MBA管理经济学
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In making the decision to produce or shut down, the firm considers only the (avoidable) variable costs & ignores fixed costs
Profit Margin (or Average Profit)
Profit-Maximization in the Short Run
In the short run, managers must make two decisions:
1. Produce or shut down?
~If shut down, produce no output and hires no variable inputs ~If shut down, firm loses amount equal to TFC
Level of output that maximizes total profit occurs at a higher level than the output that maximizes profit margin (& average profit)
Managers should ignore profit margin (average profit) when making optimal decisions
Demand for a Competitive Price-
Taker
Demand curve is horizontal at price determined by intersection of
market demand & supply
Perfectly elastic
Marginal revenue equals price
Firms are price-takers
Each produces only a very small portion of total market or industry output
All firms produce a homogeneous product Entry into & exit from the market is unrestricted
Employ empirically estimated values of market price, average variable cost, and marginal cost to calculate profit‐maximizing output and profit
Perfect Competition
Discuss 3 characteristics of perfectly competitive markets
Explain why the demand curve facing a perfectly competitive firm is perfectly elastic and serves as the firm’s marginal revenue curve Find short‐run profit‐maximizing output, derive firm and industry supply curves, and identify producer surplus Explain characteristics of long‐run competitive equilibrium for a firm, derive long‐run industry supply, and identify economic rent and producer surplus Find the profit‐maximizing level of a variable input
Demand for a Competitive Taking Firm (Figure 11.2)
S
Biblioteka BaiduPrice-
Price (dollars) Price (dollars)
P0
P0
D = MR
D
0
Q0
Quantity
0
Quantity
Panel A – Market
Panel B – Demand curve facing a price-taker
Average profit
( P ATC )Q
2. If produce, what is the optimal output level?
~If firm does produce, then how much? ~Produce amount that maximizes economic profit
Profit = π = TR - TC
Profit-Maximization in the Short Run
In the short run, the firm incurs costs that are:
Unavoidable and must be paid even if output is zero Variable costs that are avoidable if the firm chooses to shut down
Demand curve is also marginal revenue curve
(D = MR)
Can sell all they want at the market price
Each additional unit of sales adds to total revenue an amount equal to price
Chapter 11 Managerial Decisions in Competitive Markets
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
Profit Margin (or Average Profit)
Profit-Maximization in the Short Run
In the short run, managers must make two decisions:
1. Produce or shut down?
~If shut down, produce no output and hires no variable inputs ~If shut down, firm loses amount equal to TFC
Level of output that maximizes total profit occurs at a higher level than the output that maximizes profit margin (& average profit)
Managers should ignore profit margin (average profit) when making optimal decisions
Demand for a Competitive Price-
Taker
Demand curve is horizontal at price determined by intersection of
market demand & supply
Perfectly elastic
Marginal revenue equals price
Firms are price-takers
Each produces only a very small portion of total market or industry output
All firms produce a homogeneous product Entry into & exit from the market is unrestricted
Employ empirically estimated values of market price, average variable cost, and marginal cost to calculate profit‐maximizing output and profit
Perfect Competition
Discuss 3 characteristics of perfectly competitive markets
Explain why the demand curve facing a perfectly competitive firm is perfectly elastic and serves as the firm’s marginal revenue curve Find short‐run profit‐maximizing output, derive firm and industry supply curves, and identify producer surplus Explain characteristics of long‐run competitive equilibrium for a firm, derive long‐run industry supply, and identify economic rent and producer surplus Find the profit‐maximizing level of a variable input
Demand for a Competitive Taking Firm (Figure 11.2)
S
Biblioteka BaiduPrice-
Price (dollars) Price (dollars)
P0
P0
D = MR
D
0
Q0
Quantity
0
Quantity
Panel A – Market
Panel B – Demand curve facing a price-taker
Average profit
( P ATC )Q
2. If produce, what is the optimal output level?
~If firm does produce, then how much? ~Produce amount that maximizes economic profit
Profit = π = TR - TC
Profit-Maximization in the Short Run
In the short run, the firm incurs costs that are:
Unavoidable and must be paid even if output is zero Variable costs that are avoidable if the firm chooses to shut down
Demand curve is also marginal revenue curve
(D = MR)
Can sell all they want at the market price
Each additional unit of sales adds to total revenue an amount equal to price
Chapter 11 Managerial Decisions in Competitive Markets
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives