第22章FirmSupply中级微观经济学课件

ChapterTwenty-TwoFirmSupply厂商供给ChapterTwenty-TwoFirmSupply1StructureMarketenvironmentsMarketdemandforacompetitivefirmShort-runsupplydecisionUpwardslopingMCcurveShut-downconditionLong-runsupplydecisionComparinglong-runandshort-rundecisions.Producer’ssurplusandprofitsStructureMarketenvironments2FirmSupplyHowdoesafirmdecidehowmuchproducttosupply?Thisdependsuponthefirm’stechnologymarketenvironmentgoalscompetitors’behaviorsFirmSupplyHowdoesafirmdec3MarketEnvironmentsAretheremanyotherfirms,orjustafew?Dootherfirms’decisionsaffectourfirm’spayoffs?Istradinganonymous,inamarket?Oraretradesarrangedwithseparatebuyersbymiddlemen?MarketEnvironmentsAretherem4MarketEnvironmentsMonopoly(垄断）:Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly（寡头垄断）:Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.MarketEnvironmentsMonopoly(垄5MarketEnvironmentsDominantFirm:Manyfirms,butonemuchlargerthantherest.Thelargefirm’sdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.MarketEnvironmentsDominantFi6MarketEnvironmentsMonopolisticCompetition（垄断竞争）: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：自由市场还是凯恩斯主义？

——被遗忘的奥地利学派斯密：“自然的自由体系”1933.钱伯林《垄断竞争理论》

罗宾逊《不完全竞争经济学》

观点：存在垄断政策含义：政府干预、反垄断、反托拉斯附加之言：自由市场还是凯恩斯主义？

——被遗忘的奥地利学派斯70反托拉斯法：1890《theShermanAntirustActof1890》1936《theRobinso-PatmanActof1936》案例:IBM1969（不了了之）；Microsoft1997案（600多万美元罚金）反托拉斯法：1890《theShermanAntirus71奥地利学派：反托拉斯法没有必要，反生产力和违背自由确定一个产业的最佳厂商数量是不可能的（Mises,1966）。最好的模型是能够经得起“市场检验”的模型。“市场检验”是一个试错的过程，在这个过程中每个行业确定自己的最佳规模，并通过竞争性利润追求确定其价格结构（Hayek，1978）奥地利学派：反托拉斯法没有必要，反生产力和违背自由72垄断公司在成长阶段是高度创新的公司，并需要要大量的风险资本投资，垄断公司也能带来激烈的竞争，从而会有后来者居上，新崛起的垄断公司取代老的垄断公司（Schumpter，1950）。直到1850年，垄断一词一直是指美国国会授予的排他的贸易权力。可用垄断的定义只有一个，就是政府给予的特权，解决措施也只有一个，就是政府降低垄断，就是政府消除自己的垄断（Rothbard，1962）政府，而不是市场，是垄断之源。政府的授权、认证、特许、关税和其他法定措施才能创造垄断；拥有垄断能力的特殊经济组织便不再参与公开竞争（Armentanono，1990）垄断公司在成长阶段是高度创新的公司，并需要要大量的风险资本投73不去控制经济中的垄断而承受其负面效应比去控制它而承受不理想的政治要更好——贝克尔。芝加哥学派的“微观先生”——斯蒂格勒：类似完全竞争模型（theoryofpirce,1987）不受压制的市场类似于完全竞争。大厂商行为类似完全竞争不去控制经济中的垄断而承受其负面效应比去控制它而承受不理想的74实验经济学证据：当一个行业只有几个大公司时，行业内的竞争未必降低。——弗农.史密斯实验经济学证据：当一个行业只有几个大公司时，行业内的竞争未必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厂商供给ChapterTwenty-TwoFirmSupply85StructureMarketenvironmentsMarketdemandforacompetitivefirmShort-runsupplydecisionUpwardslopingMCcurveShut-downconditionLong-runsupplydecisionComparinglong-runandshort-rundecisions.Producer’ssurplusandprofitsStructureMarketenvironments86FirmSupplyHowdoesafirmdecidehowmuchproducttosupply?Thisdependsuponthefirm’stechnologymarketenvironmentgoalscompetitors’behaviorsFirmSupplyHowdoesafirmdec87MarketEnvironmentsAretheremanyotherfirms,orjustafew?Dootherfirms’decisionsaffectourfirm’spayoffs?Istradinganonymous,inamarket?Oraretradesarrangedwithseparatebuyersbymiddlemen?MarketEnvironmentsAretherem88MarketEnvironmentsMonopoly(垄断）:Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly（寡头垄断）:Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.MarketEnvironmentsMonopoly(垄89MarketEnvironmentsDominantFirm:Manyfirms,butonemuchlargerthantherest.Thelargefirm’sdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.MarketEnvironmentsDominantFi90MarketEnvironmentsMonopolisticCompetition（垄断竞争）: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