# Register now to access 7 million high quality study materials (What's Course Hero?) Course Hero is the premier provider of high quality online educational resources. With millions of study documents, online tutors, digital flashcards and free courseware, Course Hero is helping students learn more efficiently and effectively. Whether you're interested in exploring new subjects or mastering key topics for your next exam, Course Hero has the tools you need to achieve your goals.

18 Pages

### Chapter8 - Part 2

Course: ECON 293, Spring 2011
School: South Carolina
Rating:

Word Count: 1114

#### Document Preview

Maximization Profit and Competitive Supply Chapter 8 A C T I V E L E A R N I N G Identifying a firm's profit Determine this firm's total profit. Identify the area on the graph that represents the firm's profit. A competitive firm Costs, P MC P = \$10 \$6 MR ATC 50 Q 2 The Response of a Firm to a Change in Input Price When the marginal cost of production for a firm increases (from MC1 to MC2), the level of...

Register Now

#### Unformatted Document Excerpt

Coursehero >> South Carolina >> South Carolina >> ECON 293

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.
Maximization Profit and Competitive Supply Chapter 8 A C T I V E L E A R N I N G Identifying a firm's profit Determine this firm's total profit. Identify the area on the graph that represents the firm's profit. A competitive firm Costs, P MC P = \$10 \$6 MR ATC 50 Q 2 The Response of a Firm to a Change in Input Price When the marginal cost of production for a firm increases (from MC1 to MC2), the level of output that maximizes profit falls (from q 1 to q 2 ). The shaded area in the figure gives the total savings to the firm (or equivalently, the reduction in lost profit) associated with the reduction in output from q 1 to q 2. Industry Supply in the Short Run Because the third firm has a lower average variable cost curve than the first two firms, the market supply curve S begins at price P 1 and follows the marginal cost curve of the third firm MC3 until price equals P 2, when there is a kink. For P 2 and all prices above it, the industry quantity supplied is the sum of the quantities supplied by each of the three firms. Producer Surplus in the Short Run producer surplus Sum over all units produced by a firm of differences between the market price of a good and the marginal cost of production. The producer surplus for a firm is measured by the yellow area below the market price and above the marginal cost curve, between outputs 0 and q*, the profit-maximizing output. Alternatively, it is equal to rectangle ABCD because the sum of all marginal costs up to q* is equal to the variable costs of producing q*. Producer Surplus versus Profit Producer surplus = PS = R - VC Profit = = R - VC - FC Producer Surplus in the Short Run The producer surplus for a market is the area below the market price and above the market supply curve, between 0 and output Q*. Long-Run Profit Maximization The firm maximizes its profit by choosing the output at which price equals long-run marginal cost LMC. In the diagram, the firm increases its profit from ABCD to EFGD by increasing its output in the long run. Long-Run Competitive Equilibrium ze ro e c o no mic pro fit A firm is earning a normal return on its investment--i.e., it is doing as well as it could by investing its money elsewhere. e ntry and e xit In a market with entry and exit, a firm enters when it can earn a positive longrun profit and exits when it faces the prospect of a long-run loss. Long-Run Competitive Equilibrium Entry and Exit Positive profit encourages entry of new firms and