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Directions: You will write a 3-4-page essay (900-1200 words) that evaluates the quote below.  The paper should be written in APA format (abstract is not required).  Purdue Owl (owl.purdue.edu) is a good resource to use to properly format your essay. You must use two outside resources other than the textbook and notes. Quotations should be used sparingly if at all.  Peer reviewed journal articles are preferred, but reputable news sources are also acceptable (Wall Street Journal, The Economist, New York Times etc.)

“The primary social responsibility a firm has in a well-regulated and competitive economy is to use its resources efficiently and maximize its profits”

The quote above is an argument many economists when advising policy makers.  In each part below, use the concepts you learned in this course that explain why many economists make this claim. You will conclude with your own opinion regarding the statement. It is okay to disagree with the statement, but it is important to understand the other side of the argument if you disagree.

Part 1: Explain how prices efficiently allocate resources an promote efficient production in a market.

• Begin Part 1 with identifying and describing the firm, the good/service, and the industry. This will be the example you will reference throughout the essay.

• Include the following concepts as part of your explanation:
  • • Determinants of supply/demand that have caused price changes of the good or service
    • How the price changes act as signals to producers.
    • At least two relevant elasticities to consider

Part 2: Explain how competition supports efficient use of resources.

• Begin Part 2 with an explanation of how profitable the firm has been over the past 3 years. (Yahoo Finance and other financial websites have this data)
• Include relevant graphs, tables, or economic models.
• Include the following concepts as part of your explanation:
  • Major variable, fixed, implicit, explicit costs
  • How the firm maximizes profits.
  • How long run economic profits keep prices relatively stable over time (inflation adjusted)
  • Benefits to shareholders

Part 3: Explain how regulation of markets can promote societal well being more than a fully socialized economic system.

• Begin Part 3 with a discussion of the level of competition there is in the market, if the good is considered private, public, quasi-public, or a common resource. Any externalities associated with its production or consumption.
• Include relevant graphs, tables, or economic models
• Include the following concepts as part of your explanation and graphical analysis:
  • Four firm concentration ratios and/or HHI
  • Anti-trust legislation and enforcement (Federal Trade Commission and Department of Justice)
  • Price discrimination
  • Labor issues
  • Price controls, Pigouvian taxes/subsidies

Summary and Conclusions: Do you personally agree or disagree with the quote?

• There is no right or wrong answer. Use your own values, the concepts that you learned in this course and from writing this essay to justify your opinion.

Submission: You must submit using a Word Document or PDF.  It is scanned using Turnitin for plagiarism and reports a commonality score.  Commonality scores should be no greater than 5%.