Week 10 Discussion — Good News or Hard News? When Competition Drives Profit to Zero — Traditional alternative (no AI)

Instructors: publish this instead of the adaptive version if you prefer, and unpublish or delete the adaptive one.

Hook

New workshops open whenever chairs earn a profit, and they keep opening until the price falls to the lowest average total cost and no one earns more than a normal return. Buyers pay less, and owners stop earning anything extra; this week you can argue about whether that is the market working well or a hard deal for the people who run small businesses.

Your discussion question — choose Option A or Option B; they carry the same weight and the same rubric, and you say which you picked.

Option A: In the course's illustrative chair market, workshops earn an economic profit of 20 dollars a day at a price of 40 dollars a chair. New workshops enter, market supply shifts right, and the price falls until it reaches 36 dollars, the lowest average total cost, where each workshop earns zero economic profit. One view holds that this is good news: buyers pay less, each chair is made at the lowest possible cost per chair, and owners still earn exactly what their time and money could earn elsewhere. Another view holds that it is hard news for owners: every good stretch draws rivals that erase the gain, a bad stretch brings losses and closings, and the people behind those workshops carry that risk. If a new workshop opened next to an existing one in your town, should the community welcome it, and why? Keep your positive claims (what the model predicts) apart from your normative ones (what ought to happen).

Option B: Choose a business you or your community know that stayed open through a slow stretch, such as a restaurant on quiet weeknights, a beach shop in the off-season, or a market stall in bad weather, or one that closed for a while and reopened. Describe in words which of its costs it paid even when closed and which it avoided by closing. Then argue whether staying open, or closing, was the right call for that owner, and whether the shutdown rule captures everything that mattered, such as keeping staff or regular customers. Label which parts of your answer are positive claims and which are normative judgments, and say what fact would change your mind. Do not invent dollar figures or statistics; describe what you know firsthand.

There is no single right answer. Reasonable people weigh lower prices for buyers against risk and security for owners in different ways. Pick the one you actually care about, and tell us your reasoning.

Expectations

Activity format: one initial post followed by two substantive peer replies. Plan on about 45 minutes across the two deadlines; your instructor sets both due dates in Canvas.

Your initial post — by the first due date (early in the module week):

• Say which option you chose.
• For Option A, say whether a community should welcome a new workshop, using the chair market's numbers (an economic profit of 20 dollars a day at 40 dollars, and zero economic profit once entry pushes the price to 36 dollars); for Option B, name the business and describe in words the costs it paid even when closed and the costs it avoided by closing.
• Give the strongest version of the view you disagree with in one or two sentences, and say why you still hold your position or what part of the other view you accept.
• Use at least two of this week's terms (price taker, shutdown rule, entry and exit, zero economic profit) correctly.
• Label at least one of your claims as positive (what the model predicts) and at least one as normative (what ought to happen).
• Length: roughly 150–250 words if written. You may instead record your post as audio or video (about two minutes) and attach a transcript; both forms are scored by the same rubric.

Your replies — by the second due date (the end of the module week):

• Reply substantively to at least two classmates.
• A substantive reply does more than agree: point out where a post reads zero economic profit as earning nothing, check whether a shutdown argument compared the price with average variable cost rather than average total cost, or argue the other side of the question at its strongest. "Nice point!" on its own does not count.

What a strong post looks like:

I chose Option A. The positive part: in the model, a new workshop adds to market supply, so the price falls from 40 dollars toward 36, and each workshop ends up with zero economic profit, which is still a normal return on the owner's time. The normative part: I think the town should welcome it, because every buyer pays less and no owner is earning less than an ordinary job would pay. The strongest objection is that the existing owner carries the risk of the next bad stretch. I accept that, so I would want to know whether owners can move into other work easily before I called the outcome fair.

Notice how it names the curve that shifts and the direction of the price, reads zero economic profit correctly, labels the positive and the normative parts, and gives the other side its strongest form. Someone who argued for caution as carefully would meet the same bar.

Participation rubric

This discussion is worth 10 points. The three criteria below look at your initial post and your peer replies.

Post early if you can — the best threads happen when people have time to reply before the second due date.

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