Free Entry and Exit

Definitions  Long Run -a situation where a producer is able to vary all the factors of production.  Free Entry and Exit - a condition that firms can enter and leave the market freely without and restrictions.

Discussion  If you were a farmer, and you could grow anything in your farm, what would you like to grow for sale?  What factors determine your profit from growing and selling a crop?

Game Rules  You will be a farmer now.  Decide what to plant.

Game Rules  You have four choices of crops you can grow for sale. 1.Corn 2.Wheat 3.Rice 4.Soybeans

Production Cost  Different production costs for crops. $8 per unit of corn $9 per unit of wheat $10 per unit of rice $11 per unit of soybeans

Game Rules  The four corners of the classroom are the four markets.  Mark your choice by physically going to the market of the crop you wish to plant later.

Game Rules  The amount of the crop you supply is always 1 unit. i.e. quantity supplied of each crops = the number of farmers in the market.  You have 30 seconds to so.

Profit Calculation  After knowing the price of the crop you planted and sold, you can now calculate your own profit:  For Corn’s Profit = P C – 8  For Wheat’s Profit = P W – 9  For Rice’s Profit = P R – 10  For Soybeans’ Profit = P S - 11

Farmer Profit Chart RoundMarket Name*Price of CropProfit

Discussion  How did you make your decision on the selection of crop you want to grow and sell initially?  After several rounds of the game, how did you make the decision?  What factors did you consider?  What factors did affect your profits?

Discussion  In the first rounds of the game, how many people got positive profits? How many got negative profits?  Why did your profits move towards zero as you continued to make your production decision?

Discussion  What are the basic conditions to have such long-run equilibrium ?