causes a shift to the right in the supply curve to S 2. The long-run equilibrium occurs at a price of \$30, where each firm earns zero profit and there is no incentive to enter or exit the industry. Long-Run Competitive Equilibrium A long-run competitive equilibrium occurs when three conditions hold: 1. All firms in the industry are maximizing profit. No firm has an incentive either to enter or exit the industry because all firms are earning zero economic profit. The price of the product is such that the quantity supplied by the industry is equal to the quantity by demanded consumers. 2. 3. Long-Run Competitive Equilibrium e c o no mic re nt: Amount that firms are willing to pay for an input less the minimum amount necessary to obtain it. pro duc e r s urplus in the lo ng run: In the long run, in a competitive market, the producer surplus that a firm earns on the output that it sells consists of the economic rent that it enjoys from all its scarce inputs. Producer Surplus in the LongRun In long-run equilibrium, all firms earn zero economic profit. In (a), a baseball team in a moderate-sized city sells enough tickets so that price (\$7) is equal to marginal and average cost. In (b), the demand is greater, so a \$10 price can be charged. The team increases sales to the point at which the average cost of production plus the average economic rent is equal to the ticket price. When the opportunity cost associated with owning the franchise is taken into account, the team earns zero economic profit. The Industry's Long-Run Supply Curve Lo ng -Run S upply in a Co ns tant-Co s t Indus try When demand increases, initially causing a price, the firm initially increases its output from q 1 to q 2. But the entry of new firms causes a shift to the right in industry supply. Because input prices are unaffected by the increased output of the industry, entry occurs until the original price is obtained. The long-run s upply curve for a cons tant-cos t indus try is , the re fore , a horiz ontal line at a price that is e qual to the long-run m inim um ave rage cos t of production. The Industry's Long-Run Supply Curve Lo ng -Run S upply in an Inc re as ing -Co s t Indus try When demand increases, initially causing a price rise, the firms increase their output from q 1 to q 2. In that case, the entry of new firms causes a shift to the right in supply from S 1 to S 2 . Because input prices increase as a result, the new long-run equilibrium occurs at a higher price than the initial equilibrium. In an incre as ing-cos t indus try, the long-run indus try s upply curve is upward s loping. Effects of a Tax Effe c t o f an Output Tax o n a Co mpe titive Firm's Output An output tax raises the firm's marginal cost curve by the amount of the tax. The firm will reduce its output to the point at which the marginal cost plus the tax is equal to the price of the product. Effects of a Tax Effe c t o f an Output Tax o n Indus try Output An output tax placed on all firms in a competitive market shifts the supply curve for the industry upward by the amount of the tax. This shift raises the market price of the product and lowers the total output of the industry. A C T I V E L E A R N I N G Identifying long-run equilibrium A number of stores offer film developing as a service to their customers. Suppose that each store offering this service has a cost function C(q) = 50 + 0.5q + 0.08q2 and a marginal cost MC = 0.5 + 0.16q. If the going rate for developing a roll of film is \$8.50, is the industry in long-run equilibrium? If not, find the price associated with long-run equilibrium.
Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.

