曼昆經(jīng)濟(jì)學(xué)原理教案14

1、,,,,Firms in Competitive Markets,Chapter 14,Copyright © 2001 by Harcourt, Inc.All rights reserved.   Requests for permission to make copies of any part of thework should be mailed to:Permissions Depart

2、ment, Harcourt College Publishers,6277 Sea Harbor Drive, Orlando, Florida 32887-6777.,The Meaning of Competition,A perfectly competitive market has the following characteristics:There are many buyers and sellers in the

3、 market.The goods offered by the various sellers are largely the same.Firms can freely enter or exit the market.,The Meaning of Competition,As a result of its characteristics, the perfectly competitive market has the f

4、ollowing outcomes:The actions of any single buyer or seller in the market have a negligible impact on the market price.Each buyer and seller takes the market price as given.,The Meaning of Competition,Buyers and seller

5、s in competitive markets are said to be price takers.Buyers and sellers must accept the price determined by the market.,Revenue of a Competitive Firm,Total revenue for a firm is the selling price times the quantity sol

6、d.TR = (P X Q),Revenue of a Competitive Firm,Total revenue is proportional to the amount of output.,,,Revenue of a Competitive Firm,Average revenue tells us how much revenue a firm receives for the typical unit sold.,,,

7、Revenue of a Competitive Firm,In perfect competition, average revenue equals the price of the good.,Revenue of a Competitive Firm,Marginal revenue is the change in total revenue from an additional unit sold.MR =?TR/ ?Q,

8、Revenue of a Competitive Firm,For competitive firms, marginal revenue equals the price of the good.,Total, Average, and Marginal Revenue for a Competitive Firm,Profit Maximization for the Competitive Firm,The goal of a c

9、ompetitive firm is to maximize profit.This means that the firm will want to produce the quantity that maximizes the difference between total revenue and total cost.,Profit Maximization: A Numerical Example,Profit Maxim

10、ization for the Competitive Firm...,Quantity,0,ATC,AVC,,,,Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.,Profit Maximization for the Competitive Firm,Profit maximization occurs at the quan

11、tity where marginal revenue equals marginal cost.,Profit Maximization for the Competitive Firm,When MR > MC ? increase Q,When MR < MC ? decrease Q,When MR = MC ? Profit is maximized.,,The Marginal-Cost Curve and th

12、e Firm’s Supply Decision...,Quantity,0,MC,ATC,AVC,,,,Copyright © 2001 by Harcourt, Inc. All rights reserved,The Firm’s Short-Run Decision to Shut Down,A shutdown refers to a short-run decision not to produce anythin

13、g during a specific period of time because of current market conditions.Exit refers to a long-run decision to leave the market.,The Firm’s Short-Run Decision to Shut Down,The firm considers its sunk costs when deciding

14、to exit, but ignores them when deciding whether to shut down.Sunk costs are costs that have already been committed and cannot be recovered.,The Firm’s Short-Run Decision to Shut Down,The firm shuts down if the revenue i

15、t gets from producing is less than the variable cost of production.Shut down if TR < VCShut down if TR/Q < VC/QShut down if P < AVC,The Firm’s Short-Run Decision to Shut Down...,Quantity,ATC,AVC,0,Costs,,,,Th

16、e Firm’s Short-Run Decision to Shut Down,The portion of the marginal-cost curve that lies above average variable cost is the competitive firm’s short-run supply curve.,The Firm’s Long-Run Decision to Exit or Enter a Mark

17、et,In the long-run, the firm exits if the revenue it would get from producing is less than its total cost.Exit if TR < TCExit if TR/Q < TC/QExit if P < ATC,The Firm’s Long-Run Decision to Exit or Enter a Mark

18、et,A firm will enter the industry if such an action would be profitable. Enter if TR > TCEnter if TR/Q > TC/QEnter if P > ATC,,The Competitive Firm’s Long-Run Supply Curve...,,Quantity,MC = Long-run S,ATC,AVC

19、,0,Costs,,,,,The Competitive Firm’s Long-Run Supply Curve,The competitive firm’s long-run supply curve is the portion of its marginal-cost curve that lies above average total cost.,The Competitive Firm’s Long-Run Supply

20、Curve...,Quantity,MC,ATC,AVC,0,Costs,,,,,,The Firm’s Short-Run and Long-Run Supply Curves,Short-Run Supply CurveThe portion of its marginal cost curve that lies above average variable cost.Long-Run Supply CurveThe mar

21、ginal cost curve above the minimum point of its average total cost curve.,,,Measuring Profit in the Graph for the Competitive Firm...,Quantity,0,Price,P = AR = MR,ATC,MC,P,,,Profit-maximizing quantity,a. A Firm with Pro

