Ch22FirmSupply(中级微观经济学-北大,赵耀辉).pptx

Ch22FirmSupply(中级微观经济学-北大,赵耀辉).pptx

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ChapterTwenty-Two,FirmSupply,FirmSupply,Howdoesafirmdecidehowmuchproducttosupply?

Thisdependsuponthefirmstechnologymarketenvironmentgoalscompetitorsbehaviors,MarketEnvironments,Aretheremanyotherfirms,orjustafew?

Dootherfirmsdecisionsaffectourfirmspayoffs?

Istradinganonymous,inamarket?

Oraretradesarrangedwithseparatebuyersbymiddlemen?

MarketEnvironments,Monopoly:

Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly:

Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.,MarketEnvironments,DominantFirm:

Manyfirms,butonemuchlargerthantherest.Thelargefirmsdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.,MarketEnvironments,MonopolisticCompetition:

Manyfirmseachmakingaslightlydifferentproduct.Eachfirmsoutputlevelissmallrelativetothetotal.PureCompetition:

Manyfirms,allmakingthesameproduct.Eachfirmsoutputlevelissmallrelativetothetotal.,MarketEnvironments,Laterchaptersexaminemonopoly,oligopoly,andthedominantfirm.Thischapterexploresonlypurecompetition.,PureCompetition,Afirminaperfectlycompetitivemarketknowsithasnoinfluenceoverthemarketpriceforitsproduct.Thefirmisamarketprice-taker.Thefirmisfreetovaryitsownprice.,PureCompetition,Ifthefirmsetsitsownpriceabovethemarketpricethenthequantitydemandedfromthefirmiszero.Ifthefirmsetsitsownpricebelowthemarketpricethenthequantitydemandedfromthefirmistheentiremarketquantity-demanded.,PureCompetition,Sowhatisthedemandcurvefacedbytheindividualfirm?

PureCompetition,Y,$/outputunit,MarketSupply,MarketDemand,pe,PureCompetition,y,$/outputunit,MarketSupply,pe,p,Atapriceofp,zeroisdemandedfromthefirm.,MarketDemand,PureCompetition,y,$/outputunit,MarketSupply,pe,p,p”,Atapriceofp”thefirmfacestheentiremarketdemand.,Atapriceofp,zeroisdemandedfromthefirm.,MarketDemand,PureCompetition,Sothedemandcurvefacedbytheindividualfirmis.,PureCompetition,y,$/outputunit,MarketSupply,pe,p,p”,Atapriceofp”thefirmfacestheentiremarketdemand.,Atapriceofp,zeroisdemandedfromthefirm.,MarketDemand,PureCompetition,Y,$/outputunit,pe,p,p”,MarketDemand,Smallness,Whatdoesitmeantosaythatanindividualfirmis“smallrelativetotheindustry”?

Smallness,$/outputunit,y,FirmsMC,Theindividualfirmstechnologycausesitalwaystosupplyonlyasmallpartofthetotalquantitydemandedatthemarketprice.,Firmsdemandcurve,pe,TheFirmsShort-RunSupplyDecision,Eachfirmisaprofit-maximizerandinashort-run.Q:

Howdoeseachfirmchooseitsoutputlevel?

TheFirmsShort-RunSupplyDecision,Eachfirmisaprofit-maximizerandinashort-run.Q:

Howdoeseachfirmchooseitsoutputlevel?

A:

Bysolving,TheFirmsShort-RunSupplyDecision,Whatcanthesolutionys*looklike?

TheFirmsShort-RunSupplyDecision,Whatcanthesolutionys*looklike?

（a）ys*0:

P（y）,y,ys*,TheFirmsShort-RunSupplyDecision,Whatcanthesolutiony*looklike?

（b）ys*=0:

