-Tsinghua-Micro-Ch21-Cost-Curves课件

1、Chapter Twenty-OneCost CurvesWhat do we do in this chapter?We examine how c(y) varies with y.Why? We need to prepare ourselves for studying firms supply.We have the following types of cost curves:A total cost curve and average total cost curveA variable cost curve and average variable cost curveAn a

2、verage fixed cost curve Marginal cost curveComparing consumer behavior with producer behavior Consumer: Maximize Utility subject to linear constraint; Producer: Minimize linear function subject to production function; Minimizing a linear function makes things much simpler; Also, the production funct

3、ion is cardinal; utility is ordinal !From last Chapter: Short-Run & Long-Run Total Costsx1x2Short-runoutputexpansionpathLong-run costs are:Short-run costs are:Fixed, Variable & Total Cost Functions Let F be the short-run fixed cost F does not vary with the firms output level. Let cv(y) be the variab

4、le cost function.Then the total cost function isy$Fcv(y)c(y)FAv. Fixed, Av. Variable & Av. Total Cost CurvesFor y 0, the firms average total cost function is$/output unitAFC(y)y0AFC(y) 0 as y Av. Fixed, Av. Variable & Av. Total Cost Curves How about the average variable cost? It must be increasing e

5、ventually Since at least one input is fixed in the short-run.$/output unitAFC(y)AVC(y)ATC(y)y0Since AFC(y) 0 as y ,ATC(y) AVC(y) as y .And since short-run AVC(y) musteventually increase, ATC(y) must eventually increase in a short-run.Marginal Cost FunctionSince the firms total cost function is:The m

6、arginal cost is:Marginal and Variable Cost FunctionsNote:Marginal and Variable Cost FunctionsMC(y)y0Area is the variablecost of making y units$/output unitHow is marginal cost related to average variable cost?SinceTherefore,as$/output unityAVC(y)MC(y)The short-run MC curve intersectsthe short-run AV

7、C curve frombelow at the AVC curves minimum.MC and ATC are similarly relatedSimilarly, sinceTherefore,as$/output unityMC(y)ATC(y)as$/output unityAVC(y)MC(y)ATC(y)Short-Run & Long-Run Total Cost CurvesSuppose the firm can be in one of just three short-runs;x2 = x2 or x2 = x2 x2 x2 x2.or x2 = x2.yF0F

8、= w2x2F = w2x2A larger amount of the fixedinput increases the firmsfixed cost. Why does a larger amount of the fixed input reduce the slope of the firms total cost curve?cs(y;x2)cs(y;x2)$FLet MP1 be the marginal physical productivity of the variable input 1;So the firms extra cost from producing one

9、 extra unit of output is3.This is the slope of the firms total cost curve.4.If input 2 is a complement to input 1 thenMP1 is higher for higher x2. Hence, MC is lower for higher x2.Short-Run & Long-Run Total Cost CurvesShort-Run & Long-Run Total Cost CurvesThe firm has three short-run total cost curv

10、es.In the long-run, how does the firm choose amongst these three?yF0FyyFor 0 y y, choose x2 = x2.cs(y;x2)cs(y;x2)cs(y;x2)$FyF0FyyFor 0 y y, choose x2 = x2.For y y y, choose x2 = x2.cs(y;x2)cs(y;x2)cs(y;x2)$FyF0Fcs(y;x2)yyFor 0 y y, choose x2 = x2.For y y y, choose x2 = x2.For y y, choose x2 = x2.cs(y;x2)cs(y;x2)$FyF0cs(y;x2)cs(y;x2)Fcs(y;x2)yyFor 0 y y, choose x2 = x2.For y y y, choose x2 = x2.For y 0, the long-run MC equals theMC