微觀經(jīng)濟學第八章利潤的最大化和競爭性供給

1、微觀經(jīng)濟學第八章利潤的最大化和競爭性供給Topics to be DiscussedProfit MaximizationMarginal Revenue, Marginal Cost, and Profit MaximizationChoosing Output in the Short RunThe Competitive Firms Short-Run Supply CurveTopics to be DiscussedChoosing Output in the Long RunThe Industrys Long-Run Supply CurvePerfectly Competiti

2、ve MarketsIntroductionCharacteristics of Perfectly Competitive Markets1)Identical products2)Individual firms are too small to impact the market3)No barriers to entry and exitProfit MaximizationDo firms maximize profits?1) Possibility of other objectivesRevenue maximizationDividend maximizationShort-

3、run profit maximizationProfit MaximizationDo firms maximize profits?2) Implications of non-profit objectiveOver the long-run investors would not support the companyWithout profits, survival unlikelyProfit MaximizationDo firms maximize profits?3) Long-run profit maximization is valid and does not exc

4、lude the possibility of altruistic behavior.Marginal Revenue, Marginal Cost, and Profit MaximizationDetermining the profit maximizing level of outputProfit ( ) = Total Revenue - Total CostTotal Revenue (R) = PqTotal Cost (C) = CqTherefore:Profit Maximizationin the Short Run0Cost,Revenue,Profit$ (per

5、 year)Output (units per year)Profit Maximizationin the Short Run0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)Profit Maximizationin the Short Run0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)Profit Maximizationin the Short Run0Cost,Revenue,Profit$ (per year)Output (unit

6、s per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationObservationsR(q)Curvature of the line indicating that higher output levels are accompanied by lower pricesR(q) slope = marginal revenueC(q)C(q) slope = marginal costQuestion: Why is C(q) positive when output is zero?Mar

7、ginal Revenue, Marginal Cost, and Profit MaximizationMarginal revenue is the additional revenue from producing one more unit of output.Marginal cost is the additional cost from producing one more unit of output.Marginal Revenue, Marginal Cost, and Profit Maximization0Cost,Revenue,Profit$ (per year)O

8、utput (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationComparing R(q) and C(q)Output levels0- q0: C(q) R(q) FC + VC R(q)MR MCIndicates higher profit at higher output0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Co

9、st, and Profit MaximizationComparing R(q) and C(q)Output levels0- q0: C(q) R(q) FC + VC R(q)MR MCIndicates higher profit at higher outputQuestion: Why is profit negative when output is zero?0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Prof

10、it MaximizationComparing R(q) and C(q)Output levelsq0 - q*: R(q) C(q)MR MCIndicates higher profit at higher output 0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationComparing R(q) and C(q)Output levels q*: R(q)= C(q)MR = MC 0

11、Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationComparing R(q) and C(q)Output levels q*: R(q)= C(q)MR = MC Question: Why would profit be reduced at lower and higher levels of output?0Cost,Revenue,Profit$ (per year)Output (un

12、its per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationComparing R(q) and C(q)Output levels Beyond q*: R(q) C(q)MC = MR 0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationTherefore, it can be said:P

13、rofits are maximized when MC = MR.0Cost,Revenue,Profit$ (per year)Output (units per year)R(q)C(q)ABq0q*Marginal Revenue, Marginal Cost, and Profit MaximizationMarginal Revenue, Marginal Cost, and Profit MaximizationMarginal Revenue, Marginal Cost, and Profit MaximizationThe Competitive Firm1)Price t

14、aker2) Market output (Q) and firm output (q)3)Market demand (D) and firm demand (d)4)R(q) is a straight lineMarginal Revenue, Marginal Cost, and Profit MaximizationOutput (bushels)Price$ per bushelPrice$ per bushelOutput millions of bushels)Marginal Revenue, Marginal Cost, and Profit MaximizationOut

15、put (bushels)Price$ per bushelPrice$ per bushelOutput millions of bushels)d$4D100200100FirmIndustry$4Marginal Revenue, Marginal Cost, and Profit MaximizationThe Competitive Firm5)The competitive firms demandIndividual producer sells all units for $4 regardless of the producers level of output.If the

16、 producer tries to raise price, sales are zero.If the producers tries to lower price he cannot increase salesP = D = MR = ARMarginal Revenue, Marginal Cost, and Profit MaximizationThe Competitive Firm6)Profit MaximizationMC(q) = MR = PChoosing Output in the Short RunWe will combine production and co

