第14章-竞争市场上的企业-曼昆经济学原理第七版课件

FirmsinCompetitiveMarkets©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.1FirmsinCompetitiveMarkets©WhatisaCompetitiveMarket?CompetitivemarketPerfectlycompetitivemarketMarketwithmanybuyersandsellersTradingidenticalproductsEachbuyerandsellerisapricetakerFirmscanfreelyenterorexitthemarket©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.2WhatisaCompetitiveMarket?CWhatisaCompetitiveMarket?FirminacompetitivemarketTriestomaximizeprofitProfitTotalrevenueminustotalcostTotalrevenue,TR=PˣQPricetimesquantityProportionaltotheamountofoutput©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.3WhatisaCompetitiveMarket?FWhatisaCompetitiveMarket?Averagerevenue,AR=TR/QTotalrevenuedividedbythequantitysoldMarginalrevenue,MR=∆TR/∆QChangeintotalrevenuefromanadditionalunitsoldForcompetitivefirmsAR=PMR=P©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.4WhatisaCompetitiveMarket?ATable15©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Total,Average,andMarginalRevenueforaCompetitiveFirmTable15©2015CengageLearninProfitMaximizationMaximizeprofitProducequantitywheretotalrevenueminustotalcostisgreatestComparemarginalrevenuewithmarginalcostIfMR>MC:increaseproductionIfMR<MC:decreaseproductionMaximizeprofitwhereMR=MC©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.6ProfitMaximizationMaximizeprTable27©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ProfitMaximization:ANumericalExampleTable27©2015CengageLearninProfitMaximizationThemarginal-costcurveandthefirm’ssupplydecisionMCcurveisupwardslopingATCcurveisU-shapedMCcurvecrossestheATCcurveattheminimumofATCcurveThepricelineishorizontal:P=AR=MR©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.8ProfitMaximizationThemarginaFigure19©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ProfitMaximizationforaCompetitiveFirmCostsandRevenueThisfigureshowsthemarginal-costcurve(MC),theaverage-total-costcurve(ATC),andtheaverage-variable-costcurve(AVC).Italsoshowsthemarketprice(P),whichforacompetitivefirmequalsbothmarginalrevenue(MR)andaveragerevenue(AR).AtthequantityQ1,marginalrevenueMR1exceedsmarginalcostMC1,soraisingproductionincreasesprofit.AtthequantityQ2,marginalcostMC2isabovemarginalrevenueMR2,soreducingproductionincreasesprofit.Theprofit-maximizingquantityQMAXisfoundwherethehorizontallinerepresentingthepriceintersectsthemarginal-costcurve.Quantity0ATCAVCP=AR=MRP=MR1=MR2MCMC1MC2Q2Q1QMAXThefirmmaximizesprofitbyproducingthequantityatwhichmarginalcostequalsmarginalrevenue.Figure19©2015CengageLearniProfitMaximizationRulesforprofitmaximization:IfMR>MC,firmshouldincreaseoutputIfMC>MR,firmshoulddecreaseoutputIfMR=MC,profit-maximizinglevelofoutputMarginal-costcurveDeterminesthequantityofthegoodthefirmiswillingtosupplyatanypriceIsthesupplycurve©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.10ProfitMaximizationRulesforpFigure211©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.MarginalCostastheCompetitiveFirm’sSupplyCurvePriceAnincreaseinthepricefromP1toP2leadstoanincreaseinthefirm’sprofit-maximizingquantityfromQ1toQ2.Becausethemarginal-costcurveshowsthequantitysuppliedbythefirmatanygivenprice,itisthefirm’ssupplycurve.Quantity0ATCAVCMCP1P2Q2Q1Figure211©2015CengageLearnProfitMaximizationShutdownShort-rundecisionnottoproduceanythingDuringaspecificperiodoftimeBecauseofcurrentmarketconditionsFirmstillhastopayfixedcostsExitLong-rundecisiontoleavethemarketFirmdoesn’thavetopayanycosts©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.12ProfitMaximizationShutdown©2ProfitMaximizationThefirm’sshort-rundecisiontoshutdownTR=totalrevenueVC=variablecostsFirm’sdecision:ShutdownifTR<VC(P<AVC)Competitivefirm’sshort-runsupplycurveTheportionofitsmarginal-costcurveThatliesaboveaveragevariablecost©