第22章FirmSupply中級微觀經(jīng)濟學課件

ChapterTwenty-TwoFirmSupply廠商供給ChapterTwenty-TwoFirmSupply1StructureMarketenvironmentsMarketdemandforacompetitivefirmShort-runsupplydecisionUpwardslopingMCcurveShut-downconditionLong-runsupplydecisionComparinglong-runandshort-rundecisions.Producer’ssurplusandprofitsStructureMarketenvironments2FirmSupplyHowdoesafirmdecidehowmuchproducttosupply?Thisdependsuponthefirm’stechnologymarketenvironmentgoalscompetitors’behaviorsFirmSupplyHowdoesafirmdec3MarketEnvironmentsAretheremanyotherfirms,orjustafew?Dootherfirms’decisionsaffectourfirm’spayoffs?Istradinganonymous,inamarket?Oraretradesarrangedwithseparatebuyersbymiddlemen?MarketEnvironmentsAretherem4MarketEnvironmentsMonopoly(壟斷）:Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly（寡頭壟斷）:Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.MarketEnvironmentsMonopoly(壟5MarketEnvironmentsDominantFirm:Manyfirms,butonemuchlargerthantherest.Thelargefirm’sdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.MarketEnvironmentsDominantFi6MarketEnvironmentsMonopolisticCompetition（壟斷競爭）:Manyfirmseachmakingaslightlydifferentproduct.Eachfirm’soutputlevelissmallrelativetothetotal.PureCompetition:Manyfirms,allmakingthesameproduct.Eachfirm’soutputlevelissmallrelativetothetotal.MarketEnvironmentsMonopolisti7MarketEnvironmentsLaterchaptersexaminemonopoly,oligopoly,andthedominantfirm.Thischapterexploresonlypurecompetition.MarketEnvironmentsLaterchapt8PureCompetitionAfirminaperfectlycompetitivemarketknowsithasnoinfluenceoverthemarketpriceforitsproduct.Thefirmisamarket

price-taker.Thefirmisfreetovaryitsownprice.PureCompetitionAfirminape9PureCompetitionIfthefirmsetsitsownpriceabovethemarketpricethenthequantitydemandedfromthefirmiszero.Ifthefirmsetsitsownpricebelowthemarketpricethenthequantitydemandedfromthefirmistheentiremarketquantity-demanded.PureCompetitionIfthefirmse10PureCompetitionSowhatisthedemandcurvefacedbytheindividualfirm?PureCompetitionSowhatisthe11PureCompetitionY$/outputunitMarketSupplyMarketDemandpePureCompetitionY$/outputunit12PureCompetitiony$/outputunitMarketSupplypep’Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit13PureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit14PureCompetitionSothedemandcurvefacedbytheindividualfirmis...PureCompetitionSothedemand15PureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit16PureCompetitionY$/outputunitpep’p”MarketDemandPureCompetitionY$/outputunit17SmallnessWhatdoesitmeantosaythatanindividualfirmis“smallrelativetotheindustry”?Theindividualfirm’stechnologycausesit

alwaystosupplyonlyasmallpartofthetotalquantitydemandedatthemarketprice.SmallnessWhatdoesitmeanto18TheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?TheFirm’sShort-RunSupplyDe19TheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?A:BysolvingTheFirm’sShort-RunSupplyDe20TheFirm’sShort-RunSupplyDecisionCase(a)ys*>0:P(y)yys*TheFirm’sShort-RunSupplyDe21TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*>0,thefirst-

ordermaximumprofitconditionisThatis,Soataprofitmaximumwithys*>0,the

marketpricepequalsthemarginal

costofproductionaty=ys*.TheFirm’sShort-RunSupplyDe22MR>MCMR<MCMR>MC23TheFirm’sShort-RunSupplyDecisionCase(b)ys*=0:P(y)yys*=0TheFirm’sShort-RunSupplyDe24TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*>0,thesecond-

ordermaximumprofitconditionisThatis,Soataprofitmaximumwithys*>0,the

firm’sMCcurvemustbeupward-sloping.TheFirm’sShort-RunSupplyDe25TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’MCs(y)TheFirm’sShort-RunSupplyDe26TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.MCs(y)TheFirm’sShort-RunSupplyDe27TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.Aty=y’,p=MCandMCslopesdownwards.

y=y’isprofit-minimizing.MCs(y)TheFirm’sShort-RunSupplyDe28TheFirm’sShort-RunSupplyDecision$/outputunitypey’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.

