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Topic 2 Lecture 14

Topic 2 Lecture 14. STVC. STVC. DRL. In order to be able to analyse output choices by the firm, it is necessary to add some other cost schedules to this diagram. IRL. SMC. SMC. X. X. Topic 2 Lecture 14. STVC. STVC. DRL. Define SAVC = STVC / X

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Topic 2 Lecture 14

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  1. Topic 2 Lecture 14 STVC STVC DRL In order to be able to analyse output choices by the firm, it is necessary to add some other cost schedules to this diagram . . . IRL SMC SMC X X Robin Naylor, Department of Economics, Warwick

  2. Topic 2 Lecture 14 STVC STVC DRL Define SAVC = STVC/X How would you represent it in the diagram? IRL SMC SMC X X Robin Naylor, Department of Economics, Warwick

  3. Topic 2 Lecture 14 STVC STVC DRL Define SAVC = STVC/X How would you represent it in the diagram? IRL SMC SMC X At X1, which is greater, SMC or SAVC? And at X2? X1 X2 X Robin Naylor, Department of Economics, Warwick

  4. Topic 2 Lecture 14 STVC STVC DRL At what point on STVC is SMC=SAVC? IRL SMC SMC X X1 X2 X Robin Naylor, Department of Economics, Warwick

  5. Topic 2 Lecture 14 STVC STVC DRL At what point on STVC is SMC=SAVC? IRL SMC X SMC To the right of X3, which is greater, SMC or SAVC? X1 X2 X3 X Robin Naylor, Department of Economics, Warwick

  6. Topic 2 Lecture 14 STVC STVC DRL IRL SAVC SMC X SMC X1 X2 X3 X Robin Naylor, Department of Economics, Warwick

  7. Topic 2 Lecture 14 SMC SMC SAVC SAVC X We now need to add the STFC to STVC to get STC (=STVC + STFC). Then we can derive SAFC in the diagram above and hence SATC = SAVC + SAFC). Robin Naylor, Department of Economics, Warwick

  8. Topic 2 Lecture 14 STVC + STFC = STC STVC STVC Add in STFC. STC is just the vertical sum of STVC and STFC. So SMC can be derived from either STVC or STC: it’s the ‘marginal’ curve of both. STFC SMC SMC X X Robin Naylor, Department of Economics, Warwick

  9. Topic 2 Lecture 14 STVC + STFC = STC STVC STVC What about SAFC? STFC SMC SMC X SAFC X Robin Naylor, Department of Economics, Warwick

  10. Topic 2 Lecture 14 SMC SMC SAVC SAVC SAFC SAFC X So we can now add SAFC in the diagram above and hence derive SATC = SAVC + SAFC. Robin Naylor, Department of Economics, Warwick

  11. Topic 2 Lecture 14 SATC SMC SMC SAVC SAVC SAFC SATC SAFC X So we can now add SAFC in the diagram above and hence derive SATC = SAVC + SAFC. Robin Naylor, Department of Economics, Warwick

  12. Topic 2 Lecture 14 SATC SMC SMC SAVC SAVC SATC X These are the 3 crucial short-run cost curves we’ll be using. Next, we’ll add a curve to the diagram to show the Demand Curve which the firm faces. Robin Naylor, Department of Economics, Warwick

  13. Topic 2: Lecture 14 In studying around the Lecture 14 material, you should continue to be studying from B&B 4th Ed., Chapter 6 on Inputs and Production Functions and Chapter 7 on Cost-minimisation and Chapter 8 on Cost Curves. Robin Naylor, Department of Economics, Warwick

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