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.13ProfitMaximizationThefirm’sFigure314©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.TheCompetitiveFirm’sShort-RunSupplyCurveCostsIntheshortrun,thecompetitivefirm’ssupplycurveisitsmarginal-costcurve(MC)aboveaveragevariablecost(AVC).Ifthepricefallsbelowaveragevariablecost,thefirmisbetteroffshuttingdowntemporarily.Quantity0ATCMCAVC1.Intheshortrun,thefirmproducesontheMCcurveifP>AVC,...2....butshutsdownifP<AVC.Figure314©2015CengageLearnProfitMaximizationSunkcostAcostthathasalreadybeencommittedandcannotberecoveredShouldbeignoredwhenmakingdecisions“Don’tcryoverspiltmilk”“Letbygonesbebygones”Intheshortrun,fixedcostsaresunkcosts©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.15ProfitMaximizationSunkcost©Near-emptyrestaurants&off-seasonminiaturegolfRestaurant–stayopenforlunch?FixedcostsNotrelevantAresunkcostsinshortrunVariablecosts–relevantShutdownifrevenuefromlunch<variablecostsStayopenifrevenuefromlunch>variablecosts16©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Stayingopencanbeprofitable,evenwithmanytablesempty.Near-emptyrestaurants&off-sNear-emptyrestaurants&off-seasonminiaturegolfOperatorofaminiature-golfcourseIgnorefixedcostsShutdownifRevenue<variablecostsStayopenifRevenue>variablecosts17©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Near-emptyrestaurants&off-sProfitMaximizationFirm’slong-rundecisionExitthemarketifTotalrevenue<totalcosts;TR<TCSameas:P<ATCEnterthemarketifTotalrevenue>totalcosts;TR>TCSameas:P>ATCCompetitivefirm’slong-runsupplycurveTheportionofitsmarginal-costcurvethatliesaboveaveragetotalcost©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.18ProfitMaximizationFirm’slongFigure419©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.TheCompetitiveFirm’sLong-RunSupplyCurveCostsInthelongrun,thecompetitivefirm’ssupplycurveisitsmarginal-costcurve(MC)aboveaveragetotalcost(ATC).Ifthepricefallsbelowaveragetotalcost,thefirmisbetteroffexitingthemarket.Quantity0MC1.Inthelongrun,thefirmproducesontheMCcurveifP>ATC,...2....butexitsifP<ATCATCFigure419©2015CengageLearnProfitMaximizationMeasuringprofitIfP>ATCProfit=TR–TC=(P–ATC)ˣQIfP<ATCLoss=TC-TR=(ATC–P)ˣQ=Negativeprofit©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.20ProfitMaximizationMeasuringpFigure521©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ProfitastheAreabetweenPriceandAverageTotalCostPriceTheareaoftheshadedboxbetweenpriceandaveragetotalcostrepresentsthefirm’sprofit.Theheightofthisboxispriceminusaveragetotalcost(P–ATC),andthewidthoftheboxisthequantityofoutput(Q).Inpanel(a),priceisaboveaveragetotalcost,sothefirmhaspositiveprofit.Inpanel(b),priceislessthanaveragetotalcost,sothefirmincursaloss.Quantity0(a)AfirmwithprofitsProfitMCATCP=AR=MRPQ(profit-maximizingquantity)ATCPriceQuantity0(b)AfirmwithlossesLossMCATCP=AR=MRPQ(loss-minimizingquantity)ATCFigure521©2015CengageLearnSupplyCurveShortrun:marketsupplywithafixednumberoffirmsShortrun:numberoffirmsisfixedEachfirmsuppliesquantitywhereP=MCForP>AVC:supplycurveisMCcurveMarketsupplyAddupquantitysuppliedbyeachfirm©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.22SupplyCurveShortrun:marketFigure623©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Short-RunMarketSupplyPriceIntheshortrun,thenumberoffirmsinthemarketisfixed.Asaresult,themarketsupplycurve,showninpanel(b),reflectstheindividualfirms’marginal-costcurves,showninpanel(a).Here,inamarketof1,000firms,thequantityofoutputsuppliedtothemarketis1,000timesthequantitysuppliedbyeachfirm.Quantity(firm)0(a)IndividualfirmsupplyMC100$2.00PriceQuantity(market)0(b)Marketsupply2001.00Supply100,000$2.00200,0001.00Figure623©2015CengageLearnSupplyCurveLongrunFirmscanenterandexitthemarketIfP>ATC,firmsmakepositiveprofitNewfirmsenterthemarketIfP<ATC,firmsmakenegativeprofitFirmsexitthemarket©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.24SupplyCurveLongrun©2015CenSupplyCurveLongrunProcessofentryandexitendswhenFirmsstillinmarketmakezeroeconomicprofit(P=ATC)BecauseMC=ATC:EfficientscaleLongrunsupplycurveisperfectlyelasticHorizontalatminimumATC©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.25SupplyCurveLongrun©2015CenFigure726©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Long-RunMarketSupplyPriceInthelongrun,firmswillenterorexitthemarketuntilprofitisdriventozero.Asaresult,priceequalstheminimumofaveragetotalcost,asshowninpanel(a).Thenumberoffirmsadjuststoensurethatalldemandissatisfiedatthisprice.Thelong-runmarketsupplycurveishorizontalatthisprice,asshowninpanel(b).Quantity(firm)0(a)Firm’sZero-ProfitConditionMCATCPriceQuantity(market)0(b)MarketsupplyP=minimumATCSupplyFigure726©2015CengageLearnSupplyCurveWhydocompetitivefirmsstayinbusinessiftheymakezeroprofit?Profit=totalrevenue–totalcostTotalcostincludesallopportunitycostsZero-profitequilibriumEconomicprofitiszeroAccountingprofitispositive©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.27“We’reanonprofitorganization-wedon’tintendtobe,butweare!”SupplyCurveWhydocompetitiveSupplyCurveMarketinlongrunequilibriumP=minimumATCZeroeconomicprofitIncreaseindemandDemandcurveshiftsoutwardShortrunHigherquantityHigherprice:P>ATC–positiveeconomicprofit©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.28SupplyCurveMarketinlongrunSupplyCurvePositiveeconomicprofitinshortrunLongrun–firmsenterthemarketShortrunsupplycurve–shiftsrightPrice–decreasesbacktominimumATCQuantity–increasesBecausetherearemorefirmsinthemarketEfficientscale©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.29SupplyCurvePositiveeconomicFigure830©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.AnIncreaseinDemandintheShortRunandLongRun(a)PricePriceThemarketstartsinalong-runequilibrium,shownaspointAinpanel(a).Inthisequilibrium,eachfirmmakeszeroprofit,andthepriceequalstheminimumaveragetotalcost.Quantity(market)0MarketQuantity(firm)0FirmATCMC(a)InitialConditionShort-runsupply,S1Demand,D1Q1P1Long-runsupplyP1A1.Amarketbeginsinlong-runequilibrium…2.…withthefirmearningzeroprofit.Figure830©2015CengageLearnFigure831©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.AnIncreaseinDemandintheShortRunandLongRun(b)PricePricePanel(b)showswhathappensintheshortrunwhendemandrisesfromD1toD2.TheequilibriumgoesfrompointAtopointB,pricerisesfromP1toP2,andthequantitysoldinthemarketrisesfromQ1toQ2.Becausepricenowexceedsaveragetotalcost,eachfirmnowmakesaprofit,whichovertimeencouragesnewfirmstoenterthemarket.Quantity(market)0MarketQuantity(firm)0Firm(b)Short-RunResponseS1D1Q1P1Long-runsupplyP1A3.Butthenanincreaseindemandraisestheprice…4.…leadingtoshort-runprofits.D2BQ2P2P2MCATCFigure831©2015CengageLearnFigure832©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.AnIncreaseinDemandintheShortRunandLongRun(c)PricePriceThisentryshiftstheshort-runsupplycurvetotherightfromS1toS2,asshowninpanel(c).Inthenewlong-runequilibrium,pointC,pricehasreturnedtoP1butthequantitysoldhasincreasedtoQ3.Profitsareagainzero,andpriceisbacktotheminimumofaveragetotalcost,butthemarkethasmorefirmstosatisfythegreaterdemand.Quantity(market)0MarketQuantity(firm)0Firm(c)Long-RunResponseS1D1Q1AD2BQ2P2MCATC5.Whenprofitsinduceentry,supplyincreasesandthepricefalls,…6.…restoringlong-runequilibrium.S2CQ3P1P1Long-runsupplyFigure832©2015CengageLearnSupplyCurveLong-runsupplycurvemightslopeupwardSomeresourceusedinproductionmaybeavailableonlyinlimitedquantitiesIncreaseinquantitysupplied–increaseincosts–increaseinpriceFirmsmayhavedifferentcostsSomefirmsearnprofiteveninthelongrunLong-runsupplycurveMoreelasticthanshort-runsupplycurve©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.33SupplyCurveLong-runsupplycu谢谢大家！