ECON 1011 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost

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17 Oct 2018

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ECON 1011 Lecture Notes - Lecture 15: Taipei Metro, Marginal Revenue, Marginal Cost

ECON 1011 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost

ECON 1011 Lecture 18: Lecture 15: Theory of Market Supply

Document Summary

Supply functions in markets are given by the summation of the marginal cost curves. Adding up all these firms inverse marginal costs will get us the market supply. Same cost curves; same knowledge of market; produce identical products. Long run in this context means something that happens over a longer period of time. We"re talking about the period of time after free entry and exit of firms occur in the marketplace. Entry and exits occur in response to profit changes in the industry. If firms are making positive profits in one industry, other firms will be aware due to perfect information. If another firm realizes they"re making little profit compared to others, they will exit. Positive profit inspires entry of new firms. Negative profit (lawsuits) inspires eventual exits from that industry. With no fixed cost in production, the production decision is even simpler. Prices correspond to intersection of lines (of right graph)

Related Questions

Suppose you are given the following information about an industry:

Qd = 6500 - 100P Market Demand

Qs = 1200P Market Supply

Assume further that a representative firm's cost function is::

C(q)= 722 + q^2 / 200 and Marginal cost of

MC(q) = q / 100

Assume further that firms are identical and the market is characterized by perfect competition.

A) Find the equilibrium price and quantity and the output the firm will produce in the short run. What is the profit of each firm?

B) Would you expect entry or exit to this industry in the long run? Explain. What effect would such entry/exit have on the market equilibrium?

C) What is the lowest price the firms may survive in the long-run? Is profit positive, negative, or zero at that price?

D) What is the lowest price the firm may sell in the short-run? Is profit positive, negative, or zero at that price?

pearferret188

Poinsettia growing is a perfectly competitive industry and all poinsettia growers have the same cost curves. The market price of poinsettias is $5 a pot and each grower maximizes profit by producing 2,600 pots a week. The average total cost of producing Poinsettias is $20 a pot. The minimum average variable cost is $4 a pot and the minimum average total cost is $12 a pot. In the short-run, does each grower incur an economic loss or make a profit? How much?

Answer with a positive number.

Because firms in the industry are ______, some firms will ______ the market in the long-run. The number of poinsettia growers will ______.

A. making an economic profit; enter; increase

B. incurring an economic loss; exit; decrease

C .incurring an economic loss; enter and some firms will exit; increase or decrease depending on the relative number of entering and exiting firms

D. making an economic profit; exit and some firms will enter; decrease or increase depending on the relative number of exiting and entering firms

E.making zero economic profit; shut down and exit; decrease

amethystbutterfly829

Suppose you are given the following information about a particular perfectly competitive industry:

Q^D= 6500-100P .....Market demand

Q^S= 1200P .....Market Supply

C(Q)=722+(Q²)/200 ......Firm's total cost function

Assume all firms in this perfectly competitive industry are identical.

a) Find the equillibrium price and the equilibrium quantity for the entire industry, the output supplied by the firm, and the profit of each firm.

b) Would you expect to see entry into or exit from this industry in the long run? Explain. What effect will entry or exit have on market equilibrium?

c) Suppose the long run total cost function is given by C(Q) = 6Q-3Q²+Q³. What will the price be in long run equilibrium in this industry? Is profit positive, negative or zero? Explain.

apricothorse950

ECON 1011 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost

ECON 1011 Lecture Notes - Lecture 15: Taipei Metro, Marginal Revenue, Marginal Cost

ECON 1011 Lecture Notes - Lecture 16: Marginal Cost, Fixed Cost

ECON 1011 Lecture 18: Lecture 15: Theory of Market Supply

Document Summary

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