Intermediate Microeconomics · free preview
Long-Run Industry Supply
Entry and exit flatten long-run supply at minimum average cost in constant-cost industries, scarce inputs tilt it upward in increasing-cost ones, and the shape determines how demand growth prices itself, pure quantity adjustment or rising price with rents to the scarce factors.
1. The entry-exit engine
The entry-exit engine
2. Increasing-cost industries
Increasing-cost industries
3. Rents and who earns them
Rents and who earns them
4. Decreasing-cost rarity
Decreasing-cost rarity
5. Constant-cost flatness
What sustains flat long-run supply in a constant-cost industry?
6. The increasing-cost tilt
Why does an increasing-cost industry's long-run supply slope up?
7. Rent capitalization
A taxi license earns 10 thousand a year in rent, interest at 5 percent. What is its price?
8. Why tax rents
Why do economists favor taxing pure economic rents?
9. Rent on the upward supply
In a rising long-run supply, the height above min AC is rent per unit. If price is 3 and min AC is 2, write the rent per unit.
10. License price
Compute 10000 divided by 0.05, and write the number.
11. A fatter rent stream
A taxi license earns 12 thousand a year and interest rates run 4 percent. What is the license worth?
12. Rent per unit higher
In a rising long-run supply, price is 4 and minimum average cost is 2. What is the rent per unit?
13. Taxing the rent stream
The rent per unit is 1 in the rising-supply industry. What happens if the government taxes that rent fully?
14. Total rent in the industry
At price 3 with minimum average cost 2, the 80 firms each earn 1 per unit. What is total rent?
15. License at a fatter rent
A license earns 12 thousand a year with interest at 4 percent. Compute its price in thousands, and write the number.
16. Total industry rent
With price 3, minimum average cost 2, and 80 units traded, compute total rent, and write the number.
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