|INSTRUCTOR DISCUSSION NOTES:
The Computer Age Doesn't Eliminate Paper, It Just Shrinks the Size of Paper Companies
1. Give some examples of long-run cost reduction offered in the article summary. Draw a graph of long-run average costs to illustrate what is happening in the article.
Sale of forests, elimination of whole divisions of the paper company. Firms are moving backward along the long-run average cost curve.
2. Draw a graph of supply and demand to illustrate what is happening in the article. Be sure to include all of the curve shifts outlined in the summary. What is the ultimate change on price?
Demand for paper has fallen. Mill closures reduce supply of paper. Cheap imports increase supply of paper. Increased demand for newspapers in developing countries increase demand for paper. Ultimate change to price is indeterminate, without knowing more about the impacts from demand/supply changes.
3. Is this an example of a paper company's attempt to achieve economies of scale? Why or why not?
No. Because the companies are reducing scale, this could be an attempt to eliminate diseconomies of scale; i.e., trying to achieve minimum efficient scale.
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