firmsupply.22

firmsupply.22 - Econ 100A Firm Supply(Chapter 22 Thomas G...

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Unformatted text preview: Econ 100A: Firm Supply (Chapter 22) Thomas G. Koch Fall 2008 Thomas G. Koch Firm Supply (22) 1(35) Clickers • Turn on your clicker • Hit a button Thomas G. Koch Firm Supply (22) 2(35) From before second exam • Used technology and input cost . . . • To find cost function. • What is the cost of producing one more? • Independent of market structure • Still unanswered—how much will the firm produce? What we need to know, on the margin What is the marginal benefit of making one more good? Thomas G. Koch Firm Supply (22) 3(35) What is the marginal benefit? • It depends upon the market structure • Is the market very competitive? • One small firm among many firms • Or does the firm have market power? • Think of cable company Market Environment How do demand, other firms respond to one firm’s pricing? Thomas G. Koch Firm Supply (22) 4(35) Pure Competition • Small firm, large market • Homogenous good—all firms produce same thing • Takes market price as given • Why not higher price? Lower price? • So just takes price What markets? Wheat (yes); Personal computers (maybe?); MP3 players (no) Thomas G. Koch Firm Supply (22) 5(35) Competitive firms and demand Thomas G. Koch Firm Supply (22) 6(35) Supply decision max y p · y- c ( y ) • R = p · y is revenues • c ( y ) is costs • Firm tries to maximize revenues less costs Thomas G. Koch Firm Supply (22) 7(35) Thinking on the margin...
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firmsupply.22 - Econ 100A Firm Supply(Chapter 22 Thomas G...

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