{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture Notes 6 - Some Important Extensions Role of...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Some Important Extensions Role of bankruptcy Long-run versus short-run marginal cost and competitive dynamics Ricardian competition Competitive markets and income distribution
Background image of page 1

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

View Full Document Right Arrow Icon
Bankruptcy vs Shutdown Revenue < Avoidable cost leads to shutdown Better for all if firm remains operating as long as Revenue > Avoidable cost Capital investment funded by debt and equity Debt is more “senior” -- gets repaid before before dividends to shareholders If revenues insufficient to “service debt,“ firm may seek the protection of bankruptcy. Bankruptcy court organizes financial claims against firm in order to enable continued operation, and maybe even re-financing. Bonds may remain with some value.
Background image of page 2
Long-run vs Short-run Marginal Costs Short-run total cost Long-run total cost is lower envelope of short run total cost curves. Marginal costs are the slopes. Where short-run cost equals long run cost, long-run marginal cost
Background image of page 3

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

View Full Document Right Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}