曼昆经济学原理Cha.ppt

1、Firms in Competitive Markets,1, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,What is a

2、 Competitive Market?,(Perfectly) Competitive market 1) Market with many buyers and sellers 2) Trading the identical (same) products (Consequently) Each buyer and seller is a price taker No single buyer or seller can influence the price 3) Firms can freely enter or exit the market,2, 2012 Cengage Lea

3、rning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,What is a Competitive Market?,The goal of a competitive f

4、irm Maximize profit Total revenue minus total cost Total revenue = price times quantity = P Q Proportional to the amount of output (P is fixed: price taker),3, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a

5、 license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,What is a Competitive Market?,Average revenue Total revenue divided by the quantity sold Marginal revenue Change in total revenue from an additional unit sold For competitive firms

6、(as price taker) Average revenue = P Marginal revenue = P,4, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website

7、 for classroom use.,Table 1,5, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Total, Ave

8、rage, and Marginal Revenue for a Competitive Firm,Profit Maximization,Maximize profit Produce (choose) quantity where profit (= total revenue minus total cost) is the largest Compare marginal revenue with marginal cost If MR MC increase production If MR MC decrease production Maximize profit where M

9、R = MC,6, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Table 2,7, 2012 Cengage Learnin

10、g. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Profit Maximization: A Numerical Example,Profit Maximization,

11、The marginal-cost curve and the firms supply decision (Ch 13) MC curve upward sloping ATC curve U-shaped MC curve crosses the ATC curve at the minimum of ATC curve,8, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitt

12、ed in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Profit Maximization,Rules for profit maximization: If MR MC firm should increase output If MC MR firm should decrease output If MR = MC profit-maximizing level of output In c

13、ompetitive market, MR=P Profit maximized where P = MC Marginal-cost curve Determines the quantity of the good the firm is willing to supply at any price MC curve itself is the supply curve,9, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part,

14、except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Figure 1,10, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted

15、in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Profit Maximization for a Competitive Firm,This figure shows the marginal-cost curve (MC), the average-total-cost curve (ATC), and the average-variable-cost curve (AVC). It also

16、 shows the market price (P), which equals marginal revenue (MR) and average revenue (AR). At the quantity Q1, marginal revenue MR1 exceeds marginal cost MC1, so raising production increases profit. At the quantity Q2, marginal cost MC2 is above marginal revenue MR2, so reducing production increases

17、profit. The profit-maximizing quantity QMAX is found where the horizontal price line intersects the marginal-cost curve.,MC,MC1,MC2,Q2,Q1,QMAX,The firm maximizes profit by producing the quantity at which marginal cost equals marginal revenue.,Figure 2,11, 2012 Cengage Learning. All Rights Reserved.

18、May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Marginal Cost as the Competitive Firms Supply Curve,An increase in the price from P1

19、to P2 leads to an increase in the firms profit-maximizing quantity from Q1 to Q2. Because the marginal-cost curve shows the quantity supplied by the firm at any given price, it is the firms supply curve.,MC,P1,P2,Q2,Q1,Profit Maximization,Shutdown Short-run decision not to produce anything During a

20、specific period of time, stop producing because of market conditions Firm still has to pay fixed costs Exit Long-run decision to leave the market (after exit) Firm doesnt have to pay any costs,12, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in p

21、art, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Profit Maximization,The firms short-run decision to shut down Shut down if TR VC (i.e., P AVC) if the operating loss is larger than FC (=loss wi

22、th shut down) TR = total revenue, VC = variable costs, FC = fixed costs,13, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-pr

23、otected website for classroom use.,Figure 3,14, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroo

24、m use.,The Competitive Firms Short-Run Supply Curve,In the short run, the competitive firms supply curve is its marginal-cost curve (MC) above average variable cost (AVC). If the price falls below average variable cost, the firm is better off shutting down.,MC,1. In the short run, the firm produces

25、on the MC curve if PAVC,.,2. .but shuts down if PAVC.,Profit Maximization,Competitive firms short-run supply curve The portion of its marginal-cost curve That lies above average variable cost Sunk cost Has already been committed Cannot be recovered Ignore them when making decisions,15, 2012 Cengage

26、Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Near-empty restaurants,Restaurant stay open for lunch?