Soaprofit-max.

supplylevel

canlieonlyontheupwards

slopingpart

ofthefirm’s

MCcurve.MCs(y)ys*TheFirm’sShort-RunSupplyDe29TheFirm’sShort-RunShut-DownConditionButnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.TheFirm’sShort-RunShut-Down30Butnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.Thefirm’sprofitfunctionis

Ifthefirmchoosesy=0thenitsprofitisTheFirm’sShort-RunShut-DownCondition

Butnoteverypointontheupw31Sothefirmwillchooseanoutputlevely>0onlyifTheFirm’sShort-RunShut-DownConditionSothefirmwillchooseanout32Sothefirmwillchooseanoutputlevely>0onlyif

I.e.,onlyif

Equivalently,onlyifTheFirm’sShort-RunShut-DownConditionSothefirmwillchooseanout33AVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun34AVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun35AVCs(y)ACs(y)MCs(y)$/outputunityp>AVCs(y)TheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun36AVCs(y)ACs(y)MCs(y)p>AVCs(y)ys*>0.$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)p>AVCs(y)37TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)p<AVCs(y)ys*=0.$/outputunityp>AVCs(y)ys*>0.TheFirm’sShort-RunSupplyDe38TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)p<AVCs(y)ys*=0.Thefirm’sshort-run

supplycurve$/outputunityp>AVCs(y)ys*>0.TheFirm’sShort-RunSupplyDe39TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)Thefirm’sshort-run

supplycurveShutdown

point$/outputunityTheFirm’sShort-RunSupplyDe40TheFirm’sShort-RunSupplyDecisionShut-downisnotthesameasexit.Shutting-downmeansproducingnooutput(butthefirmisstillintheindustryandsuffersitsfixedcost).Exitingmeansleavingtheindustry,whichthefirmcandoonlyinthelong-run.TheFirm’sShort-RunSupplyDe41TheFirm’sLong-RunSupplyDecisionThelong-runisthecircumstanceinwhichthefirmcanchooseamongstallofitsshort-runcircumstances.Howdoesthefirm’slong-runsupplydecisioncomparetoitsshort-runsupplydecisions?TheFirm’sLong-RunSupplyDec42TheFirm’sLong-RunSupplyDecisionAcompetitivefirm’slong-runprofitfunctionis

Thelong-runcost

c(y)ofproducingyunitsofoutputconsistsonlyofvariablecostssinceallinputsarevariableinthelong-run.TheFirm’sLong-RunSupplyDec43TheFirm’sLong-RunSupplyDecisionThefirm’slong-runsupplyleveldecisionisto

The1stand2nd-ordermaximizationconditionsare,fory*>0,TheFirm’sLong-RunSupplyDec44TheFirm’sLong-RunSupplyDecisionAdditionally,thefirm’seconomicprofitlevelmustnotbenegativesincethenthefirmwouldexittheindustry.So,TheFirm’sLong-RunSupplyDec45TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitTheFirm’sLong-RunSupplyDec46TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitp>AC(y)TheFirm’sLong-RunSupplyDec47TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitp>AC(y)TheFirm’sLong-RunSupplyDec48TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitThefirm’slong-run

supplycurveTheFirm’sLong-RunSupplyDec49Y$/outputunitLMC=long-runsupplyCminLong-RunConstantAverageCostsY$/outputunitLMC=long-runsup50TheFirm’sLong-RunSupplyDecisionHowisthefirm’slong-runsupplycurverelatedtoallofitsshort-runsupplycurves?TheFirm’sLong-RunSupplyDec51TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)TheFirm’sLong&Short-RunSu52TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*ys*isprofit-maximizinginthisshort-run.TheFirm’sLong&Short-RunSu53TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*ys*isprofit-maximizinginthisshort-run.PsTheFirm’sLong&Short-RunSu54TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*Thefirmcanincreaseprofitbyincreasing

