321_18 - ECON 321 Spring 2011: Lecture 18 Chapter 22: Firm...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 321 Spring 2011: Lecture 18 Chapter 22: Firm Supply
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Definitions for Chapter 22: Firm Supply Price taker = a producer or consumer who does not have any influence on the market price Pure (perfect) competition Many firms producing an identical product Firms cannot set price (producers are price takers.) Shutdown condition If the price is below the minimum of the average Variable costs, the firm will produce nothing. As long as AVC(y)>P, firm will produce some positive quantity. Producer’s surplus Revenue minus variable costs ~ profit plus fixed costs.
Background image of page 2
Another Algorithm Just as in utility maximization we have a step-by-step process to minimize costs subject to an output constraint.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Step 1 Is the technology linear? i.e. is it of the form: No: move to step 2 Yes: Perfect Substitutes. Try both corners and choose the one with the lowest cost: i.e. check: 2 1 2 1 ) , ( bx ax x x f + = ) / ( * ) / ( * 2 1 b y w and a y w
Background image of page 4
Step 2 It wasn’t linear, is it a minimum function? i.e. is it of the form:
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/16/2011 for the course ECON 321 taught by Professor Murray during the Spring '11 term at South Carolina.

Page1 / 9

321_18 - ECON 321 Spring 2011: Lecture 18 Chapter 22: Firm...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online