P（y）,y,ys*=0,TheFirmsShort-RunSupplyDecision,Fortheinteriorcaseofys*0,thefirst-ordermaximumprofitconditionis,Thatis,Soataprofitmaximumwithys*0,themarketpricepequalsthemarginalcostofproductionaty=ys*.,TheFirmsShort-RunSupplyDecision,Fortheinteriorcaseofys*0,thesecond-ordermaximumprofitconditionis,Thatis,Soataprofitmaximumwithys*0,thefirmsMCcurvemustbeupward-sloping.,TheFirmsShort-RunSupplyDecision,$/outputunit,y,pe,ys*,y,MCs（y）,TheFirmsShort-RunSupplyDecision,$/outputunit,y,pe,ys*,y,Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.,MCs（y）,TheFirmsShort-RunSupplyDecision,$/outputunit,y,pe,ys*,y,Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.,Aty=y,p=MCandMCslopesdownwards.y=yisprofit-minimizing.,MCs（y）,TheFirmsShort-RunSupplyDecision,$/outputunit,y,pe,y,Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.Soaprofit-max.supplylevelcanlieonlyontheupwardsslopingpartofthefirmsMCcurve.,MCs（y）,ys*,TheFirmsShort-RunSupplyDecision,Butnoteverypointontheupward-slopingpartofthefirmsMCcurverepresentsaprofit-maximum.,TheFirmsShort-RunSupplyDecision,Butnoteverypointontheupward-slopingpartofthefirmsMCcurverepresentsaprofit-maximum.ThefirmsprofitfunctionisIfthefirmchoosesy=0thenitsprofitis,TheFirmsShort-RunSupplyDecision,Sothefirmwillchooseanoutputlevely0onlyif,TheFirmsShort-RunSupplyDecision,Sothefirmwillchooseanoutputlevely0onlyifI.e.,onlyifEquivalently,onlyif,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,$/outputunit,y,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,$/outputunit,y,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,$/outputunit,y,pAVCs（y）,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,pAVCs（y）ys*0.,$/outputunit,y,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,pAVCs（y）ys*=0.,$/outputunit,y,pAVCs（y）ys*0.,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,pAVCs（y）ys*=0.,Thefirmsshort-runsupplycurve,$/outputunit,y,pAVCs（y）ys*0.,TheFirmsShort-RunSupplyDecision,AVCs（y）,ACs（y）,MCs（y）,Thefirmsshort-runsupplycurve,Shutdownpoint,$/outputunit,y,TheFirmsShort-RunSupplyDecision,Shut-downisnotthesameasexit.Shutting-downmeansproducingnooutput（butthefirmisstillintheindustryandsuffersitsfixedcost）.Exitingmeansleavingtheindustry,whichthefirmcandoonlyinthelong-run.,TheFirmsLong-RunSupplyDecision,Thelong-runisthecircumstanceinwhichthefirmcanchooseamongstallofitsshort-runcircumstances.Howdoesthefirmslong-runsupplydecisioncomparetoitsshort-runsupplydecisions?

TheFirmsLong-RunSupplyDecision,Acompetitivefirmslong-runprofitfunctionisThelong-runcostc（y）ofproducingyunitsofoutputconsistsonlyofvariablecostssinceallinputsarevariableinthelong-run.,TheFirmsLong-RunSupplyDecision,Thefirmslong-runsupplyleveldecisionistoThe1stand2nd-ordermaximizationconditionsare,fory*0,TheFirmsLong-RunSupplyDecision,Additionally,thefirmseconomicprofitlevelmustnotbenegativesincethenthefirmwouldexittheindustry.So,TheFirmsLong-RunSupplyDecision,MC（y）,AC（y）,y,$/outputunit,TheFirmsLong-RunSupplyDecision,MC（y）,AC（y）,y,$/outputunit,pAC（y）,TheFirmsLong-RunSupplyDecision,MC（y）,AC（y）,y,$/outputunit,pAC（y）,TheFirmsLong-RunSupplyDecision,MC（y）,AC（y）,y,$/outputunit,Thefirmslong-runsupplycurve,TheFirmsLong-RunSupplyDecision,Howisthefirmslong-runsupplycurverelatedtoallofitsshort-runsupplycurves?

TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p,ys*,y*,ys*isprofit-maximizinginthisshort-run.,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p,ys*,y*,ys*isprofit-maximizinginthisshort-run.,Ps,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p,ys*,y*,Thefirmcanincreaseprofitbyincreasingx2andproducingy*outputunits.,Ps,P,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p”,ys*,ys*isloss-minimizinginthisshort-run.,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p”,ys*,ys*isloss-minimizinginthisshort-run.,Loss,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,ACs（y）,MCs（y）,p”,ys*,Thislosscanbeeliminatedinthelong-runbythefirmexitingtheindustry.,Loss,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,p,ys*,ys*isprofit-maximizinginthisshort-run.,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,p,ys*,ys*isprofit-maximizinginthisshort-run.,Ps,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,p,ys*,ys*isprofit-maximizinginthisshort-run.y*isprofit-maximizinginthelong-run.,y*,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,p,ys*,ys*isprofit-maximizinginthisshort-run.y*isprofit-maximizinginthelong-run.,y*,P,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,p,ys*,y*,Ps,P,Thefirmcanincreaseprofitbyreducingx2andproducingy*unitsofoutput.,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,TheFirmsLong&Short-RunSupplyDecisions,MC（y）,AC（y）,y,$/outputunit,Short-runsupplycurves,Long-runsupplycurve,ProducersSurplusRevisited,Thefirmsproducerssurplusistheaccumulation,unitbyextraunitofoutput,ofextrarevenuelessextraproductioncost.Howisproducerssurplusrelatedprofit?

ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,y*（p）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,PS,y*（p）,ProducersSurplusRevisited,Sothefirmsproducerssurplusis,Thatis,PS=Revenue-VariableCost.,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,PS,y*（p）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,y*（p）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,y*（p）,Revenue=py*（p）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,y*（p）,Revenue=py*（p）,cv（y*（p）,ProducersSurplusRevisited,y,$/outputunit,AVCs（y）,ACs（y）,MCs（y）,p,PS,y*（p）,ProducersSurplusRevisited,PS=Revenue-VariableCost.Profit=Revenue-Total