Chapter 23 Industry Supply - Chapter 23 Industry Supply...

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Chapter 23 Industry Supply 23.1) Short-Run Industry Supply a) Let S i (p) be the supply of firm i. b) Industry supply curve (Market supply curve): = = ( ) Sp i 1nSi p 23.2) Industry Equilibrium in the Short Run a) Take the market supply curve and find intersection with market demand curve. b) Combinations of price and output that lie above the AC curve represent positive profits, combinations below represent negative profits. c) Picture: d) Even if a firm is making negative profits, it will still be better for it to stay in business in the short run if price and output combination lie above the AVC curve. 23.3) Industry Equilibrium in the Long Run a) Firms are able to adjust their fixed factors. b) If a firm is making losses in the long run, it can exit the industry. c) Free entry : No restrictions against new firms entering the industry. d) Barriers to industry : Examples: licenses or legal restriction. e)
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This note was uploaded on 10/26/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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Chapter 23 Industry Supply - Chapter 23 Industry Supply...

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