Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

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198 PRICE AND OUTPUT UNDER PERFECT COMPETITION [CHAP. 8(a)(b)(c)The market period refers to the period of time over which the market supply of a commodity is completelyfixed. This may be one day, one month, one year, or more and depends on the industry involved. Forexample, if fresh strawberries are delivered to the New York market every Monday and no other deliveriescan be made during the same week, then the market period for strawberries in New York is one week. Forwheat, the market period extends from one harvest to the next or for one year. For Da Vinci’s paintings,the market period refers to an infinite length of time.In general, the price of wheat is lowest just after harvest time and highest just before the next harvest.However, the price is usually not so low after harvest time that all the wheat available will be exhaustedlong before the next harvest. Or it is usually not so high during the year that large quantities of wheat areleft unsold by the nest harvest or must be sold at very low prices. In a perfectly functioning market (includingperfect knowledge of present and future conditions), the entire supply of wheat from one harvest will just beexhausted at the time of the next.The price of wheat between consecutive harvests (the span of the market period) is equal to the harvest priceplus the opportunity cost of holding capital tied down in wheat and the cost of storage and insurance betweenharvest time and the time of sale. In the real world, speculators in wheat make sure (unless they make seriousmistakes in their expectations) that this equality is approximately true.SHORT-RUN EQUILIBRIUM OF THE FIRM: TOTAL APPROACH8.8 (a) How can the firm increase its output in the short run? (b) How many units of the commodity can thefirm sell in the short run at the equilibrium price? (c) What crucial assumption do we make in order todetermine the equilibrium output of the firm?(a)(b)(c)Within the limitations imposed by its given scale of plant, the firm can vary the amount of the commodityproduced in the short run by varying its use of the variable inputs.Since the perfectly competitive firm faces an infinitely elastic demand curve, it can sell any amount of thecommodity at the given market price.The crucial assumption we make in order to determine the equilibrium output of the firm (i.e., how much thefirm wants to produce and sell per time period) is that the firm wants to maximize its total profits. It should benoted that not all firms seek to maximize total profits (or mininize total losses) at all times. However, theassumption of profit maximization is essential if we are to have a general theory of the firm, and in generalit leads to more accurate predictions of business behavior than any alternative assumption. The short-runequilibrium of the firm can be looked at from a total revenue–total cost approach or from a marginalrevenue–marginal cost approach.8.9 If the STC of a firm at various levels of output is given by the values in Table 8.5 and TR ¼ PQ ¼ $4Q,(a) determine the level of output at which the firm maximizes total losses, breaks even, and maximizestotal profits; (b) plot the TR and STC schedules on one set of axes and label (on the STC curve) A thepoint of total loss maximization, B and E the break-even points, C the point of lowest SAC, and D thepoint of total profit maximization; and (c) plot the total profit schedule, (d) At which point is the firm inshort-run equilibrium?Table 8.5Q 0 100 200 300 400 500 600 700 750 800 900STC ($) 400 1000 1300 1500 1600 1700 1850 2100 2265 2500 3600
CHAP. 8] PRICE AND OUTPUT UNDER PERFECT COMPETITION 199(a) Table 8.6(1)Q(2)P ($)(3)TR ($)(4)TC ($)(5)Total Profit ($)0 4 0 400 2400100 4 400 1000 2600 Total Losses Maximized200 4 800 1300 2500300 4 1200 1500 2300400 4 1600 1600 0 Break-Even Point500 4 2000 1700 þ300600 4 2400 1850 þ550700 4 2800 2100 þ700750 4 3000 2265 þ735 Total Profits Maximized800 4 3200 2500 þ700900 4 3600 3600 0 Break-Even Point(b)Fig. 8-12
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PREFACEvimicroeconomic theory and r
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viiiCONTENTS4.5 Characteristics of
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xCONTENTS10.8 The Kinked Demand Cur
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2 INTRODUCTION [CHAP. 1owners to bu
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4 INTRODUCTION [CHAP. 13. The meani
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6 INTRODUCTION [CHAP. 11.3 Distingu
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8 INTRODUCTION [CHAP. 1(c)In the mo
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10 INTRODUCTION [CHAP. 1Table 1.2Pr
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12 INTRODUCTION [CHAP. 1PARTIAL EQU
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CHAPTER 2Demand, Supply,and Equilib
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16 DEMAND, SUPPLY, AND EQUILIBRIUM:
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40 THE MEASUREMENT OF ELASTICITIES
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CHAPTER 4Consumer DemandTheory4.1 T
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64 CONSUMER DEMAND THEORY [CHAP. 4A
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98 CONSUMER DEMAND THEORY [CHAP. 4i
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CHAPTER 5Advanced Topics inConsumer
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104 ADVANCED TOPICS IN CONSUMER DEM
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CHAPTER 6Theory of Production6.1 PR
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120 THEORY OF PRODUCTION [CHAP. 6EX
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122 THEORY OF PRODUCTION [CHAP. 66.
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136 THEORY OF PRODUCTION [CHAP. 6(b
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142 THEORY OF PRODUCTION [CHAP. 6eq
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144 THEORY OF PRODUCTION [CHAP. 6(c
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CHAPTER 7Costs of Production7.1 SHO
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CHAPTER 11Recent and AdvancedTopics
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264 RECENT AND ADVANCED TOPICS IN M
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CHAPTER 12Game Theory andOligopolis
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274 GAME THEORY AND OLIGOPOLISTIC B
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284 INPUT PRICING AND EMPLOYMENT [C
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CHAPTER 14General Equilibriumand We
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314 GENERAL EQUILIBRIUM AND WELFARE
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CHAPTER 15The Economics ofInformati
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338 THE ECONOMICS OF INFORMATION [C
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348 FINAL EXAMINATIONsimultaneously
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350 FINAL EXAMINATION 6. (a) The co
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352 INDEXDecreasing cost industry 1
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354 INDEXMonopolistic competition:
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356 INDEXTime preference 106Total c
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Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

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