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SHUTDOWN RULE, MONOPOLY: The marginal revenue and marginal cost approach to analyzing a monopoly firm's short-run production decision can be used to identify circumstances in which a firm minimizes losses by shutting down production in the short run. If the market price falls below average total cost, it must decide if the economic loss from producing the quantity of output that equates marginal revenue and marginal cost is more or less than the economic loss incurred with shutting down production in the short run (which is equal to total fixed cost).

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Lesson Contents
Unit 1: Instability
  • Overview
  • Business Cycles
  • Expansionary Good Times
  • Contractionary Bad Times
  • Unit 1 Summary
  • Unit 2: A Simple Cycle
  • Long-Run Trend
  • Contraction
  • Trough
  • Expansion
  • Peak
  • Unit 2 Summary
  • Unit 3: Measurement
  • Indicators
  • Leading
  • Coincident
  • Lagging
  • Unit 3 Summary
  • Unit 4: Causes
  • Complexity
  • Investment
  • The Process
  • Politics
  • The Process
  • Unit 4 Summary
  • Unit 5: Policies
  • Options
  • Expansionary
  • Contractionary
  • Unit 5 Summary
  • Course Home
    Business Cycles

    To purpose of this lesson is to examine the nature and causes of macroeconomic instability, which goes by the handy title business cycles. Business cycles are the recurring expansions and contractions of economic activity that generate the problems of unemployment and inflation. This lesson explores how business cycles can be stabilized with the goal of lessening unemployment and inflation.

    • The notion of business cycles is introduced in the first unit of this lesson, with an eye on what they are and why they are important to study.
    • The four components of a standard, simple business cycle -- expansion, peak, contraction, and trough -- are then presented and discussed in the second unit.
    • The third unit is devoted to several key measures of business cycle activity, especially leading, lagging, and coincident indicators.
    • A couple of the most often discussed causes of business-cycle instability -- investment and politics -- are discussed in the fourth unit.
    • The fifth unit closes out this lesson with an introduction to the expansionary and contractionary economic policies used to stabilize business cycles.

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    DISMAL SCIENCE

    A term for the study of economics developed during the late 18th and early 19th century when economists concluded that continued population growth would push wages and living standards to a minimal subsistence level and keep them there. It persists to the present time because economics continue to point out that actions result in opportunity cost, that nothing is free, and that eventually society has to pay the price for what it does.

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    APLS

    WHITE GULLIBON
    [What's This?]

    Today, you are likely to spend a great deal of time at a garage sale trying to buy either a coffee cup commemorating the 2000 Olympics or a birthday gift for your grandmother. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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    The wealthy industrialist, Andrew Carnegie, was once removed from a London tram because he lacked the money needed for the fare.
    "It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult. "

    -- Seneca, statesman, dramatist, philosopher

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