Economics 202: Intermediate Microeconomic Theory

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Economics 202 Intermediate Microeconomic Theory

• Questions?
• Read Chapters 11 (Applied Competitive Analysis)
  and Chapter 12 (General Equilibrium Welfare)

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Long-run Industry Supply Curves
Input Prices Type of Industry SR Cost curves LR
Supply Curve Constant Constant-cost dont
shift Horizontal Increasing Increasing-cost shif
t up Upward-sloping Decreasing
Decreasing-cost shift down Downward-sloping Deriv
ation numerical example 1. Initial long-run
equilibrium 2. Demand shifts out
unexpectedly 3. Short-run increase in Q (along
SR Industry supply higher Price) 4. Positive
economic ? (signal) 5. Entry by new firms AT
SAME AVERAGE COST. (entry is at higher costs
for incr-cost industry) 6. Output expands until
back to zero economic ?. ? is diluted by new
firms which cause lower Poutput ( ? diluted
by ? Pinputs ,for incr.-cost industry) 7. Price
of the product/output falls.