27、 Fixed costs Are sunk costs in short run Not relevant in short run decision Variable costs relevant Shut down if revenue from lunch variable costs,16, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license

28、distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Profit Maximization,Firms long-run decision Exit the market if Total revenue total costs; TR TC Same as: P ATC Competitive firms long-run supply curve The portion of its marginal-cost curve

29、that lies above average total cost,17, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Fi

30、gure 4,18, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,The Competitive Firms Long-Run

31、 Supply Curve,In the long run, the competitive firms supply curve is its marginal-cost curve (MC) above average total cost (ATC). If the price falls below average total cost, the firm is better off exiting the market.,MC,1. In the long run, the firm produces on the MC curve if PATC,.,2. .but exits i

32、f PATC,Profit Maximization,Measuring profit (in graph) If P ATC Profit = TR TC = (P ATC) Q If P ATC Loss = TC - TR = (ATC P) Q = Negative profit,19, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license di

33、stributed with a certain product or service or otherwise on a password-protected website for classroom use.,Figure 5,20, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain pro

34、duct or service or otherwise on a password-protected website for classroom use.,Profit as the Area between Price and Average Total Cost,The area of the shaded box between price and average total cost represents the firms profit. The height of this box is price minus average total cost (P ATC), and t

35、he width of the box is the quantity of output (Q). In panel (a), price is above average total cost, so the firm has positive profit. In panel (b), price is less than average total cost, so the firm has losses.,(a) A firm with profits,MC,ATC,(b) A firm with losses,MC,ATC,Supply Curve,Short run: marke

36、t supply with a fixed number of firms Short run number of firms is fixed Each firm supplies quantity where P = MC For P AVC: supply curve is MC curve Market supply Add up quantity supplied by each firm (horizontal sum of individual supply curve),21, 2012 Cengage Learning. All Rights Reserved. May no

37、t be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Figure 6,22, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or dup

38、licated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Short-Run Market Supply,In the short run, the number of firms in the market is fixed. As a result, the market supply cu

39、rve, shown in panel (b), reflects the individual firms marginal-cost curves, shown in panel (a). Here, in a market of 1,000 firms, the quantity of output supplied to the market is 1,000 times the quantity supplied by each firm.,(a) Individual firm supply,MC,100,$2.00,(b) Market supply,200,1.00,Suppl

40、y,100,000,$2.00,200,000,1.00,Supply Curve,Long run Firms can enter and exit the market If P ATC firms make positive profit New firms enter the market If P ATC firms make negative profit Firms exit the market Process of entry and exit ends when Firms in market make zero profit (P = ATC) Each firm pro

41、duces at efficient scale (P= MC = ATC) Long run supply curve perfectly elastic Horizontal at minimum ATC,23, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or serv

42、ice or otherwise on a password-protected website for classroom use.,Figure 7,24, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a passwo

43、rd-protected website for classroom use.,Long-Run Market Supply,In the long run, firms will enter or exit the market until profit is driven to zero. As a result, price equals the minimum of average total cost, as shown in panel (a). The number of firms adjusts to ensure that all demand is satisfied a

44、t this price. The long-run market supply curve is horizontal at this price, as shown in panel (b).,(a) Firms Zero-Profit Condition,MC,(b) Market supply,P= minimum ATC,Supply,Supply Curve,Why do competitive firms stay in business if they make zero profit? Profit = total revenue total cost Total cost

45、includes all opportunity costs Zero-profit equilibrium Economic profit is zero Accounting profit is positive,25, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or

46、service or otherwise on a password-protected website for classroom use.,Supply Curve,Market in long run equilibrium P = minimum ATC Zero economic profit Suppose Increase in demand Demand curve shifts outward Short run Higher quantity Higher price: P ATC positive economic profit,26, 2012 Cengage Lear

47、ning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Supply Curve,Positive economic profit in short run Long ru

48、n new firms enter the market Short run supply curve shifts right Price decreases back to minimum ATC Quantity increases Because there are more firms in the market Individual firm produces at “efficient scale”,27, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated,

49、in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,Figure 8,28, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except

50、for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,An Increase in Demand in the Short Run and Long Run (a),The market starts in a long-run equilibrium, shown as point A in panel (a). In this equilibrium, eac

51、h firm makes zero profit, and the price equals the minimum average total cost.,Market,Firm,MC,(a) Initial Condition,Short-run supply, S1,Demand, D1,Q1,P1,Figure 8,29, 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitt

52、ed in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.,An Increase in Demand in the Short Run and Long Run (b),Panel (b) shows what happens in the short run when demand rises from D1 to D2. The equilibrium goes from point A to point B, price rises from P1 to P2, and the quantity sold in the market rises from Q1 to Q2. Because price now exceeds average total