17、st analysis with demand to determine output and profitability.A Competitive FirmMaking a Positive Profit10203040Price($ perunit)012345678910115060OutputA Competitive FirmMaking a Positive Profit10203040Price($ perunit)012345678910115060AR=MR=PAssume a marketprice of $40.DOutputA Competitive FirmMaki

18、ng a Positive Profit10203040Price($ perunit)012345678910115060DAR=MR=PMC q0q*OutputA Competitive FirmMaking a Positive ProfitOutput10203040Price($ perunit)012345678910115060DAR=MR=PMCLost profit forqq q*q1 : MR MC andq2: MC MR andq0: MC = MR butMC fallingq1q2A Competitive FirmMaking a Positive Profi

19、t10203040Price($ perunit)012345678910115060DAR=MR=PMCLost profit forqq q*Why must MC berising to maximizeprofits?OutputA Competitive FirmMaking a Positive Profit10203040Price($ perunit)012345678910115060DMCq0q*AVCATCAR=MR=PABOutputCAt q*: MR = MCand P ATCA Competitive FirmIncurring LossesPrice($ per

20、unit)DAR=MR=PMCq*OutputA Competitive FirmIncurring LossesPrice($ perunit)DP = MRMCq*OutputAVCATCFCBAEAt q*: MR = MCand P ATCA Competitive FirmIncurring LossesPrice($ perunit)DP = MRMCq*OutputAVCATCFCBAEWould this producercontinue to produce with a loss?Choosing Output in the Short RunSummary of Prod

21、uction DecisionsExample: Some CostConsiderations for ManagersThree 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 firms accounting ledger may have two components, only one of which involves marginal cost.Examp

22、le: Some CostConsiderations for ManagersThree guidelines for estimating marginal cost:3)All opportunity cost should be included in determining marginal cost.A Competitive FirmsShort-Run Supply CurvePrice($ perunit)OutputA Competitive FirmsShort-Run Supply CurvePrice($ perunit)OutputAVCATCA Competiti

23、ve FirmsShort-Run Supply CurvePrice($ perunit)MCOutputAVCATCA Competitive FirmsShort-Run Supply CurvePrice($ perunit)MCOutputAVCATCP = AVCP1P2q1q2The firm chooses theoutput level where MR =MC,as long as the firm is able tocover its variable cost of production.What happensif P MC for all units.Produc

24、er Surplus for a FirmPrice($ perunit ofoutput)OutputAVCMCPAq*DBC0ProducerSurplusAlternatively, VC is thesum of MC or ODCq* .R is P x q* or OABq*.Producer surplus =R - VC or ABCD.Producer Surplus for a MarketPrice($ perunit ofoutput)OutputProducer Surplus for a MarketPrice($ perunit ofoutput)OutputDP

25、roducer Surplus for a MarketPrice($ perunit ofoutput)OutputDSP*Q*Market supply (S) is the sum of the firms MC.Producer Surplus for a MarketPrice($ perunit ofoutput)OutputDSP*Q*ProducerSurplusMarket producer surplus isthe difference between P* and S from 0 to Q*.Choosing Output in the Long RunIn the

26、long run, a firm can alter all its inputs, including the size of the plant.We assume free entry and free exit.Output Choice in the Long RunPrice($ perunit ofoutput)OutputOutput Choice in the Long RunPrice($ perunit ofoutput)OutputP = MR$40Output Choice in the Long RunPrice($ perunit ofoutput)OutputP

27、 = MRSACSMC$40Output Choice in the Long RunPrice($ perunit ofoutput)OutputP = MRSACSMCq1$40ABDIn the short run, thefirm is faced with fixedinputs. P = $40 ATC.Profit is equal to ABCD.Output Choice in the Long RunPrice($ perunit ofoutput)OutputP = MRSACSMCq1$40ABCD$30LACEGLMCOutput Choice in the Long

28、 RunPrice($ perunit ofoutput)OutputP = MRSACSMCq1$40ABCDIn the long run, the plant size will be increased and output increased to q3.Long-run profit, EFGD short runprofit ABCD.$30q3q2LACEGFLMCOutput Choice in the Long RunPrice($ perunit ofoutput)OutputP = MRSACSMCq1$40ABCDIn the long run the profit