Below is a small sample set of documents:

South Carolina - ECON - 293
The Analysis of Competitive MarketsChapter 9Chapter OutlineEvaluating the Gains and Losses from Government Policies-Consumer and Producer Surplus The Efficiency of a Competitive Market The Impact of a Tax or Subsidy Review of Consumer and Producer Su
South Carolina - ECON - 293
The Analysis of Competitive MarketsChapter 9ExternalitiesIn absence of market failures, the competitive market outcome is efficient, maximizes total surplus. One type of market failure: e xte rnality, the uncompensated impact of one person's actions on
South Carolina - ECON - 293
Market Power: Monopoly and MonopsonyChapter 10Chapter Outline 10.1 10.2 10.3 10.4 10.7Monopoly Monopoly Power Sources of Monopoly Power The Social Costs of Monopoly Power Limiting Market Power: The Antitrust LawsMarket Power: Monopoly and Monopsony
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
South Carolina - ECON - 293
Andrew Simpson, Language, Society and Culture, USCLanguage, Society and CultureUnit 2Diglossia and Code-switchingIn unit 1, we mentioned the fact that people in multilingual communities may often switch between different languages that they speak. Hol
South Carolina - ECON - 293
Language, Society and Culture Ling 115, Andrew Simpson, USCLanguage, Society and CultureUnit 3Language Maintenance, Shift and Loss in Minority GroupsThis unit considers changing patterns of language use among comparatively small linguistic communities
South Carolina - ECON - 293
Language, Society and Culture, Andrew Simpson, USCLanguage, Society and CultureUnit 4National Languages and Language PlanningThis class considers how languages are developed into national languages. First of all we will briefly review what is meant by
South Carolina - ECON - 293
Language and GenderDifferences in male and female speech Qualitative Differences the Carib people (West Indies) women using Arawak words traditional Bengali women /l/ vs. /n/ Zulu women sound taboos E.g. /z/: &quot;amanzi&quot; is pronounced as &quot;amandi&quot;Voic
South Carolina - ECON - 293
Language, Society and Culture, Andrew Simpson, USCLanguage, Society and CultureUnit 11Language and GenderThis lecture considers the interaction of Gender with language, how men and women consistently speak in rather clearly different ways (and why the
South Carolina - ECON - 293
Language, Society and Culture, Andrew Simpson, USCLanguage, Society and CultureUnit 12How language changes in societyProgress or decay? 0. IntroductionThis class considers how language undergoes change and whether language change should be concluded
South Carolina - ECON - 293
How language changes in societyCauses and consequencesThe Continual Nature of Language ChangennnAll languages undergo continual change, generation by generation Many people have strongly negative feelings towards changes in language. Is language dec
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Phys 605. Homework 4 Due 5pm, Monday, October 6, 2008 Problem 4-1: [10 pts.] A general surface of revolution may be described in cylindrical polar coordinates (r,z) by the function r = r(z). The function r(z) and its derivative dr/dz r (z) are given. Use
Ohio - PHYS - 605
Phys 605. Homework 5 Due 5pm, Tuesday, October 14, 2008 Problem 5-1: [20 pts.] A spherical pendulum consists of a particle of mass m in a uniform gravitational field constrained to move on the surface of a sphere of radius R. (a) Find a Lagrangian for the
Ohio - PHYS - 605
Phys 605. Homework 5 Due 5pm, Monday, October 27, 2008 Problem 5-1: [10 pts.] Consider point particles scattering elastically (angle of incidence equals angle of reflection at point of impact) from an infinitely massive, perfectly hard ellipsoid of rotati
Ohio - PHYS - 605
Phys 605. Homework 7 Due 5pm, Monday, November 3, 2008 Problem 7-1: [10 pts] Make sure you understand the derivation of the &quot;active&quot; rotation formula (Eq. 4.62 GPS pg. 162) r = r cos + n(r n)(1 - cos ) + (r n) sin . ^ ^ ^ (&quot;active&quot; rotation formula) that
Ohio - PHYS - 605
Ohio - PHYS - 605
Phys 605. Midterm Exam October 15, 2007Problem 1: [45 pts.]A cylinder of radius R, mass M1 , and moment of inertia (about its central axis) I = 1 M1 R2 is rolling without slipping on an incline with angle with respect to the horizontal. The incline 2 its
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Ohio - PHYS - 605
