chapter8平狄克微观经济学-PPT课件.pptx

Slide 1Topics to be DiscussednPerfectly Competitive MarketsnProfit MaximizationnMarginal Revenue,Marginal Cost,and Profit MaximizationnChoosing Output in the Short-RunSlide 2Topics to be DiscussednThe Competitive Firms Short-Run Supply CurvenShort-Run Market SupplynChoosing Output in the Long-RunnThe Industrys Long-Run Supply CurveSlide 3Perfectly Competitive MarketsnCharacteristics of Perfectly Competitive Markets1)Price taking2)Product homogeneity3)Free entry and exitSlide 4Perfectly Competitive MarketsnPrice TakinglThe individual firm sells a very small share of the total market output and,therefore,cannot influence market price.lThe individual consumer buys too small a share of industry output to have any impact on market price.Slide 5Perfectly Competitive MarketsnProduct HomogeneitylThe products of all firms are perfect substitutes.lExamplesuAgricultural products,oil,copper,iron,lumberSlide 6Perfectly Competitive MarketsnFree Entry and ExitlBuyers can easily switch from one supplier to another.lSuppliers can easily enter or exit a market.Slide 7Perfectly Competitive MarketsnDiscussion QuestionslWhat are some barriers to entry and exit?lAre all markets competitive?lWhen is a market highly competitive?Slide 8Profit MaximizationnDo firms maximize profits?lPossibility of other objectivesuRevenue maximizationuDividend maximizationuShort-run profit maximizationSlide 9Profit MaximizationnDo firms maximize profits?lImplications of non-profit objectiveuOver the long-run investors would not support the companyuWithout profits,survival unlikelySlide 10Profit MaximizationnDo firms maximize profits?lLong-run profit maximization is valid and does not exclude the possibility of altruistic behavior.Slide 11Marginal Revenue,Marginal Cost,and Profit MaximizationnDetermining the profit maximizing level of outputlProfit()=Total Revenue-Total CostlTotal Revenue(R)=PqlTotal Cost(C)=CqlTherefore:Slide 12Profit Maximization in the Short Run0Cost,Revenue,Profit($s per year)Output(units per year)R(q)Total RevenueSlope of R(q)=MRSlide 130Cost,Revenue,Profit$(per year)Output(units per year)Profit Maximization in the Short RunC(q)Total CostSlope of C(q)=MCWhy is cost positive when q is zero?Slide 14nMarginal revenue is the additional revenue from producing one more unit of output.nMarginal cost is the additional cost from producing one more unit of output.Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 15nComparing R(q)and C(q)lOutput levels:0-q0:uC(q)R(q)lNegative profit uFC+VC R(q)uMR MClIndicates higher profit at higher output0Cost,Revenue,Profit($s per year)Output(units per year)R(q)C(q)ABq0q*Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 16nComparing R(q)and C(q)lQuestion:Why is profit negative when output is zero?Marginal Revenue,Marginal Cost,and Profit MaximizationR(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Slide 17nComparing R(q)and C(q)lOutput levels:q0-q*uR(q)C(q)uMR MClIndicates higher profit at higher outputlProfit is increasingR(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 18nComparing R(q)and C(q)lOutput level:q*uR(q)=C(q)uMR=MCuProfit is maximizedR(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 19nQuestionlWhy is profit reduced when producing more or less than q*?R(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 20nComparing R(q)and C(q)lOutput levels beyond q*:uR(q)C(q)uMC MRu Profit is decreasingMarginal Revenue,Marginal Cost,and Profit MaximizationR(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Slide 21nTherefore,it can be said:lProfits are maximized when MC=MR.Marginal Revenue,Marginal Cost,and Profit MaximizationR(q)0Cost,Revenue,Profit$(per year)Output(units per year)C(q)ABq0q*Slide 22Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 23Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 24nThe Competitive FirmlPrice takerlMarket output(Q)and firm output(q)lMarket demand(D)and firm demand(d)lR(q)is a straight lineMarginal Revenue,Marginal Cost,and Profit MaximizationDemand and Marginal Revenue Facedby a Competitive FirmOutput(bushels)Price$per bushelPrice$per bushelOutput(millions of bushels)d$4100200100FirmIndustryD$4Slide 26nThe Competitive FirmlThe competitive firms demanduIndividual producer sells all units for$4 regardless of the producers level of output.uIf the producer tries to raise price,sales are zero.Marginal Revenue,Marginal Cost,and Profit MaximizationSlide 27nThe Competitive FirmlThe competitive firms demanduIf the producers tries to lower price he cannot increase salesuP=D=MR=ARMarginal Revenue,Marginal Cost,and Profit MaximizationSlide 28nThe Competitive FirmlProfit MaximizationuMC(q)=MR=PMarginal Revenue,Marginal Cost,and Profit MaximizationSlide 29Choosing Output in the Short RunnWe will combine production and cost analysis with demand to determine output and profitability.Slide 30q0Lost profit forqq q*q1q2A Competitive FirmMaking