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251Ch3lecture5Notes

251Ch3lecture5Notes - marginal cost of production •...

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8/28/2011 1 1 Chapter 3: Demand and Supply Lecture 5: Supply as marginal cost Supply equation • Q s = 2P – 4 • Rewrite in slope-intercept form: P = (1/2)Q s + 2 Slope = ½ Y-intercept = (0,2) Supply as marginal cost Marginal cost = cost of producing one more unit • The lowest price a seller would be willing to take is a price that just covers the
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Unformatted text preview: marginal cost of production. • Supply price = marginal cost Graphing marginal cost P Q S 2 Q s = 2P – 4 Q s = 6 MC = $5 Q s = 2 MC = $3 Increasing marginal cost • Positive slope of supply curve implies marginal costs increase as output increases...
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