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Firm Supply

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					Firm Supply
             Firm Supply
• FIRMS MAXIMIZE PROFITS

• PRICES (OUTPUT, p, INPUT,w,) ARE
  FIXED

• PROFIT MAXIMIZED AT q THAT
  EQUATES MC(q) = p IF
  – MC(q) IS RISING
  – MC(Q) ≥ AVC(q)
          Firm Supply
• MARGINAL COST = AVERAGE TOTAL
  COST AT MINIMUM OF ATC

• MARGINAL COST = AVERAGE
  VARIABLE COST AT MINIMUM OF AVC
             Firm Supply
• Total Cost = Average Total Cost * Supply
     TC = ATC * q
• Variable Cost = Average Variable Cost *
  Supply
     VC = AVC * q
• Total Revenue = Price * Supply
     R=p*q
             Firm Supply
• Operating Income Net Income = Total
  Revenue – Variable Cost
     OI = p * q – AVC * q
     OI = (p – AVC)*q
• Profit = Total Revenue – Total Cost
      = p * q – ATC * q
      = (p – ATC) * q

				
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posted:5/8/2013
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