x2andproducingy*outputunits.PsPTheFirm’sLong&Short-RunSu55TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*ys*isloss-minimizinginthisshort-run.TheFirm’sLong&Short-RunSu56TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*ys*isloss-minimizinginthisshort-run.LossTheFirm’sLong&Short-RunSu57TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*Thislosscanbeeliminatedinthelong-

runbythefirmexitingtheindustry.LossTheFirm’sLong&Short-RunSu58TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitTheFirm’sLong&Short-RunSu59TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.TheFirm’sLong&Short-RunSu60TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.PsTheFirm’sLong&Short-RunSu61TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.

y*isprofit-maximizinginthelong-run.y*TheFirm’sLong&Short-RunSu62TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.

y*isprofit-maximizinginthelong-run.y*PTheFirm’sLong&Short-RunSu63TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*y*PsPThefirmcanincreaseprofitbyreducing

x2andproducingy*unitsofoutput.TheFirm’sLong&Short-RunSu64TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitTheFirm’sLong&Short-RunSu65TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitTheFirm’sLong&Short-RunSu66TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitTheFirm’sLong&Short-RunSu67TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitShort-runsupplycurvesLong-runsupplycurveTheFirm’sLong&Short-RunSu68LongRunandShortRunSupplyThelong-runsupplycurveismoreelasticthantheshort-runsupplycurve.Becausethefirmhasmoreleewayinadjustingsupplyinthelong-runthanintheshortrun.LongRunandShortRunSupplyT69附加之言：自由市場還是凱恩斯主義？

