Profit Maximization课件.ppt

精品文档 60 Profit Maximization Ed. 7: Ch. 8, pgs 264-265, pgs 277-300 Ed. 6: Ch. 8, pages 265-266, pgs 278-304 精品文档 Profit Maximization assuming: Firm must charge every consumer the same price (i.e., no price discrimination) No Strategic Interaction among Firms We will consider two industry structures: Monopoly Monopolistic Competition 精品文档 Profit Maximization Example Q FC VC TC AFC AVC ATC MC 0 100 0 100 - - - ? ? 50 1 100 50 150 100 50 150 ? ? 30 2 100 80 180 50 40 90 ? ? 20 3 100 100 200 33.3 33.33 66.7 ? ? 10 4 100 110 210 25 27.5 52.5 ? ? 20 5 100 130 230 20 26 46 精品文档 Q FC VC TC AFC AVC ATC MC 5 100 130 230 20 26 46 ? ? 30 6 100 160 260 16.7 26.67 43.3 ? ? 40 7 100 200 300 14.3 28.57 42.9 ? ? 50 8 100 250 350 12.5 31.25 43.8 ? ? 60 9 100 310 410 11.1 34.44 45.6 ? ? 70 10 100 380 480 10 38 48 ? 精品文档 What output maximizes profits if the marginal revenue (MR) for each unit the firm sells is $55? What are these profits? 8 55*8-43.75*8=90 精品文档 What output maximizes profits if the marginal revenue for each unit the firm sells is $35? What are these profits? 6 35*6-43.33*6=-50 Produce an output of 6 in short-run if fixed costs are sunk. 精品文档 What output maximizes profits if the marginal revenue for each unit the firm sells is $25? What are these profits? 5? 25*5-46*5=-105 Better off producing 0 so profits=-FC=-100 精品文档 Short-Run Profit Maximizing Rule Produce at an Output where Marginal Revenue = Marginal Cost (MR) (MC) if Total Revenue Variable Cost [When the firm cannot price discriminate, this is the same thing as saying as long as Price AVC (from P*Q AVC*Q) ] 精品文档 Monopoly Characteristics There is a single seller There are no close substitutes for the good There are extremely high barriers to entry 精品文档 Natural Monopoly (type of monopoly where there exists large economies of scale) Quantity 0 $/unit Long Run Average Total Cost ATCone big firm ATC1/2 big firm Qbig firm Q1/2 big firm when a single firm can supply a good or se