Intermediate Microeconomics · free preview
Short-Run Supply and the Shutdown Rule
The firm's short-run supply curve is its marginal cost curve above minimum average variable cost, zero below it, since fixed cost is sunk and operating pays exactly when revenue covers variable cost, the rule checked against the worked cubic.
1. Supply as inverted marginal cost
Supply as inverted marginal cost
2. The shutdown comparison
The shutdown comparison
3. The supply curve's shape
The supply curve's shape
4. Sunk cost discipline
Sunk cost discipline
5. The supply inversion
What is the firm's supply at price 16 for the worked MC of 3q squared minus 12q plus 16?
6. The shutdown price
What is the shutdown price for the worked cubic family?
7. Below the floor
Price is 6, below 7. What does the firm do and what does it lose?
8. The rule's logic
Why does fixed cost not enter the shutdown decision?
9. Supply at 10
For the inverted supply q equals 2 plus root of p minus 4 over 3, compute q at p of 10, and write it to two decimals.
10. The shutdown quantity
At exactly the shutdown price 7, what quantity does MC deliver? Write the number.
11. Supply at the familiar price
Using q equal to 2 plus root of p minus 4 over 3, what is supply at p of 16?
12. Surplus at the shutdown point
At exactly the shutdown price 7, the firm supplies 3 units. What is its producer surplus?
13. Surplus at ten
At p of 10 with supply q of 4, what is producer surplus?
14. Fixed cost irrelevance
Suppose the fixed cost were 100 instead of 36. What happens to supply at p of 16?
15. Supply at thirteen
Using q equals 2 plus root of p minus 4 over 3, compute supply at p of 13, and write the number to two decimals.
16. Revenue at ten
At p of 10 the firm supplies 4 units. Compute total revenue, and write the number.
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