谢谢大家！FirmsinCompetitiveMarkets©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.35FirmsinCompetitiveMarkets©WhatisaCompetitiveMarket?CompetitivemarketPerfectlycompetitivemarketMarketwithmanybuyersandsellersTradingidenticalproductsEachbuyerandsellerisapricetakerFirmscanfreelyenterorexitthemarket©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.36WhatisaCompetitiveMarket?CWhatisaCompetitiveMarket?FirminacompetitivemarketTriestomaximizeprofitProfitTotalrevenueminustotalcostTotalrevenue,TR=PˣQPricetimesquantityProportionaltotheamountofoutput©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.37WhatisaCompetitiveMarket?FWhatisaCompetitiveMarket?Averagerevenue,AR=TR/QTotalrevenuedividedbythequantitysoldMarginalrevenue,MR=∆TR/∆QChangeintotalrevenuefromanadditionalunitsoldForcompetitivefirmsAR=PMR=P©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.38WhatisaCompetitiveMarket?ATable139©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Total,Average,andMarginalRevenueforaCompetitiveFirmTable15©2015CengageLearninProfitMaximizationMaximizeprofitProducequantitywheretotalrevenueminustotalcostisgreatestComparemarginalrevenuewithmarginalcostIfMR>MC:increaseproductionIfMR<MC:decreaseproductionMaximizeprofitwhereMR=MC©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.40ProfitMaximizationMaximizeprTable241©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ProfitMaximization:ANumericalExampleTable27©2015CengageLearninProfitMaximizationThemarginal-costcurveandthefirm’ssupplydecisionMCcurveisupwardslopingATCcurveisU-shapedMCcurvecrossestheATCcurveattheminimumofATCcurveThepricelineishorizontal:P=AR=MR©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.42ProfitMaximizationThemarginaFigure143©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ProfitMaximizationforaCompetitiveFirmCostsandRevenueThisfigureshowsthemarginal-costcurve(MC),theaverage-total-costcurve(ATC),andtheaverage-variable-costcurve(AVC).Italsoshowsthemarketprice(P),whichforacompetitivefirmequalsbothmarginalrevenue(MR)andaveragerevenue(AR).AtthequantityQ1,marginalrevenueMR1exceedsmarginalcostMC1,soraisingproductionincreasesprofit.AtthequantityQ2,marginalcostMC2isabovemarginalrevenueMR2,soreducingproductionincreasesprofit.Theprofit-maximizingquantityQMAXisfoundwherethehorizontallinerepresentingthepriceintersectsthemarginal-costcurve.Quantity0ATCAVCP=AR=MRP=MR1=MR2MCMC1MC2Q2Q1QMAXThefirmmaximizesprofitbyproducingthequantityatwhichmarginalcostequalsmarginalrevenue.Figure19©2015CengageLearniProfitMaximizationRulesforprofitmaximization:IfMR>MC,firmshouldincreaseoutputIfMC>MR,firmshoulddecreaseoutputIfMR=MC,profit-maximizinglevelofoutputMarginal-costcurveDeterminesthequantityofthegoodthefirmiswillingtosupplyatanypriceIsthesupplycurve©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.44ProfitMaximizationRulesforpFigure245©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.MarginalCostastheCompetitiveFirm’sSupplyCurvePriceAnincreaseinthepricefromP1toP2leadstoanincreaseinthefirm’sprofit-maximizingquantityfromQ1toQ2.Becausethemarginal-costcurveshowsthequantitysuppliedbythefirmatanygivenprice,itisthefirm’ssupplycurve.Quantity0ATCAVCMCP1P2Q2Q1Figure211©2015CengageLearnProfitMaximizationShutdownShort-rundecisionnottoproduceanythingDuringaspecificperiodoftimeBecauseofcurrentmarketconditionsFirmstillhastopayfixedcostsExitLong-rundecisiontoleavethemarketFirmdoesn’thavetopayanycosts©2015CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.46ProfitMaximizationShutdown©2ProfitMaximizationThefirm’sshort-rundecisiontoshutdownTR=totalrevenueVC=variablecostsFirm’sdecision:ShutdownifTR<VC(P<AVC)Competitivefirm’sshort-runsupplycurveTheportionofitsmarginal-costcurveThatlies