MBA管理经济学
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~ Shutdown price is minimum AVC
11-10
Fixed, Sunk,& Average Costs
❖Fixed, sunk, & average costs are irrelevant in the production decision
~ Fixed costs have no effect on marginal cost or minimum average variable cost—thus optimal level of output is unaffected
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
Chapter 11 Managerial Decisions in
Competitive Markets
11-1
Learning Objectives
❖ 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
~ Managers should ignore profit margin (average profit) when making optimal decisions
A verageprofit (PA T C)Q QQ
P A T C P r o fit m a r g in
11-8
Short-Run Output Decision
~ If shut down, firm loses amount equal to TFC
2. If produce, what is the optimal output level?
~ If firm does produce, then how much? ~ Produce amount that maximizes economic profit
~ Perfectly elastic
❖Marginal revenue equals price
~ 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
costs
11-7
Profit Margin (or Average Profit)
❖Level of output that maximizes total profit occurs at a higher level than the output that maximizes profit margin (& average profit)
~ Sunk costs are forever unrecoverable and cannot affect current or future decisions
~ Only marginal costs, not average costs, matter for the optimal level of output
profit‐maximizing output and profit
11-2
Perfect Competition
❖Firms are price-takers
~ Each produces only a very small portion of total market or industry output
Break-even point
Panel B: Profit curve when P = $36
Break-even point
11-14
Short-Run Loss Minimization: P = $10.50 (Figure 11.5)
PTrootfaitl =co$3st,1=5$01-7$x53,10000 = -=$1$,59,51000
❖All firms produce a homogeneous product ❖Entry into & exit from the market is
unrestricted
11-3
Demand for a Competitive Price-Taker
❖Demand curve is horizontal at price determined by intersection of market demand & supply
Computing Short-Run Producer Surplus (Figure 11.6)
P ro d u c e r s u rp lu s T R T V C $ 9 1 1 0 $ 5 .5 5 1 1 0 $990$610 $380
Or, equivalently, P r o d u c e r s u r p l u s = A r e a o f t r a p e z o i d e d b a i n F i g u r e 1 1 . 6
❖Firm will produce output where P = SMC
as long as:
~ Total revenue ≥ total avoidable cost or total variable cost (TR TVC)
❖Equivalently, the firm should produce if
Profit = π = TR - TC 11-6
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
economic rent and producer surplus
❖ Find the profit‐maximizing level of a variable input
❖ Employ empirically estimated values of market price,
average variable cost, and marginal cost to calculate
(Figure 11.6)
11-20
Long-Run Profit-Maximizing Equilibrium (Figure 11.7)
~ Supply prices give marginal costs of production for every firm
11-17
Short-Run Producer Surplus
❖Short-run producer surplus is the amount
by which TR exceeds TVC
~ If P minimum AVC, produce output at
which P = SMC ❖ATC tells how much profit/loss if
produce
π = (P – ATC)Q 11-16
Short-Run Supply Curves
❖For an individual price-taking firm
11-11
Profit Maximization: P = $36
(Figure 11.3)
11-12
Profit Maximization: P = $36
(Figure 11.3)
11-13
Profit Maximization: P = $36
(Figure 11.4)
Panel A: Total revenue & total cost
P AVC
11-9
Short-Run Output Decision
❖The firm will shut down if:
~ Total revenue cannot cover total avoidable
cost (TR < TVC) or, equivalently, P AVC
~ Produce zero output ~ Lose only total fixed costs
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
= H e ig h t A v e ra g eb a s e ($$3980$5)802110
$ 3 8 0 m u l t i p l i e d b y 1 0 0 f i r m s ( $ 3 8 0 1 0 0 ) $ 3 8 , 0 0 0 11-19
Short-Run Firm & Industry Supply
~ Variable costs that are avoidable if the firm chooses to shut down
❖In making the decision to produce or shut
down, the firm considers only the
(avoidable) variable costs & ignores fixed
Total revenue = $10.50 x 300 = $3,150
11-15
Summary of Short-Run Output Decision
❖AVC tells whether to produce
~ Shut down if price falls below minimum
AVC ❖SMC tells how much to produce
~ The area above the short-run supply curve that is below market price over the range of output supplied
~ Exceeds economic profit by the amount of
TFC
11-18
~ Portion of firm’s marginal cost curve above
minimum AVC ~ For prices below minimum AVC, quantity
supplied is zero
❖For a competitive industry
~ Horizontal sum of supply curves of all individual firms; always upward sloping
11-4
Demand for a Competitive Price-Taking Firm (Figure 11.2)
S
Price (dollars) Price (dollars)
P0
P0
D = MR
D
0
Q0
QuantiHale Waihona Puke Baiduy
0
Quantity
Panel A – Market
Panel B – Demand curve facing a price-taker 11-5
11-10
Fixed, Sunk,& Average Costs
❖Fixed, sunk, & average costs are irrelevant in the production decision
~ Fixed costs have no effect on marginal cost or minimum average variable cost—thus optimal level of output is unaffected
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
Chapter 11 Managerial Decisions in
Competitive Markets
11-1
Learning Objectives
❖ 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
~ Managers should ignore profit margin (average profit) when making optimal decisions