——被遺忘的奧地利學派斯密：“自然的自由體系”1933.錢伯林《壟斷競爭理論》

羅賓遜《不完全競爭經(jīng)濟學》

觀點：存在壟斷政策含義：政府干預、反壟斷、反托拉斯附加之言：自由市場還是凱恩斯主義？

——被遺忘的奧地利學派斯70反托拉斯法：1890《theShermanAntirustActof1890》1936《theRobinso-PatmanActof1936》案例:IBM1969（不了了之）；Microsoft1997案（600多萬美元罰金）反托拉斯法：1890《theShermanAntirus71奧地利學派：反托拉斯法沒有必要，反生產(chǎn)力和違背自由確定一個產(chǎn)業(yè)的最佳廠商數(shù)量是不可能的（Mises,1966）。最好的模型是能夠經(jīng)得起“市場檢驗”的模型?！笆袌鰴z驗”是一個試錯的過程，在這個過程中每個行業(yè)確定自己的最佳規(guī)模，并通過競爭性利潤追求確定其價格結(jié)構(gòu)（Hayek，1978）奧地利學派：反托拉斯法沒有必要，反生產(chǎn)力和違背自由72壟斷公司在成長階段是高度創(chuàng)新的公司，并需要要大量的風險資本投資，壟斷公司也能帶來激烈的競爭，從而會有后來者居上，新崛起的壟斷公司取代老的壟斷公司（Schumpter，1950）。直到1850年，壟斷一詞一直是指美國國會授予的排他的貿(mào)易權力?？捎脡艛嗟亩x只有一個，就是政府給予的特權，解決措施也只有一個，就是政府降低壟斷，就是政府消除自己的壟斷（Rothbard，1962）政府，而不是市場，是壟斷之源。政府的授權、認證、特許、關稅和其他法定措施才能創(chuàng)造壟斷；擁有壟斷能力的特殊經(jīng)濟組織便不再參與公開競爭（Armentanono，1990）壟斷公司在成長階段是高度創(chuàng)新的公司，并需要要大量的風險資本投73不去控制經(jīng)濟中的壟斷而承受其負面效應比去控制它而承受不理想的政治要更好——貝克爾。芝加哥學派的“微觀先生”——斯蒂格勒：類似完全競爭模型（theoryofpirce,1987）不受壓制的市場類似于完全競爭。大廠商行為類似完全競爭不去控制經(jīng)濟中的壟斷而承受其負面效應比去控制它而承受不理想的74實驗經(jīng)濟學證據(jù)：當一個行業(yè)只有幾個大公司時，行業(yè)內(nèi)的競爭未必降低?！マr(nóng).史密斯實驗經(jīng)濟學證據(jù)：當一個行業(yè)只有幾個大公司時，行業(yè)內(nèi)的競爭未必75Producer’sSurplusRevisitedThefirm’sproducer’ssurplusistheaccumulation,byextraunitofoutput,ofextrarevenuelessextraproductioncost.Howisproducer’ssurplusrelatedtoprofit?Producer’sSurplusRevisitedTh76Producer’sSurplusRevisitedy$/outputunitAVCs(y)ACs(y)MCs(y)pPSy*(p)Producer’sSurplusRevisitedy$77Producer’sSurplusRevisitedSothefirm’sproducer’ssurplusisThatis,PS=Revenue-VariableCost.Producer’sSurplusRevisitedSo78Producer’sSurplusRevisitedy$/outputunitAVCs(y)ACs(y)MCs(y)py*(p)Producer’sSurplusRevisitedy$79Producer’sSurplusRevisitedy$/outputunitAVCs(y)ACs(y)MCs(y)py*(p)Revenue=py*(p)Producer’sSurplusRevisitedy$80Producer’sSurplusRevisitedy$/outputunitAVCs(y)ACs(y)MCs(y)py*(p)Revenue=py*(p)cv(y*(p))Producer’sSurplusRevisitedy$81Producer’sSurplus-1y$/outputunitAVCs(y)ACs(y)MCs(y)pPSy*(p)Producer’sSurplus-1y$/outpu82Producer’sSurplus-2y$/outputunitAVCs(y)ACs(y)MCs(y)py*(p)Producer’sSurplus-2y$/outpu83Producer’sSurplusRevisitedPS=Revenue-VariableCost.Profit=Revenue-TotalCost

=Revenue-FixedCost

-VariableCost.So,PS=Profit+FixedCost.Onlyiffixedcostiszero(thelong-run)arePSandprofitthesame.Producer’sSurplusRevisitedPS84ChapterTwenty-TwoFirmSupply廠商供給ChapterTwenty-TwoFirmSupply85StructureMarketenvironmentsMarketdemandforacompetitivefirmShort-runsupplydecisionUpwardslopingMCcurveShut-downconditionLong-runsupplydecisionComparinglong-runandshort-rundecisions.Producer’ssurplusandprofitsStructureMarketenvironments86FirmSupplyHowdoesafirmdecidehowmuchproducttosupply?Thisdependsuponthefirm’stechnologymarketenvironmentgoalscompetitors’behaviorsFirmSupplyHowdoesafirmdec87MarketEnvironmentsAretheremanyotherfirms,orjustafew?Dootherfirms’decisionsaffectourfirm’spayoffs?Istradinganonymous,inamarket?Oraretradesarrangedwithseparatebuyersbymiddlemen?MarketEnvironmentsAretherem88MarketEnvironmentsMonopoly(壟斷）:Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly（寡頭壟斷）:Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.MarketEnvironmentsMonopoly(壟89MarketEnvironmentsDominantFirm:Manyfirms,butonemuchlargerthantherest.Thelargefirm’sdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.MarketEnvironmentsDominantFi90MarketEnvironmentsMonopolisticCompetition（壟斷競爭）:Manyfirmseachmakingaslightlydifferentproduct.Eachfirm’soutputlevelissmallrelativetothetotal.PureCompetition:Manyfirms,allmakingthesameproduct.Eachfirm’soutputlevelissmallrelativetothetotal.MarketEnvironmentsMonopolisti91MarketEnvironmentsLaterchaptersexaminemonopoly,oligopoly,andthedominantfirm.Thischapterexploresonlypurecompetition.MarketEnvironmentsLaterchapt92PureCompetitionAfirminaperfectlycompetitivemarketknowsithasnoinfluenceoverthemarketpriceforitsproduct.Thefirmisamarket

