Transcript Lecture 05.1

Econ 201
Spring 2009
Lecture 5.1
Cost Curves, Profit Maximization
5-7-2009
1
Seattle Salmon (Fig. 9.2)
Qty
Price/Lb
Sup
p
Total
Cos
t
Mar
$10
0
15
$0
($15)
$10
$10
1
25
$10
($15)
$10
10
$0
$10
2
31
$20
($11)
$10
6
$4
$10
3
35
$30
($5)
$10
4
$6
$10
4
40
$40
$0
$10
5
$5
$10
5
46
$50
$4
$10
6
$4
$10
6
54
$60
$6
$10
8
$2
$10
7
63.5
$70
$7
$10
9.5
$1
$10
8
76
$80
$4
$10
12.5
($3)
$10
9
90
$90
$0
$10
14
($4)
$10
10
106
$100
($6)
$10
16
($6)
Tot Rev
Net Rev
Cos
t
Mar Rev
N/A
Marg
Net
Rev
N/A
Profit Max
MR (=P) = MC
2
Graphically
Biggest Difference
$120
$100
$80
$60
Tot Rev
Total Cost
$40
Mar Rev
Mar Cost
Net Rev
$20
$0
0
1
2
3
4
5
6
7
8
9
10
($20)
($40)
MR = MC
3
Suppose the Price Goes Up ($15)
• Could Re-compute Tot Rev and Net Rev
Price/Lb
Qty Supp
Total Cost
Tot Rev
Net Rev
Mar Rev
Mar Cost
Marg Net
Rev
N/A
N/A
$15
0
15
$0
($15)
$10
$15
1
25
$15
($10)
$15
10
$5
$15
2
31
$30
($1)
$15
6
$9
$15
3
35
$45
$10
$15
4
$11
$15
4
40
$60
$20
$15
5
$10
$15
5
46
$75
$29
$15
6
$9
$15
6
54
$90
$36
$15
8
$7
$15
7
63.5
$105
$42
$15
9.5
$6
$15
8
76
$120
$44
$15
12.5
$3
$15
9
90
$135
$45
$15
14
$1
$15
10
106
$150
$44
$15
16
($1)
4
Suppose the Price Goes Up ($15)
• Or just find the new point where MC = new price
Price/Lb
Qty Supp
Total Cost
Tot Rev
Net Rev
Mar Rev
Mar Cost
Marg Net
Rev
N/A
N/A
$15
0
15
$0
($15)
$10
$15
1
25
$15
($10)
$15
10
$5
$15
2
31
$30
($1)
$15
6
$9
$15
3
35
$45
$10
$15
4
$11
$15
4
40
$60
$20
$15
5
$10
$15
5
46
$75
$29
$15
6
$9
$15
6
54
$90
$36
$15
8
$7
$15
7
63.5
$105
$42
$15
9.5
$6
$15
8
76
$120
$44
$15
12.5
$3
$15
9
90
$135
$45
$15
14
$1
$15
10
106
$150
$44
$15
16
($1)
5