course. If you’re curious about the paper, you can read about it here.
In monopolistically competitive markets, sellers offer differentiated products, and this Hawaiian food truck is no different. While some people believe that food trucks should only offer a small range of menus, the chef argues that in order to stand out in such a competitive market that he has to offer variety. Introducing new substitutes will decrease the demand for others and eventually lead to zero economic profit.
Thanks to Hannah Canil for the clip suggestion!
@Wootenomics check out the very beginning of Hawaii 5-0 season 2 ep. 4 after the theme song. Yay Econ.
— Hannah Canil (@hannnnah22) January 14, 2017
If you haven’t driven by YUM!’s combination stores, they are a site to see. A family of picky eaters can stop by a location and grab a combination (depending on the pairings) of pizza, tacos, fried chicken, fish, or burgers. The combination of stores varies depending on the area, and some even have three-in-one:
This song (and accompanying picture) can serves a great introduction to the concepts of product differentiation and economies of scope. The YUM! brands have a large presence in major categories in the fast food market:
4. KFC — 20,404 locations
7. Pizza Hutt — 13,728
11. Taco Bell — 6,500
Thanks to Rob Szarka for the recommendation.
This CBS clip details ways families can avoid being subjected to price discrimination tactics by firm. CBS affiliates across the country started searching for different items around the country to see how varied the prices were. While customers may prefer to pay the same price (an argument for equity), firms can actually improve efficiency by practicing price discrimination.