Lecture 10. Supply 范里安版《中级微观经济学》ppt.pptVIP

The Firm’s Long Short-RunSupply Decision y $/output unit Long-run supply curve Short-run supply curves The long-run supply curve is more elastic than the short-run supply curve. * Supply From A Competitive Industry In a competitive industry, the market supply curve is the combination of supply decisions of the many individual firms. Since every firm in the industry is a price-taker, total quantity supplied at a given price is the sum of quantities supplied at that price by the individual firms. * In a short-run, the number of firms in the industry is, temporarily, fixed. Let n be the number of firms;i = 1, … ,n. Si(p) is firm i’s supply function. The industry’s short-run supply function is Short-Run Supply * Industry Supplywith Heterogeneous Firms p S1(p) p S2(p) p S(p) = S1(p) + S2(p) S1(p) Firm 1’s Supply Firm 2’s Supply Industry’s Supply p’ S(p’) = S1(p’) p’ * Industry Supplywith Heterogeneous Firms p S1(p) p S2(p) p” S1(p”) p” S1(p”)+S2(p”) S2(p”) Firm 1’s Supply Firm 2’s Supply Short-run industrysupply p S(p) = S1(p) + S2(p) Industry’s Supply * Short-Run Industry Equilibrium Market demand Short-run industrysupply pse Yse Y Short-run equilibrium price clears themarket and is taken as given by each firm. p * Short-Run Industry Equilibrium In a short-run, neither entry nor exit can occur. If firms are heterogeneous: some firms may earn positive economics profits, while others may suffer economic losses, and still others may earn zero economic profit. If firms are homogeneous: All firms may earn positive economics profits, suffer economic losses, or earn zero economic profit. * Short-Run Industry Equilibrium y1 y2 y3 ACs ACs ACs MCs MCs MCs y1* y2* y3* pse Firm 1 Firm 2 Firm 3 P1 0 P2 0 P3 = 0 Firm 1 wishesto remain inthe industry. Firm 2 wishesto exit fromthe industry. Firm 3 isindifferent. * Long-Run Industry Supply In the long-run, firms in the industry are free to exit, and firms outside the industry are free to enter. The number of firms in