22、fits,Measuring Profit in the Graph for the Competitive Firm...,Quantity,0,Price,P = AR = MR,ATC,MC,P,,,,,,Q,Loss-minimizing quantity,,b. A Firm with Losses,Supply in a Competitive Market,Market supply equals the sum of

23、the quantities supplied by the individual firms in the market.,The Short Run: Market Supply with a Fixed Number of Firms,For any given price, each firm supplies a quantity of output so that its marginal cost equals price

24、. The market supply curve reflects the individual firms’ marginal cost curves.,The Short Run: Market Supply with a Fixed Number of Firms...,(a) Individual Firm Supply,Quantity(firm),0,Price,,(b) Market Supply,Quantity

25、(market),Price,0,Supply,,MC,,,,,,,,,,,1.00,$2.00,100,200,1.00,$2.00,100,000,200,000,The Long Run: Market Supply with Entry and Exit,Firms will enter or exit the market until profit is driven to zero.In the long run, pr

26、ice equals the minimum of average total cost.The long-run market supply curve is horizontal at this price.,The Long Run: Market Supply with Entry and Exit...,(a) Firm’s Zero-Profit Condition,Quantity(firm),0,Price,P =

27、minimum ATC,,(b) Market Supply,Quantity(market),Price,0,Supply,,,MC,ATC,,,,The Long Run: Market Supply with Entry and Exit,At the end of the process of entry and exit, firms that remain must be making zero economic pr

28、ofit.The process of entry & exit ends only when price and average total cost are driven to equality.Long-run equilibrium must have firms operating at their efficient scale.,Firms Stay in Business with Zero Profit,P

29、rofit equals total revenue minus total cost.Total cost includes all the opportunity costs of the firm.In the zero-profit equilibrium, the firm’s revenue compensates the owners for the time and money they expend to keep

30、 the business going.,,,Increase in Demand in the Short Run,An increase in demand raises price and quantity in the short run.Firms earn profits because price now exceeds average total cost.,Increase in Demand in the Shor

31、t Run...,Market,Firm,Quantity(firm),0,Price,MC,ATC,P1,Quantity(market),Price,0,D1,,P1,Q1,A,,,,,,S,1,,Long-runsupply,,,,,(a) Initial Condition,P,Increase in Demand in the Short Run...,Market,Firm,Quantity(firm),0,Pric

32、e,MC,ATC,P1,Quantity(market),Price,0,D1,,P1,Q1,A,,,,,,S1,,Long-runsupply,,,,,(b) Short-Run Response,,,,,,Increase in Demand in the Short Run...,Market,Firm,Quantity(firm),0,Price,MC,ATC,P1,Quantity(market),Price,0,D1

33、,,P1,Q1,A,,,,,,S1,,Long-runsupply,,,,,(c) Long-Run Response,,D2,B,,Q2,P2,,S2,,,C,,Q3,Why the Long-Run Supply Curve Might Slope Upward,Some resources used in production may be available only in limited quantities.Firms

34、may have different costs.,Marginal Firm,The marginal firm is the firm that would exit the market if the price were any lower.,Summary,Because a competitive firm is a price taker, its revenue is proportional to the amount

35、 of output it produces.The price of the good equals both the firm’s average revenue and its marginal revenue.,Summary,To maximize profit a firm chooses the quantity of output such that marginal revenue equals marginal c

36、ost. This is also the quantity at which price equals marginal cost.Therefore, the firm’s marginal cost curve is its supply curve.,Summary,In the short run when a firm cannot recover its fixed costs, the firm will choos

37、e to shut down temporarily if the price of the good is less than average variable cost.In the long run when the firm can recover both fixed and variable costs, it will choose to exit if the price is less than average to

38、tal cost.,Summary,In a market with free entry and exit, profits are driven to zero in the long run and all firms produce at the efficient scale.Changes in demand have different effects over different time horizons.,Prof

39、it Maximization for the Competitive Firm...,Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.,The Marginal-Cost Curve and the Firm’s Supply Decision...,Harcourt, Inc. items and derived items

40、copyright © 2001 by Harcourt, Inc.,The Firm’s Short-Run Decision to Shut Down...,The Competitive Firm’s Long-Run Supply Curve...,The Competitive Firm’s Long-Run Supply Curve...,Measuring Profit in the Graph for the

41、Competitive Firm...,Measuring Profit in the Graph for the Competitive Firm...,The Short Run: Market Supply with a Fixed Number of Firms...,The Long Run: Market Supply with Entry and Exit...,Increase in Demand in the Shor