1. Lectures in Microeconomics-Charles W. Upton A Competitive Industry-More

2. A Tabular Analysis All firms have this cost function

3. A Competitive Industry-More MC, AC and AVC Computing MC, AC and AVC is straightforward

4. A Competitive Industry-More Computation Review A quick review

5. A Competitive Industry-More The Minimums Minimums of AC and AVC

6. A Competitive Industry-More The Supply Function

7. A Competitive Industry-More The Supply Function

8. A Competitive Industry-More Supply Function with Multiple Firms

9. A Competitive Industry-More Supply and Demand Supply Function Demand Function

10. A Competitive Industry-More Supply and Demand Initially, 10 firms

11. A Competitive Industry-More Supply and Demand Initially, 10 firms This is an entry signal

12. A Competitive Industry-More Supply and Demand Price must drop to 31. That means 100 firms

13. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2

14. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q

15. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q

16. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q

17. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q

18. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4

19. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4 q = 2

20. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4 q = 2 AC = 4/2 + 5 + 2 = 9

21. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 P =9 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4 q = 2 AC = 4/2 + 5 + 2 = 9

22. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 P =9 Q = 100 – 6(9) = 46 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4 q = 2 AC = 4/2 + 5 + 2 = 9

23. A Competitive Industry-More A Mathematical Example Q = 100 – 6P C = 4+5q + q 2 P =9 Q = 100 – 6(9) = 46 N = 46/2 = 23 AC = 4/q + 5 + q MC = 5+2q 5+2q = 4/q+5 +q q = 4/q q 2 = 4 q = 2 AC = 4/2 + 5 + 2 = 9

24. A Competitive Industry-More A Summing Up A firm’s supply curve is simply its MC curve.

25. A Competitive Industry-More A Summing Up A firm’s supply curve is simply its MC curve If there are N firms, equilibrium will be at p 1.. p1p1 Nq min N*q min p min D NS firm

26. A Competitive Industry-More A Summing Up A firm’s supply curve is simply its MC curve If there are N firms, equilibrium will be at p 1. As firms enter, the price will fall to p min, the LR supply curve. p1p1 Nq min N*q min p min D NS firm N*S firm

27. A Competitive Industry-More End ©2003 Charles W. Upton