中级微观课件·范里安版第23章讲义幻灯片.pptVIP

Long-Run Implications for Taxation LR supply (no tax) p X,Y Mkt. demand Qe ps=pe LR supply (with tax) Qt pb = pe+t t In the long-run thebuyers pay all of asales or an excise tax. Fixed Inputs and Economic Rent What if there is a barriers to entry or exit? E.g., the taxi-cab industry has a barrier to entry even though there are lots of cabs competing with each other. Liquor licensing is a barrier to entry into a competitive industry. Sources of Barriers to Entry Nature Land Oil field Entrepreneurial skills Talent Regulation License Land use regulations Fixed Inputs and Economic Rent Q: When there is a barrier to entry, will not the firms already in the industry make positive economic profits? Fixed Inputs and Economic Rent Q: When there is a barrier to entry, will not the firms already in the industry make positive economic profits? A: No. Each firm in the industry makes a zero economic profit. Why? Fixed Inputs and Economic Rent An input (e.g. an operating license) that is fixed in the long-run causes a long-run fixed cost, F. Long-run total cost, c(y) = F + cv(y). And long-run average total cost, AC(y) = AFC(y) + AVC(y). In the long-run equilibrium, what will be the value of F? Fixed Inputs and Economic Rent Think of a firm that needs an operating license -- the license is a fixed input that is rented but not owned by the firm. If the firm makes a positive economic profit then another firm can offer the license owner a higher price for it. In this way, all firms’ economic profits are competed away, to zero. Fixed Inputs and Economic Rent So in the long-run equilibrium, each firm makes a zero economic profit and each firm’s fixed cost is its payment for its operating license. Fixed Inputs and Economic Rent y $/output unit AC(y) AVC(y) MC(y) y* pe The firm’s economicprofit is zero. Fixed Inputs and Economic Rent y $/output unit AC(y) AVC(y) MC(y) y* pe F The firm’s economicprofit is zero. F is the payment to the owner of the fixedinput (the lic