price-taker.Thefirmisfreetovaryitsownprice.PureCompetitionAfirminape93PureCompetitionIfthefirmsetsitsownpriceabovethemarketpricethenthequantitydemandedfromthefirmiszero.Ifthefirmsetsitsownpricebelowthemarketpricethenthequantitydemandedfromthefirmistheentiremarketquantity-demanded.PureCompetitionIfthefirmse94PureCompetitionSowhatisthedemandcurvefacedbytheindividualfirm?PureCompetitionSowhatisthe95PureCompetitionY$/outputunitMarketSupplyMarketDemandpePureCompetitionY$/outputunit96PureCompetitiony$/outputunitMarketSupplypep’Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit97PureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit98PureCompetitionSothedemandcurvefacedbytheindividualfirmis...PureCompetitionSothedemand99PureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunit100PureCompetitionY$/outputunitpep’p”MarketDemandPureCompetitionY$/outputunit101SmallnessWhatdoesitmeantosaythatanindividualfirmis“smallrelativetotheindustry”?Theindividualfirm’stechnologycausesit

alwaystosupplyonlyasmallpartofthetotalquantitydemandedatthemarketprice.SmallnessWhatdoesitmeanto102TheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?TheFirm’sShort-RunSupplyDe103TheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?A:BysolvingTheFirm’sShort-RunSupplyDe104TheFirm’sShort-RunSupplyDecisionCase(a)ys*>0:P(y)yys*TheFirm’sShort-RunSupplyDe105TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*>0,thefirst-

ordermaximumprofitconditionisThatis,Soataprofitmaximumwithys*>0,the

marketpricepequalsthemarginal

costofproductionaty=ys*.TheFirm’sShort-RunSupplyDe106MR>MCMR<MCMR>MC107TheFirm’sShort-RunSupplyDecisionCase(b)ys*=0:P(y)yys*=0TheFirm’sShort-RunSupplyDe108TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*>0,thesecond-

ordermaximumprofitconditionisThatis,Soataprofitmaximumwithys*>0,the

firm’sMCcurvemustbeupward-sloping.TheFirm’sShort-RunSupplyDe109TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’MCs(y)TheFirm’sShort-RunSupplyDe110TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.MCs(y)TheFirm’sShort-RunSupplyDe111TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.Aty=y’,p=MCandMCslopesdownwards.

y=y’isprofit-minimizing.MCs(y)TheFirm’sShort-RunSupplyDe112TheFirm’sShort-RunSupplyDecision$/outputunitypey’Aty=ys*,p=MCandMC

slopesupwards.y=ys*is

profit-maximizing.

Soaprofit-max.

supplylevel

canlieonlyontheupwards

slopingpart

ofthefirm’s

MCcurve.MCs(y)ys*TheFirm’sShort-RunSupplyDe113TheFirm’sShort-RunShut-DownConditionButnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.TheFirm’sShort-RunShut-Down114Butnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.Thefirm’sprofitfunctionis

Ifthefirmchoosesy=0thenitsprofitisTheFirm’sShort-RunShut-DownCondition

Butnoteverypointontheupw115Sothefirmwillchooseanoutputlevely>0onlyifTheFirm’sShort-RunShut-DownConditionSothefirmwillchooseanout116Sothefirmwillchooseanoutputlevely>0onlyif