Physics 605 Classical Mechanics Fall Quarter 2008-2009 Professor: Roger W. Rollins Office: Clippinger 331 Phone: 593-1728 email: mailto:/rollins@ohiou.edu Office Hours: Specific times To Be Announced or by appointment. Course website: http:/www.phy.ohiou.
Ohio - PHYS - 605
University of Maryland - COMM - 107
Comm107 Notes2.9Chapter 5- Interview profile and bibliography due Tuesday and interview outline due Friday- Journal entry due the 23rd-----Intrapersonal CommunicationCommunication within yourselfBodily our bodies speak to us nonverballyConsci
Rutgers - PHILOSOPHY - 375
Philosophy of PhysicsReadings 8 (Demarest) and 9 (Albert)February 9, 2012Chance- Nothing is impossible but certain things are unlikely- Even with Newtonian laws considered, this only determines that certain things (i.e.microscopic regularities) are
Rutgers - PHILOSOPHY - 375
Profitability and Product Quality: Economic Determinants of Airline Safety PerformanceNancy L. RoseFebruary 8, 2012Research Question: Is there a correlation between profitability and safety investments andconsequently higher accident/incident rates?-
Rutgers - ECON - 330
A monocentric model of urban special structure was developed collectively by Alonso in 1964, Mills in 1967 and Muth 1969. This was a natural evolution model. LeRoy and Sonstelie further analyzed this model in 1983 by taking transportation methods into con
Rutgers - ECON - 330
Profitability and Product Quality: Economic Determinants of Airline Safety PerformanceNancy L. RoseFebruary 8, 2012Research Question: Is there a correlation between profitability and safety investments andconsequently higher accident/incident rates?-
Michigan - MKT - 303
IntroductionBrand loyalty, this is something that we havent talked about yet. It is something on the pyramid,because if you reach all the other levels of your brand building, that is what you should befocusing on. It is obviously important to a lot of
UT Arlington - MANA - 3319
ManagingChapter 01McGraw-Hill/IrwinCopyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.Learning ObjectivesLO 1 Summarize the major challenges of managingin the new competitive landscapeLO 2 Describe the sources of competitive adva
UT Arlington - MANA - 3319
ExternalEnvironmentandOrganizational CultureChapter 02McGraw-Hill/IrwinCopyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.Learning ObjectivesLO 1 Describe how environmental forces influenceorganizations and how organizations c
UT Arlington - MANA - 3319
ManagerialDecisionMakingChapter 03McGraw-Hill/IrwinCopyright 2011 by the McGraw-Hill Companies, Inc. All rights reserved.Learning ObjectivesLO1 Describe the kinds of decisions you will face as a managerLO2 Summarize the steps in making rational de
Pontifical Catholic University of Rio de Janeiro - ECON - 101
#100 - Tinie Tempah - Till I'm Gone (Ft Wiz Khalifa)# 99 - Lloyd - Dedication To My Ex (Miss That)# 98 - Monica - Anything (Ft Rick Ross &amp; Lil Kim)# 97 - Snoop Dogg - Sweat (Wet)# 96 - Bei Maejor - Trouble (Ft J. Cole)# 95 - Rick Ross - You The Boss
Rutgers - ECON - 122
CHAPTER 5 1. Are you ready? Is your seatbelt fastened? Here you go. How many chiral centers are present in -cadinene?CH3H3C CH(CH3)2A) none B) 1 Ans: DC) 2D) 3E) 42. Counting all stereoisomers, how many monochlorinated products of the free-radical
Rutgers - ECON - 122
CHAPTER 5 1. Are you ready? Is your seatbelt fastened? Here you go. How many chiral centers are present in -cadinene?CH3H3C CH(CH3)2A) none B) 1 Ans:C) 2D) 3E) 42. Counting all stereoisomers, how many monochlorinated products of the free-radical ch
Rutgers - ECON - 122
CHAPTER 6 1. Which of the following would you expect to have the highest boiling point? A) CH3CH2CH2Br D) CH3CH2CH2F B) CH3CH2CH2I E) CH3CH2CH3 C) CH3CH2CH2Cl Ans: B 2. What would be the name of the following?CH3CH2CHBrCHBrCH(CH3)2A) B) C) Ans: 3,4-dibr
Rutgers - ECON - 122
CHAPTER 6 1. Which of the following would you expect to have the highest boiling point? A) CH3CH2CH2Br D) CH3CH2CH2F B) CH3CH2CH2I E) CH3CH2CH3 C) CH3CH2CH2Cl Ans: 2. What would be the name of the following?CH3CH2CHBrCHBrCH(CH3)2A) 3,4-dibromo-2-methylh
Rutgers - ECON - 122
CHAPTER 7 Entering yet another chapter, the third for the coming exam you are almost ready. 1. Indicate the expected major product of the following reaction:Cl CH3 CH3NaOEt?A)OEt CH3 CH3B)CH3 CH3C)CH3 CH3D)CH3 OEt CH3E)CH2 CH3Ans: EPage 12
Rutgers - ECON - 122
CHAPTER 7 Entering yet another chapter, the third for the coming exam you are almost ready. 1. Indicate the expected major product of the following reaction:Cl CH3 CH3NaOEt?A)OEt CH3 CH3B)CH3 CH3C)CH3 CH3D)CH3 OEt CH3E)CH2 CH3Ans:Page 12.