Econ212+Spring2013+Le_Linh+Notes_for_Week_10

6 the inverse supply function rather than thinking of

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Unformatted text preview: o produce where MC(y) = p à༎ the marginal cost curve of a competitive firm is precisely its supply curve • For p> MC(y) à༎ p – Δc/Δy > 0 à༎ pΔy – Δc > 0 (increasing output by Δy) à༎ the increase in revenues from the extra output exceeds the increase in costs. à༎ profits must increase • Similarly for p< MC(y) à༎ the lost revenues are more than compensated for by the reduced costs à༎ reducing output will increase profits 22.4, 22.5. Exceptions Case 1: Chere are several levels of output where pri...
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