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

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202 PRICE AND OUTPUT UNDER PERFECT COMPETITION [CHAP. 8for the firm to shut down and minimize its total losses at $40,000 (its TFC) over the period of the short-run.Note that the firm produces its best short-run level of outputFig. 8-15provided P AVC (the symbol “” means “equal to or larger than”). If P AVC, the firm shuts down ratherthan produce its best short-run level of output.8.12 (a) Draw the short-run supply curve for the perfectly competitive firm of Problem 8.11. Also draw theindustry short-run supply curve on the assumptions that there are 100 identical firms in the industry andthat factor prices remain unchanged as industry output expands (and thus more factors are used) and(b) explain the graph of part (a). (c) What quantity of the commodity will be supplied by each firmand the industry at the commodity price of $9? At $18? At prices below $5?(a)Fig. 8-16
CHAP. 8] PRICE AND OUTPUT UNDER PERFECT COMPETITION 203(b)(c)The firm’s short-run supply curve is given by the rising portion of its MC curve over and above its AVC curve.If the supplies of inputs to the industry are perfectly elastic (that is, if the prices of factors of production remainthe same regardless of the quantity of factors demanded per unit of time by the industry), then the market orindustry short-run supply curve is obtained by the horizontal summation of the SMC curves (over and abovetheir respective AVC curves) of all the firms in the industry. (See also Section 2.8.) To be noted is that when asingle firm expands its output (and demands more factors), it is reasonable to expect that factor prices willremain unchanged. However, when all firms together expand output (and demand more factors), factorprices are likely to rise (see Problem 8.13).If the short-run equilibrium market price of the commodity is $9, each of the 100 identical firms in the industrywill produce and sell 5000 units of output (point C) and the total for the industry will be 500,000 units. At thecommodity price of $18, each firm produces and sells 7000 units. The industry total is 700,000 units. Nooutput of the commodity is produced at prices below $5 per unit (i.e., below the shut-down point, thesupply curves coincide with the price axis).8.13 Suppose that as the commodity price increases from $9 to $18 in Problem 8.12, factor prices also rise,causing the MC curve of each firm to shift up, say, by a vertical distance of $5. (a) With the aid of adiagram, determine the quantity supplied by each firm and by the industry at the commodity price of$18 and (b) compare this result with that of Problem 8.12.(a)(b)As the industry output is expanded (and more inputs are needed), the prices of the variable inputs may rise.This would cause the MC curve of each firm in the industry to shift up and to the left. In this problem we aretold that the MC curve of each firm shifts up from MC to MC 0 (see Fig. 8-17). Thus when the commodity pricerises from $9 to $18, the quantity supplied by each firm will rise from 5000 units (point C on MC) to 6000 units(point B 0 on MC 0 ) and the industry output rises from 500,000 units per time period (point C) to 600,000 units(point B 0 ).For the same increase in the commodity price (from $9 to $18), the output of each firm, and the output of theindustry rise less when factor prices rise than when they do not. (In Problem 8.12, we saw that when factorprices remain unchanged, the output of each firm rose from 5000 to 7000 units and the industry outputrose from 500,000 to 700,000 units.)Fig. 8-178.14 (a) Explain the sequence of events leading to the expansion of output when the commodity price rises inProblem 8.13(a). (b) Must the output of each of the 100 identical firms producing the commodity rise?Why? (c) What different results do we get in times of cost-push inflation?
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ProfessionalWant to learn more?We h
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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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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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128 THEORY OF PRODUCTION [CHAP. 6(a
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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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148 COSTS OF PRODUCTION [CHAP. 77.3
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252 PRICE AND OUTPUT UNDER MONOPOLI
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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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