I.e.,onlyif

Equivalently,onlyifTheFirm’sShort-RunShut-DownConditionSothefirmwillchooseanout117AVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun118AVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun119AVCs(y)ACs(y)MCs(y)$/outputunityp>AVCs(y)TheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)$/outputun120AVCs(y)ACs(y)MCs(y)p>AVCs(y)ys*>0.$/outputunityTheFirm’sShort-RunShut-DownConditionAVCs(y)ACs(y)MCs(y)p>AVCs(y)121TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)p<AVCs(y)ys*=0.$/outputunityp>AVCs(y)ys*>0.TheFirm’sShort-RunSupplyDe122TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)p<AVCs(y)ys*=0.Thefirm’sshort-run

supplycurve$/outputunityp>AVCs(y)ys*>0.TheFirm’sShort-RunSupplyDe123TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)Thefirm’sshort-run

supplycurveShutdown

point$/outputunityTheFirm’sShort-RunSupplyDe124TheFirm’sShort-RunSupplyDecisionShut-downisnotthesameasexit.Shutting-downmeansproducingnooutput(butthefirmisstillintheindustryandsuffersitsfixedcost).Exitingmeansleavingtheindustry,whichthefirmcandoonlyinthelong-run.TheFirm’sShort-RunSupplyDe125TheFirm’sLong-RunSupplyDecisionThelong-runisthecircumstanceinwhichthefirmcanchooseamongstallofitsshort-runcircumstances.Howdoesthefirm’slong-runsupplydecisioncomparetoitsshort-runsupplydecisions?TheFirm’sLong-RunSupplyDec126TheFirm’sLong-RunSupplyDecisionAcompetitivefirm’slong-runprofitfunctionis

Thelong-runcost

c(y)ofproducingyunitsofoutputconsistsonlyofvariablecostssinceallinputsarevariableinthelong-run.TheFirm’sLong-RunSupplyDec127TheFirm’sLong-RunSupplyDecisionThefirm’slong-runsupplyleveldecisionisto

The1stand2nd-ordermaximizationconditionsare,fory*>0,TheFirm’sLong-RunSupplyDec128TheFirm’sLong-RunSupplyDecisionAdditionally,thefirm’seconomicprofitlevelmustnotbenegativesincethenthefirmwouldexittheindustry.So,TheFirm’sLong-RunSupplyDec129TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitTheFirm’sLong-RunSupplyDec130TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitp>AC(y)TheFirm’sLong-RunSupplyDec131TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitp>AC(y)TheFirm’sLong-RunSupplyDec132TheFirm’sLong-RunSupplyDecisionMC(y)AC(y)y$/outputunitThefirm’slong-run

supplycurveTheFirm’sLong-RunSupplyDec133Y$/outputunitLMC=long-runsupplyCminLong-RunConstantAverageCostsY$/outputunitLMC=long-runsup134TheFirm’sLong-RunSupplyDecisionHowisthefirm’slong-runsupplycurverelatedtoallofitsshort-runsupplycurves?TheFirm’sLong-RunSupplyDec135TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)TheFirm’sLong&Short-RunSu136TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*ys*isprofit-maximizinginthisshort-run.TheFirm’sLong&Short-RunSu137TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*ys*isprofit-maximizinginthisshort-run.PsTheFirm’sLong&Short-RunSu138TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p’ys*y*Thefirmcanincreaseprofitbyincreasing

x2andproducingy*outputunits.PsPTheFirm’sLong&Short-RunSu139TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*ys*isloss-minimizinginthisshort-run.TheFirm’sLong&Short-RunSu140TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*ys*isloss-minimizinginthisshort-run.LossTheFirm’sLong&Short-RunSu141TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitACs(y)MCs(y)p”ys*Thislosscanbeeliminatedinthelong-

runbythefirmexitingtheindustry.LossTheFirm’sLong&Short-RunSu142TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitTheFirm’sLong&Short-RunSu143TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.TheFirm’sLong&Short-RunSu144TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.PsTheFirm’sLong&Short-RunSu145TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.

y*isprofit-maximizinginthelong-run.y*TheFirm’sLong&Short-RunSu146TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*ys*isprofit-maximizinginthisshort-run.

y*isprofit-maximizinginthelong-run.y*PTheFirm’sLong&Short-RunSu147TheFirm’sLong&Short-RunSupplyDecisionsMC(y)AC(y)y$/outputunitp’ys*y*PsPThefirmcanincreaseprofitbyreducing

x2andproducingy*unitsofoutput.TheFirm’sLong&Short-RunSu148TheFirm’sLong&Sh