Summary 317The following readings discuss Internet and e-commerce competition:
Borenstein, S., and G. Saloner. “Economics and Electronic Commerce.” Journal of Economic Per-
spectives(Winter 2001): 3–12.
Brynjolfsson, E., Y. Hu, and M. D. Smith. “From Niches to Riches: Anatomy of the Long Tail.” Sloan
Management Review(Summer 2006): 67–71.
Levin, J. D. “The Economics of Internet Markets.” National Bureau of Economic Research, Working
Paper 16852, March 2011.
The following volume assesses the effects of airline deregulation in promoting competition and lowering prices.
It also estimates the increase in consumer surplus resulting from airline deregulation.
Morrison, S. A., and C. Winston. The Evolution of the Airline Industry.Washington, DC: Brookings
Press, 1995.
More on the debate about diminishing resources can be found at
Kedrosky, P. “Re-litigating the Simon/Ehrlich Bet.” Infectious Greed Blog (February 18, 2010),
available online at paul.kedrosky.com/archives/2010/02/.
The following provide readable treatments of competitiveness, free trade, and protectionism.
Baldwin, R. E. “Are Economists’ Traditional Trade Policy Views Still Valid?” Journal of Economic Lit-
erature(June 1992): 804–829.
Bhagwati, J. “Free Trade: Old and New Challenges.” The Economic Journal104 (March 1994):
231–246.
“Research on Free Trade.” The American Economic Review83, Papers and Proceedings (May 1993):
362–376.
Bhagwati, J. In Defense of Globalization.Oxford, UK: Oxford University Press, 2004.
Samuelson, P. A. “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Econo-
mists Supporting Globalization.” Journal of Economic Perspectives18 (Summer 2004): 135–146.
“A Special Report on the World Economy.” The Economist(October 9, 2010).
“A Special Report on Globalization.” The Economist(September 20, 2008).
The best Internet sources for analyzing free trade are the writings of Professor Jagdish Bhagwati of Columbia
University: http://www.columbia.edu/~jb38/.CHECK STATION
ANSWERS- Equating QD 15 10P and QS 3 14P implies 18 24P, or P
18/24 $.75 per pound. Given the drop in demand, we equate 12 8P
3 14P, implying the new price P $.68. Although demand has fallen
20 percent, price has declined by just some 10 percent. - Setting P MC implies P 2QF4, or QF(P 4)/2. With 40 firms,
the supply curve is QS40(P 4)/2 20P 80. - To find the point of minimum average cost, we set AC MC. This
implies 25/Q Q 4 2Q 4, or 25/Q Q. After multiplying both
sides by Q, we have Q^2 25 or Qmin5. Thus, each firm will produce
5 thousand units. In turn, ACmin6. Thus, the long-run price is also
P $6. At this price, QD 320 (20)(6) 200 thousand units. The
requisite number of firms to supply this demand is 200/5 40. (This
exactly matches the number of current firms.) - From Check Station 2, the short-run supply curve is QS20P 80.
Setting QDequal to QSimplies 400 20P 20P 80. Therefore,
we have P $8. In turn, QF(8 4)/2 6 thousand units and
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