微观经济学15_16

15 INDUSTRY SUPPLYShort-Run Industry Supply An industry with a fixed number of firms, n . S i (p ): the supply curve of firm i , The industry supply curve , (market supply curve )∑==ni i p S p S 1)()(P y Industry Equilibrium in the Short Run The intersection of market supply curve with the market demand curve gives an equilibrium price, p *. Firm choose his quantity of production by p * = SMC (y ) A firm withp *=AC (y ) has zero profits py －c (y ) = 0p pp*y y Industry Equilibrium in the Long Run In the long run, firms are able to adjust their fixed factors. Free entry: there are no restrictions against new firms entering most competitive industries. Consider the case: all firms have identical long-run costfunctions c (y ). y * : the level of output minimizing average costs.p *= **)(y y c : the minimum value of average cost. The industry supply curves for m firms: s m (p )P s 1 s 2 s 3 s 4P *yThe maximum number of competitive firms: the intersections of the demand curve and the supply curve make lowest price consistent with nonnegative profits . The long-Run Supply Curve Construct one industry supply curve out of the n curves. Rule out all of the points on the supply curve that are below p *, Rule out some of the points on the supply curves above p *.PP *y The slope of the supply curve will be very flat. Example: a single firm ’s supply: y =2p p *= **)(y y c =1 All firms in the industry are identical. The possible supply y = 2p p ≥ 1, y ≥ 2 y = 4p p ≥ 1, y ≥ 4 …… y = 2np p ≥ 1, y ≥ 2n y = 2(n +1)p p ≥ 1, y ≥ 2(n +1) The industry supply curve y = 2np , 2(n +1) > y ≥ 2nThe range of price 1 ≤ p ≤nn 1+P y =2pP *=12 4 2n 2(n +1) y It is reasonable to take it as having a slope of zero ---- flat line at price equals minimum average cost.The important implication: in a competitive industry with free entry, profits cannot get very far from zero. Fixed Factors and Economic Rent In some circumstances the number of firms in the industry is fixed: Some factors of production that are available in fixed supply. Possessing the necessary level of talent. The number of these permits may be fixed by law. These industries are with positive profits in the long run. The entrance can be traded with the payment for positive profits. Whenever there is some fixed factor that is preventing entry into an industry, there will be an equilibrium rental for that factor. Economic Rent Economic rent : payments to a factor of production in excess of the minimum payment necessary to have that factor supplied. Economic rent in cost The ―profits‖ attributable to the land: economic rents. The equilibrium rent will be whatever it takes to drive profits to zero p *y * – c v (y *) – rent = 0 or rent = p *y * – c v (y *).CMC AC(y)A VC(y)p*O yThe Politics of RentOften economic rent exists because of legal restrictions on entry into the industry.The incumbents in a legally restricted industry may well devote considerable resources to maintaining their favored position.Rent seeking: Efforts directed at keeping or acquiring claims to factors in fixed supplies. From the viewpoint of society they represent a pure deadweight loss.16 MONOPOLYMonopoly − industry structure when there is only one firm in the industry. The demand behavior of the consumers will constrain the monopolist’s choice of price and quantity. Choosing the price: quantity is decided through demand. Choosing the quantity: price is decided through demand. Maximizing Profits The monopolist’s profit maximization problemr (y ) = p (y )y : the revenue function of the monopolist.CC (y )p *r (y )O y* yThe optimization condition.dydc dy dr = or MR = MC In the case of a monopolist.y dydp p dy dr += Writing marginal revenue in terms of elasticity⎥⎦⎤⎢⎣⎡+=)(11)()(y y p y MR ε and)()(11)(y MC y y p =⎥⎦⎤⎢⎣⎡+ε or)()(11)(y MC y y p =⎥⎦⎤⎢⎣⎡-ε> 0 ymax )()(y c y r -------A monopolist will never choose to operate where the demand curve is inelastic.Linear Demand Curve and MonopolyThe monopolist faces linear demand curve:p(y) = a–byThe revenue functionr(y) = p(y)y = ay–by2Marginal revenue functionMR(y) = a– 2by .CMCp*O y*yThe optimal output, y*, is where the marginal revenue curve intersects the marginal cost curve.Price: p* = p(y*).Inefficiency of MonopolyCMCp mp cO y m y c yConsumers will typically be worse off in an industry organized as a monopoly than one organized competitively.But, the firm will be better off!Counting both the firm and the consumer---- is the monopolylevel of output Pareto efficient?Deadweight Loss of MonopolyWhen price is changed from p m to p c :Change in monopolist’s surplus: C–AC hange in consumers’ surplus: A + B.A true increase in surplus: B+C----d eadweight loss due to the monopoly.CMCp mp c A BCO y*yWhat Causes Monopolies?Minimum efficient scale (MES).Firms collude to raise prices. ----Cartel.Natural monopoly: there are large fixed costs and small marginal costs.By historical accident.Barrier set by government.Natural MonopolyRegulating a monopoly to eliminate the inefficiency —to set price equal to marginal cost.CMCP mp rO y*yPossible problem: it may be that the monopolist would make negative profits at such a price.CMCP mp rO y*yWhat is left?To be regulated or operated by governments.Subsidy,Second-best pricing policy ---- just allow the firm to break even.The problem facing the regulators:What are the true costs of the firm?Monopolistic CompetitionDefinition of an industry: the set of firms producing products that are viewed as close substitutes by consumers.Product differentiation each firm attempts to differentiate its product from the other firms in the industry.Monopolistic competition:Each firm faces a downward sloping demand curve for its product.The firms compete in terms of both price and the kinds of products.There are no restrictions against new firms enteringCACp rO yAn interesting feature:1.Each firm is selling at a price and output combination on its demand curve.2.Each firm is maximizing its profits.3. the profits of each firm is zero.The situation is still Pareto inefficient. Question of capacity vs. varietyLess cost?More varian?。