a Positive Profit10203040Price($perunit)012345678910115060MCAVCATCAR=MR=POutputq*At q*:MR=MCand P ATCDABCq1:MR MC andq2:MC MR andq0:MC=MR butMC fallingSlide 31Would this producercontinue to produce with a loss?A Competitive FirmIncurring LossesPrice($perunit)OutputAVCATCMCq*P=MRBFCAEDAt q*:MR=MCand P ATC the firm is making profits.lIf AVC P ATC the firm should produce at a loss.lIf P AVC$1300:q=900Price$1140:q=0 QuestionShould the firm stay in businesswhen P$1140?Slide 34Some Cost Considerations for ManagersnThree guidelines for estimating marginal cost:1)Average variable cost should not be used as a substitute for marginal cost.Slide 35Some Cost Considerations for ManagersnThree guidelines for estimating marginal cost:2)A single item on a firms accounting ledger may have two components,only one of which involves marginal cost.Slide 36nThree guidelines for estimating marginal cost:3)All opportunity cost should be included in determining marginal cost.Some Cost Considerations for ManagersSlide 37A Competitive FirmsShort-Run Supply CurvePrice($perunit)OutputMCAVCATCP=AVCWhat happensif P MC for all units.Slide 54nProducer Surplus in the Short-RunThe Short-Run Market Supply CurveSlide 55nObservationlShort-run with positive fixed costThe Short-Run Market Supply CurveSlide 56D DP P*QQ*ProducerProducerSurplusSurplusMarket producer surplus isthe difference between P*and S from 0 to Q*.Producer Surplus for a MarketPrice($perunit ofoutput)OutputS SSlide 57Choosing Output in the Long RunnIn the long run,a firm can alter all its inputs,including the size of the plant.nWe assume free entry and free exit.Slide 58q1ABCDIn the short run,thefirm is faced with fixedinputs.P=$40 ATC.Profit is equal to ABCD.Output Choice in the Long RunPrice($perunit ofoutput)OutputP=MR$40SACSMCIn the long run,the plant size will be increased and output increased to q3.Long-run profit,EFGD short runprofit ABCD.q3q2GF$30LACELMCSlide 59q1ABCDOutput Choice in the Long RunPrice($perunit ofoutput)OutputP=MR$40SACSMCQuestion:Is the producer makinga profit after increased outputlowers the price to$30?q3q2GF$30LACELMCSlide 60Choosing Output in the Long RunnAccounting Profit&Economic ProfitlAccounting profit =R-wLlEconomic profit =R=wL-rKuwl=labor costurk=opportunity cost of capitalSlide 61Choosing Output in the Long RunnZero-ProfitlIf R wL+rk,economic profits are positivelIf R=wL+rk,zero economic profits,but the firms is earning a normal rate of return;indicating the industry is competitivelIf R wl+rk,consider going out of businessLong-Run Competitive EquilibriumSlide 62Choosing Output in the Long RunnEntry and ExitlThe long-run response to short-run profits is to increase output and profits.lProfits will attract other producers.lMore producers increase industry supply which lowers the market price.Long-Run Competitive EquilibriumS1Long-Run Competitive EquilibriumOutputOutput$per unit ofoutput$per unit ofoutput$40LACLMCDS2P1Q1q2FirmIndustry$30Q2P2Profit attracts firmsSupply increases until profit=0Slide 64Choosing Output in the Long RunnLong-Run Competitive Equilibrium1)MC=MR 2)P=LACuNo incentive to leave or enteruProfit=03)Equilibrium Market PriceSlide 65Choosing Output in the Long RunnQuestions1)Explain the market adjustment when P LAC and firms have identical costs.2)Explain the market adjustment when firms have different costs.3)What is the opportunity cost of land?Slide 66Choosing Output in the Long RunnEconomic RentlEconomic rent is the difference between what firms are willing to pay for an input less the minimum amount necessary to obtain it.Slide 67Choosing Output in the Long RunnAn ExamplelTwo firms A&BlBoth own their landlA is located on a river which lowers As shipping cost by$10,000 compared to B.lThe demand for As river location will increase the price of As land to$10,000Slide 68Choosing Output in the Long RunnAn ExamplelEconomic rent=$10,000 u$10,000-zero cost for the landlEconomic rent increaseslEconomic profit of A=0Slide 69Firms Earn Zero Profit inLong-Run EquilibriumTicketPriceSeason TicketsSales(millions)LAC$7$71.01.0A baseball teamin a moderate-sized city sells enough tickets so that price is equal to marginal and average cost(profit=0).LMCSlide 701.31.3$10$10Economic RentTicketPrice$7$7LACA team with the samecost in a larger citysells tickets for$10.Firms Earn Zero Profit inLong-Run EquilibriumSeason TicketsSales(millions)LMCSlide 71nWith a fixed input such as a unique location,the difference between the cost of production(LAC=7)and price($10)is the value or opportunity cost of the input(location)and represents the economic rent from the input.Firms Earn Zero Profit inLong-Run EquilibriumSlide 72nIf the opportunity cost of the input(rent)is not taken into consideration it may appear that economic profits exist in the long-run.Firms Earn Zero Profit inLong-Run EquilibriumSlide 73nThe shape of the long-run supply curve depends on the extent to which