A verageprofit (PA T C)Q QQ
P A T C P r o fit m a r g in
11-8
Short-Run Output Decision
~ If shut down, firm loses amount equal to TFC
2. If produce, what is the optimal output level?
~ If firm does produce, then how much? ~ Produce amount that maximizes economic profit
~ Perfectly elastic
❖Marginal revenue equals price
~ 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
costs
11-7
Profit Margin (or Average Profit)
❖Level of output that maximizes total profit occurs at a higher level than the output that maximizes profit margin (& average profit)
~ Sunk costs are forever unrecoverable and cannot affect current or future decisions
~ Only marginal costs, not average costs, matter for the optimal level of output
profit‐maximizing output and profit
11-2
Perfect Competition
❖Firms are price-takers
~ Each produces only a very small portion of total market or industry output
Break-even point
Panel B: Profit curve when P = $36
Break-even point
11-14
Short-Run Loss Minimization: P = $10.50 (Figure 11.5)
PTrootfaitl =co$3st,1=5$01-7$x53,10000 = -=$1$,59,51000
❖All firms produce a homogeneous product ❖Entry into & exit from the market is
unrestricted
11-3
Demand for a Competitive Price-Taker
❖Demand curve is horizontal at price determined by intersection of market demand & supply
Computing Short-Run Producer Surplus (Figure 11.6)
P ro d u c e r s u rp lu s T R T V C $ 9 1 1 0 $ 5 .5 5 1 1 0 $990$610 $380
Or, equivalently, P r o d u c e r s u r p l u s = A r e a o f t r a p e z o i d e d b a i n F i g u r e 1 1 . 6
❖Firm will produce output where P = SMC
as long as:
~ Total revenue ≥ total avoidable cost or total variable cost (TR TVC)
❖Equivalently, the firm should produce if
Profit = π = TR - TC 11-6
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
economic rent and producer surplus
❖ Find the profit‐maximizing level of a variable input
❖ Employ empirically estimated values of market price,
average variable cost, and marginal cost to calculate
(Figure 11.6)
11-20
Long-Run Profit-Maximizing Equilibrium (Figure 11.7)
~ Supply prices give marginal costs of production for every firm
11-17
Short-Run Producer Surplus
❖Short-run producer surplus is the amount
by which TR exceeds TVC
~ If P minimum AVC, produce output at
which P = SMC ❖ATC tells how much profit/loss if
produce
π = (P – ATC)Q 11-16
Short-Run Supply Curves
❖For an individual price-taking firm
11-11
Profit Maximization: P = $36
(Figure 11.3)
11-12
Profit Maximization: P = $36
(Figure 11.3)
11-13
Profit Maximization: P = $36
(Figure 11.4)
Panel A: Total revenue & total cost
P AVC
11-9
Short-Run Output Decision
❖The firm will shut down if:
~ Total revenue cannot cover total avoidable
cost (TR < TVC) or, equivalently, P AVC
~ Produce zero output ~ Lose only total fixed costs
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
= H e ig h t A v e ra g eb a s e ($$3980$5)802110
$ 3 8 0 m u l t i p l i e d b y 1 0 0 f i r m s ( $ 3 8 0 1 0 0 ) $ 3 8 , 0 0 0 11-19
Short-Run Firm & Industry Supply
~ Variable costs that are avoidable if the firm chooses to shut down
❖In making the decision to produce or shut
down, the firm considers only the
(avoidable) variable costs & ignores fixed
Total revenue = $10.50 x 300 = $3,150
11-15
Summary of Short-Run Output Decision
❖AVC tells whether to produce
~ Shut down if price falls below minimum
AVC ❖SMC tells how much to produce
~ The area above the short-run supply curve that is below market price over the range of output supplied
~ Exceeds economic profit by the amount of
TFC
11-18
~ Portion of firm’s marginal cost curve above
minimum AVC ~ For prices below minimum AVC, quantity
supplied is zero
❖For a competitive industry
~ Horizontal sum of supply curves of all individual firms; always upward sloping
11-4
Demand for a Competitive Price-Taking Firm (Figure 11.2)
S
Price (dollars) Price (dollars)
P0
P0
D = MR
D
0
Q0
QuantiHale Waihona Puke Baiduy
0
Quantity
Panel A – Market
Panel B – Demand curve facing a price-taker 11-5