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Unformatted text preview: Aniko Oery University of California, Berkeley Section 10: Shortrun and longrun supply curves Econ 100A, MICROECONOMIC ANALYSIS, Spring 2010 So far, we have derived longrun and shortrun cost functions that depend on the output level only by solving the firm’s cost minimization problem. Remember that the longrun cost function is the solution to the cost minimization problem if all inputs are variable and the shortrun cost function is the solution to the cost minimization problem if only part of the inputs (usually labor) is variable and and other inputs (usually capital) is fixed. Given these cost curves, we can solve the profit maximization problem of the firm in the longrun and in the shortrun, which is given by max Q T R ( Q )  {z } P ( Q ) · Q T C ( Q )  {z } AC ( Q ) · Q where T C ( Q ) is the longrun or shortrun cost function depending on which case we are consid ering. (Usually, we denote the short run total cost function by ST C ( Q )). The supply functions of the firms depend on the market structure in that industry. Today we will consider perfectly competitive markets where firms are pricetakers. 1 Profit maximization in perfectly competitive markets Since in perfectly competitive markets firms are price takers, that is the demand faced by the...
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 Spring '08
 Woroch
 Economics, Microeconomics, Supply And Demand

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