A Competitive IndustryMore Managerial EconomicsCharles W Upton A

A Competitive Industry-More Managerial Economics-Charles W. Upton

A Tabular Analysis • All firms have this cost function A Competitive Industry-More

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

Computation Review A quick review A Competitive Industry-More

The Minimums of AC and AVC A Competitive Industry-More

The Supply Function A Competitive Industry-More

The Supply Function A Competitive Industry-More

Supply Function with Multiple Firms A Competitive Industry-More

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Summing Up NSfirm p 1 pmin • A firm’s supply curve is simply its MC curve • If there are N firms, equilibrium will be at p 1. . D Nqmin N*qmin A Competitive Industry-More

A Summing Up NSfirm N*Sfirm p 1 pmin D Nqmin • 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 pmin, the LR supply curve. N*qmin A Competitive Industry-More

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