ECO 405 Lecture Notes - Lecture 11: Average Variable Cost, Marginal Cost, Variable Cost
Document Summary
In the short run, a price-taking firm will produce the level of output for which smc = p. at p*, for example, the firm will produce q*. The smc curve also shows what will be produced at other prices. For prices below savc, however, the firm will choose to produce no output. The heavy lines in the figure represent the firm"s short-run supply curve. The positively-sloped portion of the short-run marginal cost curve. Above the point of minimum average variable cost. It shows how much the firm will produce at every possible market price. Firms will only operate in the short run. As long as total revenue covers variable cost p >savc. Example 11. 3 short-run supply for cobb douglas production function. Firm"s short-run total cost curve is sc(v,w,q,k1) = vk1 + wq1/k1. Where k1 is the level of capital held constant in the short run. The price-taking firm will maximize profit where p = smc.