29、maximizing output is LMC = P(MR).$30q3q2LACEGFLMCOutput Choice in the Long RunQuestion:Would the producer make an economic profit if the price = $30?Choosing Output in the Long RunZero-ProfitEconomic profit = R = wL - rKwl = labor costrk = opportunity cost of capitalChoosing Output in the Long RunZe

30、ro-ProfitIf R wL + rk, economic profits are positiveIf R = wL + rk, zero economic profits, but the firms is earning a normal rate of return; indicating the industry is competitiveIf R wl + rk, consider going out of businessChoosing Output in the Long RunLong-Run Competitive EquilibriumThe long-run r

31、esponse to short-run profits is to increase output and profits.Profits will attract other producers.More producers increases industry supply which decreases market price.Long-Run Competitive EquilibriumOutputOutput$ per unit ofoutput$ per unit ofoutputFirmIndustryLong-Run Competitive EquilibriumOutp

32、utOutputQ1$ per unit ofoutput$ per unit ofoutput$40P1LACLMCDS1FirmIndustryLong-Run Competitive EquilibriumOutputOutput$ per unit ofoutput$ per unit ofoutput$40P1LACLMCDS1S2$30Q2P2Q1q2FirmIndustryChoosing Output in the Long RunLong-Run Competitive Equilibrium1) P = LAC: No incentive to leave or enter

33、2)MC = MR3) Equilibrium Market PriceChoosing Output in the Long RunQuestions:1)Explain the market adjustment when P MC for some firms.3)Explain why zero economic profits is essential for the market to be in long-run equilibrium.Choosing Output in the Long RunEconomic RentEconomic rent is the differe

34、nce between what firms are willing to pay for an input to production less the minimum amount necessary to buy that input.Firms Earn Zero Profit in Long-Run EquilibriumTicketPriceSeason TicketsSales (millions)$71.0LACLMCA baseball teamin a city with othercompetitive sports teams sells enough tickets

35、so that price is equal to marginal and average cost.Firms Earn Zero Profit in Long-Run EquilibriumTicketPriceSeason TicketsSales (millions)$71.3LACLMCIn this city, thereare no other competitors,so a $10 price can be charged.$10Economic RentChoosing Output in the Long RunWith a fixed input such as a

36、unique location, the difference between the cost of production (LAC = 7) and price ($10) is the value or opportunity cost of the input (location) and represents the rent from the input.Choosing Output in the Long RunIf the opportunity cost of the input (rent) is not taken into consideration it may a

37、ppear that economic profits exist in the long-run.The IndustrysLong-Run Supply CurveTo determine long-run supply, we assume all firms have access to the available production technology.Output is increased by using more inputs, not by invention.The IndustrysLong-Run Supply CurveThe shape of the long-

38、run supply curve depends on the extent to which changes in industry output affect the prices the firms must pay for inputs.Long-Run Supply in aConstant-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputLong-Run Supply in aConstant-Cost IndustryOutputOutput$ per unit ofoutput$ per unit o

39、foutputP1P1q1D1S1Q1Price = P1 and the industryis in long-run equilibrium,P = MC = AC.ACMCALong-Run Supply in aConstant-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1ACP1MCq1D1S1Q1Demand increases and price increases to P2.q2P2P2ACD2Long-Run Supply in aConstant-Cost IndustryOutputO

40、utput$ per unit ofoutput$ per unit ofoutputP1ACP1MCq1D1S1Q1Economic profits attract newfirms. Supply increases to S2 andthe market returns to long-run equilibrium.q2P2P2ABCS2D2Long-Run Supply in aConstant-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1ACP1MCq1SLD1S1Q1Q1 increase to

41、 Q2.Long-run supply = SL = LRAC.Change in output has no impact on input cost.ABCS2Q2D2Long-Run Supply in anIncreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputS1Long-Run Supply in anIncreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1P1q1D1ALAC1SMC1Q1Pri

42、ce = P1 and the industryis in long-run equilibrium,P = MC = AC.D1Long-Run Supply in anIncreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1P1q1S1q2P2P2D2ALAC1SMC1Q1Q2Demand increases and price increases to P2. Priceincreases to P2 and createseconomic profits.D1Long-Run Supply

43、in anIncreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1P1q1S1q2P2P2D1S2P3ABLAC1SMC1The entry of new firmscauses supply to shift to the right.Q1Q2D1Long-Run Supply in anIncreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1LAC1P1q1S1Q1q2P2P2ABD1S2P3SLSM

