Sei sulla pagina 1di 9

# 3 Pat Pizza P(i) P(ii)

14 12
Output T cost TR (i) Profit TR (i) Profit
0 10 0 -10 0 -10
1 21 14 -7 12 -9
2 30 28 -2 24 -6
3 41 42 1 36 -5
4 54 56 2 48 -6
5 69 70 1 60 -9

## Output T cost MC ATC AVC MR= 14

0 10 0 #DIV/0!
1 21 11 21.0 11.0
2 30 9 15.0 10.0
3 41 11 13.7 10.3
4 54 13 13.5 11.0
5 69 15 13.8 11.8

## Shutdown point is minimum point on the AVC curve. This happens at P 10

Supply curve starts from above the price of 10 (the MC) curve
Long-run: MC=LAC =13

4 MR: 24
Q TC MC ATC AVC
0 14 0 0 MR= 12
1 38 24 38.0 24.0
2 48 10 24.0 17.0
3 62 14 20.7 16.0
4 80 18 20.0 16.5 MR = 20
5 102 22 20.4 17.6 MR = 24
6 128 26 21.3 19.0
* Firms with identical cost structure will enter the industry at any price above the lowest ATC po
5
Demand Supply
P Q output MC AVC ATC
3.65 500,000.00 150 6 8.8 15.47
4.4 475,000.00 200 4.6 7.8 11.8
5.2 450,000.00 250 7 7 11
6 425,000.00 300 7.65 7.1 10.43
6.8 400,000.00 350 8.4 7.2 10.06
7.6 375,000.00 400 10 7.5 10
8.4 350,000.00 450 12.4 8 10.22
9.2 325,000.00 500 20.7 9 11
10 300,000.00
10.8 275,000.00 - if each of the 1000 firms, has identical cost structure,
11.6 250,000.00 firm's output by 1000.
- we will then have the MC at every level of market out
11.4 225,000.00
- since MC is a representation of Supply curve - above t
equilibrium occurs when Qs=Qd. this happen at the pri
output is 350,000.00 units. (divide by 1000 you get per
- each firm make economic loss equal = (P-ATC)*Q = (5
- definitely, firms exit this industry.
- if each of the 1000 firms, has identical cost structure,
firm's output by 1000.
- we will then have the MC at every level of market out
- since MC is a representation of Supply curve - above t
13.2 200,000.00 equilibrium occurs when Qs=Qd. this happen at the pri
14 175,000.00 output is 350,000.00 units. (divide by 1000 you get per
- each firm make economic loss equal = (P-ATC)*Q = (5
- definitely, firms exit this industry.
- The minimum insentive for firms to stay in the industr
Economic loss -581 Since P = MC, this exactly happen when each firm prod
P=10.
Firms remaining 750 - On the demand side, at P = 10, market demand is 30
- Dividing total Quantity demand by each firm's output,
firms remaining.

6 980
Demand Supply
P Q output MC AVC Old ATC New ATC
3.65 500,000.00 150 6 8.8 15.47 22.00
4.4 475,000.00 200 4.6 7.8 11.8 16.70
5.2 450,000.00 250 7 7 11 14.92
6 425,000.00 300 7.65 7.1 10.43 13.70
6.8 400,000.00 350 8.4 7.2 10.06 12.86
7.6 375,000.00 400 10 7.5 10 12.45
8.4 350,000.00 450 12.4 8 10.22 12.40
9.2 325,000.00 500 20.7 9 11 12.96
10 300,000.00
10.8 275,000.00
- Everything stay the same in the short run. Output is
11.6 250,000.00 - Due to the increased fixed cost, new ATC at this level
11.4 225,000.00 make economic loss equal = (P-ATC)*Q = (1561).
13.2 200,000.00 - definitely, firms exit this industry.
14 175,000.00 - The minimum insentive for firms to stay in the indust
Since P = MC, this exactly happen when each firm prod
P=12,40.
- On the demand side, at P = 12,40, market demand i
Economic loss -1561 units.
- Dividing total Quantity demand by each firm's output
Firms remaining 444 444 firms remaining.

