ECON1010 Lecture Notes - Lecture 4: Average Variable Cost, Marginal Cost
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Lecture 4 - Supply in Perfectly Competitive Markets
Wednesday, 14 March 2018
10:00 AM
<<Chapter2_slides(1).pptx>>
• Example of supply curve for a firm
• Marginal cost and average variable cost are both u-shaped curves
•
• Continue to think at the margin
• Profit is difference between total revenues and total costs
• In short run, shut down production if profit is less than FC
o Or hire optimal number of workers and continue operating
• In long run, shut down production if profit is less than 0
o Or hire optimal number of workers and continue operating
• In long run, only accept prices above average total cost
• In short run, only accept prices above average variable cost
•
• Factors that shift supply curve to the right
o Decrease in the price of inputs
o Advancements in technology
o Expectations
o Decrease in price/demand of substitute products
o Increase in the number of suppliers
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