微观经济学-曼昆英文版本.ppt

13 Firms in Competitive Markets * * “Identical” means all firms have the same cost curves. Note: P1 is minimum AVC. At any price below P1, each firm will shut down, and market quantity supplied will equal zero. Hence, the market supply curve begins at price = P1 and Q = 10,000. * * S1 Profit D1 P1 long-run supply D2 SR LR Effects of an Increase in Demand MC ATC P1 Market Q P (market) One firm Q P (firm) P2 P2 Q1 Q2 S2 Q3 A firm begins in long-run eq’m… …but then an increase in demand raises P,… …leading to SR profits for the firm. Over time, profits induce entry, shifting S to the right, reducing P… …driving profits to zero and restoring long-run eq’m. A B C 0 Why the LR Supply Curve Might Slope Upward The LR market supply curve is horizontal if 1) all firms have identical costs, and 2) costs do not change as other firms enter or exit the market. If either of these assumptions is not true, then LR supply curve slopes upward. 0 1) Firms Have Different Costs As P rises, firms with lower costs enter the market before those with higher costs. Further increases in P make it worthwhile for higher-cost firms to enter the market, which increases market quantity supplied. Hence, LR market supply curve slopes upward. At any P, For the marginal firm, P = minimum ATC and profit = 0. For lower-cost firms, profit 0. 0 2) Costs Rise as Firms Enter the Market In some industries, the supply of a key input is limited (e.g., amount of land suitable for farming is fixed). The entry of new firms increases demand for this input, causing its price to rise. This increases all firms’ costs. Hence, an increase in P is required to increase the market quantity supplied, so the supply curve is upward-sloping. 0 CONCLUSION: The Efficiency of a Competitive Market Profit-maximization: MC = MR Perfect competition: P = MR So, in the competitive eq’m: P = MC Recall, MC is cost of producing the marginal unit. P is value to buyers of the marginal unit