7
Demand Supply
New P D output MC AVC ATC
2.95 500,000.00 150 6 8.8 15.47
4.13 450,000.00 200 4.6 7.8 11.8
5.3 400,000.00 250 7 7 11
6.48 350,000.00 300 7.65 7.1 10.43
7.65 300,000.00 350 8.4 7.2 10.06
8.83 250,000.00 400 10 7.5 10
10 200,000.00 450 12.4 8 10.22
11.18 150,000.00 500 20.7 9 11

## - now total output is 300,000 units at price 7,65

- economic loss (834)
- in the long run, The minimum insentive for firms to st
when P>= ATC. Since P = MC, this exactly happen whe
units, and P=10.
- On the demand side, at P = 10, market demand is 20
- Dividing total Quantity demand by each firm's output,
firms remaining.
Economic loss -834

## Firms remaining 500

8 You shouldn't need the solution for this… work it out yourself.
P(iii)
10
TR (i) Profit
0 -10
10 -11 25.0 AVC MC ATC
20 -10
23.0
30 -11
40 -14 21.0
50 -19
19.0

12 10 17.0

15.0

13.0

11.0

9.0
The short-run shutdown point (at price 10)- Also
the point at which the supply curve emerges
7.0

5.0
0 0.5 1 1.5 2 2.5 3 3.5 4
40.0
35.0
20 12
30.0
Profit
25.0 MC
-14
20.0 AVC
15.0 ATC

## Shutdown point. 10.0

0 5.0
18
0.0
1 2 3 4 5 6
bove the lowest ATC point - which is in this case: 20

## Total output Firms 1000 22 Demand Supply AVC ATC

20
150,000.00
200,000.00 18
250,000.00 16
300,000.00
14
350,000.00
400,000.00 12
450,000.00
10
500,000.00
8
dentical cost structure, then we multiply each 6

## ery level of market output. 4

Supply curve - above the AVC, then market
2
. this happen at the price 8,4, and industry
de by 1000 you get per firm). 0
equal = (P-ATC)*Q = (581).
,000

,000

,000
,000

,000

,000

ry.
8
dentical cost structure, then we multiply each 6

## ery level of market output. 4

Supply curve - above the AVC, then market
2
. this happen at the price 8,4, and industry
de by 1000 you get per firm). 0
equal = (P-ATC)*Q = (581).

200,000

250,000

300,000
100,000

150,000

350,000
ry.
ms to stay in the industry is when P>= ATC.
en when each firm produce 400 units, and

## 0, market demand is 300,000.00 units.

d by each firm's output, we end up having 750

22
150,000.00
20
200,000.00
250,000.00 18
300,000.00 16
350,000.00
14
400,000.00
12
450,000.00
500,000.00 10
8

## he short run. Output is 350 units a firm. 6

t, new ATC at this level is 12,86.each firm 4
ATC)*Q = (1561).
try. 2
ms to stay in the industry is when P>= ATC. 0
en when each firm produce 450 units, and
200,000

250,000

300,000
100,000

150,000

350,000
2,40, market demand is approx. 200,000.00

## Total output Firms 1000 22 Demand Supply AVC ATC

20
150,000.00
200,000.00 18
250,000.00 16
300,000.00
14
350,000.00
400,000.00 12
450,000.00 10

6
14

12

10
500,000.00
8
nits at price 7,65 6

## insentive for firms to stay in the industry is 4

his exactly happen when each firm produce 400
2
0, market demand is 200,000.00 units. 0
d by each firm's output, we end up having 500

200,000

250,000

300,000
100,000

150,000

350,000
shutdown point (at price 10)- Also
which the supply curve emerges

3 3.5 4 4.5

MC
AVC
ATC

5 6

TC
,000

,000

,000

,000

,000
,000
TC
TC
300,000 300,000

350,000 350,000

400,000 400,000

450,000 450,000

500,000 500,000

550,000 550,000
300,000

350,000

400,000

450,000

500,000

550,000