[北大微观经济学课件]Ch22 Firm Supply

ChapterTwenty-TwoFirmSupplyFirmSupplyHowdoesafirmdecidehowmuchproducttosupply?Thisdependsuponthefirm’stechnologymarketenvironmentgoalscompetitors’behaviorsMarketEnvironmentsAretheremanyotherfirms,orjustafew?Dootherfirms’decisionsaffectourfirm’spayoffs?Istradinganonymous,inamarket?Oraretradesarrangedwithseparatebuyersbymiddlemen?MarketEnvironmentsMonopoly:Justonesellerthatdeterminesthequantitysuppliedandthemarket-clearingprice.Oligopoly:Afewfirms,thedecisionsofeachinfluencingthepayoffsoftheothers.MarketEnvironmentsDominantFirm:Manyfirms,butonemuchlargerthantherest.Thelargefirm’sdecisionsaffectthepayoffsofeachsmallfirm.Decisionsbyanyonesmallfirmdonotnoticeablyaffectthepayoffsofanyotherfirm.MarketEnvironmentsMonopolisticCompetition:Manyfirmseachmakingaslightlydifferentproduct.Eachfirm’soutputlevelissmallrelativetothetotal.PureCompetition:Manyfirms,allmakingthesameproduct.Eachfirm’soutputlevelissmallrelativetothetotal.MarketEnvironmentsLaterchaptersexaminemonopoly,oligopoly,andthedominantfirm.Thischapterexploresonlypurecompetition.PureCompetitionAfirminaperfectlycompetitivemarketknowsithasnoinfluenceoverthemarketpriceforitsproduct.Thefirmisamarketprice-taker.Thefirmisfreetovaryitsownprice.PureCompetitionIfthefirmsetsitsownpriceabovethemarketpricethenthequantitydemandedfromthefirmiszero.Ifthefirmsetsitsownpricebelowthemarketpricethenthequantitydemandedfromthefirmistheentiremarketquantity-demanded.PureCompetitionSowhatisthedemandcurvefacedbytheindividualfirm?PureCompetitionY$/outputunitMarketSupplyMarketDemandpePureCompetitiony$/outputunitMarketSupplypep’Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitionSothedemandcurvefacedbytheindividualfirmis...PureCompetitiony$/outputunitMarketSupplypep’p”Atapriceofp”thefirmfacestheentiremarketdemand.Atapriceofp’,zeroisdemandedfromthefirm.MarketDemandPureCompetitionY$/outputunitpep’p”MarketDemandSmallnessWhatdoesitmeantosaythatanindividualfirmis“smallrelativetotheindustry”?Smallness$/outputunityFirm’sMCTheindividualfirm’stechnologycausesitalwaystosupplyonlyasmallpartofthetotalquantitydemandedatthemarketprice.Firm’sdemandcurvepeTheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?TheFirm’sShort-RunSupplyDecisionEachfirmisaprofit-maximizerandinashort-run.Q:Howdoeseachfirmchooseitsoutputlevel?A:Bysolvingmax()().yssypycy0TheFirm’sShort-RunSupplyDecisionmax()().yssypycy0Whatcanthesolutionys*looklike?TheFirm’sShort-RunSupplyDecisionmax()().yssypycy0Whatcanthesolutionys*looklike?(a)ys*0:(y)yys*()()()()().*idydypMCyiidydyatyyssss0022TheFirm’sShort-RunSupplyDecisionmax()().yssypycy0Whatcanthesolutiony*looklike?(b)ys*=0:(y)yys*=0dydypMCyatyysss()().*00TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*0,thefirst-ordermaximumprofitconditionisdydypMCyss()().0Thatis,pMCyss().*Soataprofitmaximumwithys*0,themarketpricepequalsthemarginalcostofproductionaty=ys*.TheFirm’sShort-RunSupplyDecisionFortheinteriorcaseofys*0,thesecond-ordermaximumprofitconditionisdydyddypMCydMCydysss220()()().Thatis,dMCydyss().*0Soataprofitmaximumwithys*0,thefirm’sMCcurvemustbeupward-sloping.TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’MCs(y)TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.MCs(y)TheFirm’sShort-RunSupplyDecision$/outputunitypeys*y’Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.Aty=y’,p=MCandMCslopesdownwards.y=y’isprofit-minimizing.MCs(y)TheFirm’sShort-RunSupplyDecision$/outputunitypey’Aty=ys*,p=MCandMCslopesupwards.y=ys*isprofit-maximizing.Soaprofit-max.supplylevelcanlieonlyontheupwardsslopingpartofthefirm’sMCcurve.MCs(y)ys*TheFirm’sShort-RunSupplyDecisionButnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.TheFirm’sShort-RunSupplyDecisionButnoteverypointontheupward-slopingpartofthefirm’sMCcurverepresentsaprofit-maximum.Thefirm’sprofitfunctionisIfthefirmchoosesy=0thenitsprofitisssvypycypyFcy()()().svyFcF()().00TheFirm’sShort-RunSupplyDecisionSothefirmwillchooseanoutputlevely0onlyifsvypyFcyF()().TheFirm’sShort-RunSupplyDecisionSothefirmwillchooseanoutputlevely0onlyifI.e.,onlyifEquivalently,onlyifsvypyFcyF()().pycyv()0pcyyAVCyvs()().TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)$/outputunityTheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)$/outputunitypAVCs(y)TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)pAVCs(y)ys*0.$/outputunityTheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)pAVCs(y)ys*=0.$/outputunitypAVCs(y)ys*0.TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(y)pAVCs(y)ys*=0.Thefirm’sshort-runsupplycurve$/outputunitypAVCs(y)ys*0.TheFirm’sShort-RunSupplyDecisionAVCs(y)ACs(y)MCs(