Microeconomics I
Fiches de réveisions
Fiches de réveisions
Kartei Details
| Karten | 336 |
|---|---|
| Sprache | English |
| Kategorie | VWL |
| Stufe | Universität |
| Erstellt / Aktualisiert | 28.05.2019 / 02.03.2025 |
| Weblink |
https://card2brain.ch/box/20190528_microeconomics_i
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Two type of constraints for the producer
I Technological constraints: What is feasible production? -> production function -> economic constraints -> cost function
I Market constraints: How much can be sold at what price? ! Demand curve facing the firm ! depends on market environment
Market environment
Are there many other firms, or just a few?
Do other firms’ decisions affect our firm’s payoffs?
Is trading anonymous, in a market? Or are trades arranged with separate buyers by middlemen?
Market structures
Monopoly
Oligopoloy
Dominant firm
Monopolistic competition
Pure competition
Monopoly
Just one seller that determines the quantity supplied and the market-clearing price
Oligopoly
A few firms, the decisions of each influencing the payoffs of the others
Dominant Firm
Many firms, but one much larger than the rest. The large firm’s decisions affect the payoffs of each small firm. Decisions by any one small firm do not noticeably affect the payoffs of any other firm
Monopolistic Competition
Many firms each making a slightly different product. Each firms output level is small relative to the
total
Pure Competition
Many firms, all making the same product.
Each firms output level is small relative to the total
Market structure according to degree of competition
Cost curves
Assumptions of the perfect competition
Many firms, all making the same product.
Each firms output level is small relative to the total
Demand curve facing a competitive firm graph
Supply decision: first order condition
Supply condition: second order condition
Shutdowon condition
Output rule
MR = MCs; price-taking behaviour implies
MR = p. Hence, profit maximisation gives p = MCs
So MCs describes
the supply behaviour of the firm...provided that the firm produces at all.
Shutdown rule
the firm produces positive output as long as
p > AV C
Supply curve (short run) is
upward sloping part of the MCs curve above AV C
Long-run supply decision
Long-run vs. short-run supply decisions 1/4
How is the firm’s long-run supply curve related to all of its short-run supply curves?
Derive the firm’s fixed, variable, average, marginal, averaged fixed and average variable cost functions. Sketch these functions on a graph for q = 0 to q = 10. FC, VC, TC
Derive the firm’s fixed, variable, average, marginal, averaged fixed and average variable cost functions. Sketch these
functions on a graph for q = 0 to q = 10. AFC, AVC, AC, MC
How does the average cost curve relate to returns to scale?
At what output does minimum average cost occur? What about minimum average variable cost? What is the value of marginal cost at each of these outputs?
The short run industry supply function
The short-run industry supply curve
The short-run equilibrium: entry, exit, profits
In a short-run, neither entry nor exit can occur
Consequently, in a short-run equilibrium, some firms may earn positive economics profits, others may suffer economic losses,
and still others may earn zero economic profit
Short-run industry equilibrium: three cases of profit
Determining the long-run number of firms
Positive economic profit induces entry
Economic profit is positive when
the market price pse is higher than a firm’s minimum average cost: pse > min AC(y)
Entry increases
industry supply, causing pse to fall
The long-run number of firms in the industry is
the largest number for which the market price is at least as large as min AC(y)
Constructing the long-run industry supply
Constructing the long-run industry supply2
The market long-run supply curve
Long-run industry supply: as firm get smaller
Long-run industry supply: the market long run supply curve
In the long-run market equilibrium, the market price is determined
solely by
the long-run minimum average production cost