44、C1P3SMC2However, due to the increasein input prices, long-runequilibrium occurs at a higher price.Q2Q3LAC2The IndustrysLong-Run Supply CurveQuestions1) Explain how decreasing-cost is possible.2)Illustrate a decreasing cost industry.3)What is the slope of the SL in a decreasing-cost industry?Long-Run

45、 Supply in anDecreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputS1Long-Run Supply in anDecreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1q1D1LAC1Q1Price = P1 and the industryis in long-run equilibrium,P = MC = AC.ASMC1P1D1Long-Run Supply in anDecreasi

46、ng-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1q1S1q2P2P2D2ALAC1Q1Q2Demand increases and price increases to P2. Priceincreases to P2 and createseconomic profits.SMC1P1D1Long-Run Supply in anDecreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1q1S1q2P2P2D2A

47、LAC1Q1Q2S2BSMC1P1The entry of new firmscauses supply to shift to the right.D1Long-Run Supply in anDecreasing-Cost IndustryOutputOutput$ per unit ofoutput$ per unit ofoutputP1P1q1S1q2P2P2D2ALAC1SMC1Q1Q2S2BSLP3Q3SMC2P3LAC2However, due to the decreasein input prices, long-runequilibrium occurs at a low

48、er price.The IndustrysLong-Run Supply CurveThe Short and Long Run Effects of a TaxIn an earlier chapter we studied how firms respond to taxes on an input.Now, we will consider how a firm responds to a tax on its output.Effect of an Output Tax on a Competitive Firms OutputPrice($ perunit ofoutput)Out

49、putAVC1P1MC1q1Effect of an Output Tax on a Competitive Firms OutputPrice($ perunit ofoutput)OutputAVC1An output taxraises the firmsmarginal cost by theamount of the tax.MC2 = MC1 + taxAVC2P1MC1q1Effect of an Output Tax on a Competitive Firms OutputPrice($ perunit ofoutput)OutputAVC1The firm willredu

50、ce output tothe point at whichthe marginal costplus the tax equalsthe price.MC2 = MC1 + taxAVC2P1MC1q1tq2Effect of an Output Taxon Industry OutputPrice($ perunit ofoutput)OutputEffect of an Output Taxon Industry OutputPrice($ perunit ofoutput)OutputP1DQ1S1Effect of an Output Taxon Industry OutputPri

51、ce($ perunit ofoutput)OutputP1DS1Q1S2 = S1 + tP2Q2tTax shifts S1 to S2 andoutput falls to Q2. Priceincreases to P2.The Long-Run Effectsof an Output TaxOutputOutput$ per unit ofoutput$ per unit ofoutputThe Long-Run Effectsof an Output TaxOutputOutput$ per unit ofoutput$ per unit ofoutputDSP1Q1P1LAC1q

52、1The Long-Run Effectsof an Output TaxOutputOutput$ per unit ofoutput$ per unit ofoutputLAC1DS1P1Q1P1S2tq1tLAC2P3Q3The Long-Run Effectsof an Output TaxObservations:1) The tax increases LAC from LAC1 to LAC2.2)The higher LAC will give some firms and incentive to leave the industry.3) The exit of firms

53、 reduces the aggregate supply from S1 to S2.The Long-Run Effectsof an Output TaxObservations:4)Long-run equilibrium occurs at P3 and Q3, a higher price and higher output.Question:What impact would price elasticity of demand have on the degree of the price increase and output decrease?The IndustrysLo

54、ng-Run Supply CurveLong-Run Elasticity of Supply1)Constant-cost industryLong-run supply is horizontalSmall increase in price will induce an extremely large output increaseLong-run supply elasticity is infinitely largeThe IndustrysLong-Run Supply CurveLong-Run Elasticity of Supply2)Increasing-cost in

55、dustryLong-run supply is upward-sloping and elasticity is positiveThe slope (elasticity) will depend on the rate of increase in input costLong-run elasticity will generally be greater than short-run elasticity of supplyThe IndustrysLong-Run Supply CurveQuestion:Describe the elasticity of supply in a decreasing -cost industry.Example:The Long-Run Supply of HousingScenario 1: Owner-occupied housingSuburban or rural areasNational market for inputsQuestionsIs this an increasing or a constant-cost industry?What would you predict about the elasticity of supply?Example:The Long-Run Sup