【正文】 run supply is horizontal ?Small increase in price will induce an extremely large output increase The Industry’s LongRun Supply Curve Chapter 8 Slide 88 ? LongRun Elasticity of Supply 1) Constantcost industry ?Longrun supply elasticity is infinitely large ?Inputs would be readily available The Industry’s LongRun Supply Curve Chapter 8 Slide 89 ? LongRun Elasticity of Supply 2) Increasingcost industry ?Longrun supply is upwardsloping and elasticity is positive ?The slope (elasticity) will depend on the rate of increase in input cost ?Longrun elasticity will generally be greater than shortrun elasticity of supply The Industry’s LongRun Supply Curve Chapter 8 Slide 90 ? Question: ? Describe the longrun elasticity of supply in a decreasing cost industry. The Industry’s LongRun Supply Curve Chapter 8 Slide 91 The LongRun Supply of Housing ? Scenario 1: Owneroccupied housing ? Suburban or rural areas ? National market for inputs Chapter 8 Slide 92 The LongRun Supply of Housing ? Questions ? Is this an increasing or a constantcost industry? ? What would you predict about the elasticity of supply? Chapter 8 Slide 93 ? Scenario 2: Rental property ? Zoning restrictions apply ? Urban location ? Highrise construction cost The LongRun Supply of Housing Chapter 8 Slide 94 ? Questions ? Is this an increasing or a constantcost industry? ? What would you predict about the elasticity of supply? The LongRun Supply of Housing Chapter 8 Slide 95 Summary ? The managers of firms can operate in accordance with a plex set of objectives and under various constraints. ? A petitive market makes its output choice under the assumption that the demand for its own output is horizontal. Chapter 8 Slide 96 Summary ? In the short run, a petitive firm maximizes its profit by choosing an output at which price is equal to (shortrun) marginal cost. ? The shortrun market supply curve is the horizontal summation of the supply curves of the firms in an industry. Chapter 8 Slide 97 Summary ? The producer surplus for a firm is the difference between revenue of a firm and the minimum cost that would be necessary to produce the profitmaximizing output. ? Economic rent is the payment for a scarce resource of production less the minimum amount necessary to hire that factor. Chapter 8 Slide 98 Summary ? In the longrun, profitmaximizing petitive firms choose the output at which price is equal to longrun marginal cost. ? The longrun supply curve for a firm can be horizontal, upward sloping, or downward sloping. End of Chapter 8 Profit Maximization and Competitive Supply 。 Economic Profit ? Accounting profit = R wL ? Economic profit = R = wL rK ?wl = labor cost ?rk = opportunity cost of capital )(?)(?Chapter 8 Slide 62 Choosing Output in the Long Run ? ZeroProfit ? If R wL + rk, economic profits are positive ? If R = wL + rk, zero economic profits, but the firms is earning a normal rate of return。Chapter 8 Profit Maximization and Competitive Supply Chapter 8 Slide 2 Topics to be Discussed ? Perfectly Competitive Markets ? Profit Maximization ? Marginal Revenue, Marginal Cost, and Profit Maximization ? Choosing Output in the ShortRun Chapter 8 Slide 3 Topics to be Discussed ? The Competitive Firm’s ShortRun Supply Curve ? ShortRun Market Supply ? Choosing Output in the LongRun ? The Industry’s LongRun Supply Curve Chapter 8 Slide 4 Perfectly Competitive Markets ? Characteristics of Perfectly Competitive Markets 1) Price taking 2) Product homogeneity 3) Free entry and exit Chapter 8 Slide 5 Perfectly Competitive Markets ? Price Taking ? The individual firm sells a very small share of the total market output and, therefore, cannot influence market price. ? The individual consumer buys too small a share of industry output to have any impact on market price. Chapter 8 Slide 6 Perfectly Competitive Markets ? Product Homogeneity ? The products of all firms are perfect substitutes. ? Examples ?Agricultural products, oil, copper, iron, lumber Chapter 8 Slide 7 Perfectly Competitive Markets ? Free Entry and Exit ? Buyers can easily switch from one supplier to another. ? Suppliers can easily enter or exit a market. Chapter 8 Slide 8 Perfectly Competitive Markets ? Discussion Questions ? What are some barriers to entry and exit? ? Are all markets petitive? ? When is a market highly petitive? Chapter 8 Slide 9 Profit Maximization ? Do firms maximize profits? ? Possibility of other objectives ?Revenue maximization ?Dividend maximization ?Shortrun pro