1. Firm Supply Demand Curve Facing Competitive Firm Supply Decision of a Competitive Firm Producer’s Surplus and Profits Long-Run

2. The Demand Curve Facing a Competitive Firm

3. Supply Decision of a Competitive Firm Problem of a competitive firm:

4. Revenues, Costs, and Profits

5. Maximum Profits

6. Optimal Quantity Supplied Firm maximizes: Necessary condition for optimal choice:

7. An Example Short-run cost function: Marginal cost function:

8. An Example Average variable costs: Average costs:

9. An Example Profit maximization: Necessary condition:

10. An Example

11. An Example: Profits

12. Producer’s Surplus Producer’s surplus=Area below price above supply curve Alternatively: below supply curve where area below supply curve (MC):

13. An Example: Producer’s Surplus

15. Producer’s Surplus and Profits Producer’s surplus: Profits:

16. An Example: Producer’s Surplus and Profits

17. An Example Output: Profits:

18. An Example Profits: Producer’s surplus:

19. One Exception: or ?

20. A Second Exception: Shutdown! Profits if firm produces: Profits if firm does not produce: Producing is better if:

21. A Second Exception: Shutdown! Producing is better if: Rearrange. Produce only if:

22. Shutdown

23. The Firm’s Supply Curve

24. Long and Short Run Supply in Consultant Firm Example

25. Shutdown in the Short-Run and in the Long-Run In the short-run, the shutdown condition is: In the long-run, the shutdown condition is: