【正文】 t millions of bushels) Marginal Revenue, Marginal Cost, and Profit Maximization Output (bushels) Price $ per bushel Price $ per bushel Output millions of bushels) d $4 D 100 200 100 Firm Industry $4 Marginal Revenue, Marginal Cost, and Profit Maximization n The Competitive Firm 5) The petitive firm’s demand – Individual producer sells all units for $4 regardless of the producer’s level of output. – If the producer tries to raise price, sales are zero. – If the producers tries to lower price he cannot increase sales – P = D = MR = AR Marginal Revenue, Marginal Cost, and Profit Maximization n The Competitive Firm 6) Profit Maximization – MC(q) = MR = P Choosing Output in the Short Run n We will bine production and cost analysis with demand to determine output and profitability. A Competitive Firm Making a Positive Profit 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 Output A Competitive Firm Making a Positive Profit 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 AR=MR=P Assume a market price of $40. D Output A Competitive Firm Making a Positive Profit 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 D AR=MR=P MC MR MC q? w h e re at m a x i m i z ed * ?q0 q* Output A Competitive Firm Making a Positive Profit Output 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 D AR=MR=P MC Lost profit for qq q* q0 q* Lost profit for q2 q* q1 : MR MC and q2: MC MR and q0: MC = MR but MC falling q1 q2 A Competitive Firm Making a Positive Profit 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 D AR=MR=P MC Lost profit for qq q* q0 q* Lost profit for q2 q* Why must MC be rising to maximize profits? Output A Competitive Firm Making a Positive Profit 10 20 30 40 Price ($ per unit) 0 1 2 3 4 5 6 7 8 9 10 11 50 60 D MC q0 q* AVC ATC AR=MR=P A B Output C At q*: MR = MC and P ATC ABCDorqx AC) (P *? ?A Competitive Firm Incurring Losses Price ($ per unit) D AR=MR=P MC q* Output A Competitive Firm Incurring Losses Price ($ per unit) D P = MR MC q* Output AVC ATC F C B A E At q*: MR = MC and P ATC ABCDorqx AC) (P *? ?A Competitive Firm Incurring Losses Price ($ per unit) D P = MR MC q* Output AVC ATC F C B A E Would this producer continue to produce with a loss? Choosing Output in the Short Run n Summary of Production Decisions dow shoul d f i r m t he If 4.l oss. aa t pr odu c e shoul d f i r m t h e If 3.s.39。 m a king is f i r m t he If 2. w he n m a xim iz e d is 1. AT CAV C PAT C PAV C AT C P M R MC????????Example: Some Cost Considerations for Managers n Three guidelines for estimating marginal cost: 1) Average variable cost should not be used as a substitute for marginal cost. 2) A single item on a firm’s accounting ledger may have two ponents, only one of which involves marginal cost. Example: Some Cost Considerations for Managers n Three guidelines for estimating marginal cost: 3) All opportunity cost should be included in determining marginal cost. A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) Output A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) Output AVC ATC A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) MC Output AVC ATC A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) MC Output AVC ATC P = AVC P1 P2 q1 q2 The firm chooses the output level where MR =MC, as long as the firm is able to cover its variable cost of production. What happens if P AVC? A Competitive Firm’s ShortRun Supply Curve n Observations: ? P = MR ? MR = MC ? P = MC n Supply is the amount of output for every possible price. Therefore: ? If P = P1, then q = q1 ? If P = P2, then q = q2 A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) MC Output AVC ATC P = AVC P1 P2 q1 q2 A Competitive Firm’s ShortRun Supply Curve Price ($ per unit) MC Output AVC ATC P = AVC P1 P2 q1 q2 S = MC above AVC A Competitive Firm’s ShortRun Supply Curve n Observations: ? Supply is upward sloping due to diminishing returns. ? Higher price pensates the firm for higher cost of additional output and increases total profit because it applies to all units. A Competitive Firm’s ShortRun Supply Curve n Firm’s Response to and Input Price Change ? When the price of a firms product changes, the firm changes its output level, so that the marginal cost of production remains equal to the price. The Response of a Firm to a Change in Input Price Price, Cost ($ per unit) Output The Response of a Firm to a Change in Input Price Price, Cost ($ per unit) Output $5 MC1 q1 P = $5 amp。 indicating the industry is petitive ? If R wl + rk, consider going out of business Choosing Output in the Long Run n LongRun Competitive Equilibrium ? The longrun response to shortrun profits is to increase output and profits. ? Profits will attract other producers. ? More producers increases industry supply which decreases market price. LongRun Competitive Equilibrium Output Output $ per unit of output $ per unit of output Firm Industry LongRun Competitive Equilibrium Output Output Q1 $ per unit of