AECN 141 Lecture 4: Chapter 7
Document Summary
Fir(cid:373) uses sa(cid:373)e pri(cid:374)(cid:272)iples (cid:449)e"(cid:448)e see(cid:374) to (cid:373)ake produ(cid:272)tio(cid:374) de(cid:272)isio(cid:374)s. Two cases: firms with multiple production facilities, firms facing multiple related markets. Owner can use truck to: transport grain, transport livestock. What q (tp) should the firm produce: should produce at 7 units of input which gives 22 units of outputs, not profitable (atc < p) Price may be different for livestock transportation than for grain transportation. Trucker can haul one or the other. Should transport livestock: makes profit in livestock while losing money in grain, what are the aggregate effect of many truck owners facing the same decision, life the long-run supply story. Equilibrium price will eventual become the same for both markets if price structures are the same. Note: the benefits of perfect competition and deviations from perfect competition. Interaction of optimizing producers and consumers in perfectly competitive markets results in maximum economic surplus = markets are efficient. Then: consequences of moving away from perfectly competitive markets.
