1. Supply function, Entry and market structure

2. Producers Producers: Maximize profit cost minimization (engineers)
(IRS, CRS, DRS)
Today: level of production (managers)

3. Today and Next Lecture Technology for free? Typically fixed costs F
F does not depend on the level of y
Optimal supply y
After the midterm
Partial equilibrium model (one industry)
Equilibrium price given N firms
Free entry: number of firms

4. Cost Curves We add Fixed Cost F (does not depend on y)
Total cost = Fixed Cost + Variable Cost
Average costs: ATC, AFC, AVC
Marginal cost MC

5. Example: Total Cost
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6. Example: Average Cost
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7. Average and Marginal Cost
Does MC always cut ATC at the minimal point? (Intuition)
Minimal Efficient Scale (MES)
Find MES given
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8. Equality of ATC and MC at MES
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9. MES: Two methods
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10. Profit Maximizing y (price takers)
What is the optimal level of y given p, F
Secret of happiness (FOC)
Non-negative profit

11. Individual supply and profit
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12. Individual supply and profit
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