changes in industry output affect the prices the firms must pay for inputs.The Industrys Long-Run Supply CurveSlide 74The Industrys Long-Run Supply CurvenTo determine long-run supply,we assume:lAll firms have access to the available production technology.lOutput is increased by using more inputs,not by invention.Slide 75The Industrys Long-Run Supply CurvenTo determine long-run supply,we assume:lThe market for inputs does not change with expansions and contractions of the industry.AP1ACP1MCq1D1S1Q1CD2P2P2q2BS2Q2Economic profits attract newfirms.Supply increases to S2 andthe market returns to long-run equilibrium.Long-Run Supply in aConstant-Cost IndustryOutputOutput$per unit ofoutput$per unit ofoutputSLQ1 increase to Q2.Long-run supply=SL=LRAC.Change in output has no impact on input cost.Slide 77nIn a constant-cost industry,long-run supply is a horizontal line at a price that is equal to the minimum average cost of production.Long-Run Supply in aConstant-Cost IndustryLong-Run Supply in anIncreasing-Cost IndustryOutputOutput$per unit ofoutput$per unit ofoutputS1D1P1LAC1P1SMC1q1Q1AS SL LP3SMC2Due to the increasein input prices,long-runequilibrium occurs at a higher price.LAC2BS2P3Q3q2P2P2D1Q2Slide 79nIn a increasing-cost industry,long-run supply curve is upward sloping.Long-Run Supply in aIncreasing-Cost IndustrySlide 80The IndustrysLong-Run Supply CurvenQuestions1)Explain how decreasing-cost is possible.2)Illustrate a decreasing cost industry.3)What is the slope of the SL in a decreasing-cost industry?S2BSLP3Q3SMC2P3LAC2Due to the decreasein input prices,long-runequilibrium occurs at a lower price.Long-Run Supply in anDecreasing-Cost IndustryOutputOutput$per unit ofoutput$per unit ofoutputP1P1SMC1AD1S1Q1q1LAC1Q2q2P2P2D2Slide 82nIn a decreasing-cost industry,long-run supply curve is downward sloping.Long-Run Supply in aIncreasing-Cost IndustrySlide 83nThe Effects of a TaxlIn an earlier chapter we studied how firms respond to taxes on an input.lNow,we will consider how a firm responds to a tax on its output.The IndustrysLong-Run Supply CurveSlide 84Effect of an Output Tax on a Competitive Firms OutputPrice($perunit ofoutput)OutputAVC1MC1P1q1The firm willreduce output tothe point at whichthe marginal costplus the tax equalsthe price.q2t tMC2=MC1+taxAVC2An output taxraises the firmsmarginal cost by theamount of the tax.Slide 85Effect of an OutputTax on Industry OutputPrice($perunit ofoutput)OutputD DP1S S1Q1P2Q2S S2=S1+ttTax shifts S1 to S2 andoutput falls to Q2.Priceincreases to P2.Slide 86nLong-Run Elasticity of Supply1)Constant-cost industryuLong-run supply is horizontaluSmall increase in price will induce an extremely large output increaseThe IndustrysLong-Run Supply CurveSlide 87nLong-Run Elasticity of Supply1)Constant-cost industryuLong-run supply elasticity is infinitely largeuInputs would be readily availableThe IndustrysLong-Run Supply CurveSlide 88nLong-Run Elasticity of Supply2)Increasing-cost industryuLong-run supply is upward-sloping and elasticity is positiveuThe slope(elasticity)will depend on the rate of increase in input costuLong-run elasticity will generally be greater than short-run elasticity of supplyThe IndustrysLong-Run Supply CurveSlide 89nQuestion:lDescribe the long-run elasticity of supply in a decreasing-cost industry.The IndustrysLong-Run Supply CurveSlide 90The Long-Run Supply of HousingnScenario 1:Owner-occupied housinglSuburban or rural areaslNational market for inputsSlide 91The Long-Run Supply of HousingnQuestionslIs this an increasing or a constant-cost industry?lWhat would you predict about the elasticity of supply?Slide 92nScenario 2:Rental propertylZoning restrictions applylUrban locationlHigh-rise construction costThe Long-Run Supply of HousingSlide 93nQuestionslIs this an increasing or a constant-cost industry?lWhat would you predict about the elasticity of supply?The Long-Run Supply of HousingSlide 94SummarynThe managers of firms can operate in accordance with a complex set of objectives and under various constraints.nA competitive market makes its output choice under the assumption that the demand for its own output is horizontal.Slide 95SummarynIn the short run,a competitive firm maximizes its profit by choosing an output at which price is equal to(short-run)marginal cost.nThe short-run market supply curve is the horizontal summation of the supply curves of the firms in an industry.Slide 96SummarynThe producer surplus for a firm is the difference between revenue of a firm and the minimum cost that would be necessary to produce the profit-maximizing output.nEconomic rent is the payment for a scarce resource of production less the minimum amount necessary to hire that factor.Slide 97SummarynIn the long-run,profit-maximizing competitive firms choose the output at which price is equal to long-run marginal cost.nThe long-run supply curve for a firm can be horizontal,upward sloping,or downward sloping.E