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ASSIGNMENT
SUBMITTED BY:
Asad Mahmood
Roll No. 13
SUBMITTED TO :
University Of Peshawar
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Managerial Economics
Contents
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Managerial Economics
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Managerial Economics
The long run supply curve measures the quantities of a good or service offered for sale
by all sellers--potential and actual--who could sell in the market.
Long run supply is more elastic than short run supply.
Total number of
1,700
farms
New York State Apple Supply with Identical
Firms Quantity Marginal
Average
Supplied Cost =
Cost
The table shows the short run supply of (thousands Short Run
($/ton)
New York State apples with 1,700 firms of tons) Price
identical to Jonathan's Apple Farm. 0
The table was constructed by
170 200 552
multiplying the quantities from a single
apple farm by 1,700 (total number of 255 248 437
farms). 340 400 400
This is a short run supply curve because
at prices below $400, some farms want 357 440 401
to leave the market (average cost 374 484 404
exceeds price) and at prices above $400
391 528 408
farms are making economic profits, so
there will be entry of new farms. 408 588 414
425 632 422
510 1,360 690
On the short run supply curve the number of firms in the industry is constant because
no firm can change its fixed factors, which include land.
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Managerial Economics
On the long run supply curve all firms operate at the point where marginal cost equal
average cost. The number of firms adjusts to vary the supply.
Remember, all firms are identical.
Total number of
1,700 Long Run
farms
Long Run and Short Run NYS Apple Quantity Marginal Long
Average Number
Supply Curves Supplied Cost = Run
Cost of Apple
(thousands Short Run Price
($/ton) Farms
In the short run each of 1,700 of tons) Price ($/ton)
apple farms moves along its 0 400 0
marginal cost curve producing
170 200 552 400 850
the short run supply shown in
the table at the right. 255 248 437 400 1,275
In the long run each firm 340 400 400 400 1,700
produces exactly 200 tons and
the number of firms varies. 357 440 401 400 1,785
Thus, the long run supply curve 374 484 404 400 1,870
is perfectly elastic at a price of
391 528 408 400 1,955
$200/ton.
408 588 414 400 2,040
425 632 422 400 2,125
510 1,360 690 400 2,550
Graph of the NYS Apple Supply Curves
The graph shows the short run and long run supply curves for New York State apples.
The short run curve is 1,700 (current number of farms) times the supply of a typical .
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Managerial Economics
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Managerial Economics
What are the effects of decreasing a variable input price on the short and long run
supply curves in a perfectly competitive industry?
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Managerial Economics
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Managerial Economics
What are the effects of decreasing a fixed input price on the short and long run supply
curves in a perfectly competitive industry?
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Managerial Economics
A firm’s technology is the set of methods that it uses to convert inputs into product, called the
production function.
Improving a firm’s technology means that it is possible to produce more with the same fixed
and variable inputs.
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Managerial Economics
Summary
The market supply curve is the sum of the quantities supplied by each firm at each price.
Markets with homogeneous suppliers (agricultural products like New York State apples,
for example) have perfectly elastic long run supply curves.
Changing the cost of a variable factor changes short and long run supply.
Changing the cost of a fixed factor changes long run supply.
Changing technology changes short and long run supply
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Managerial Economics
BIBLIOGRAPHY
http://www.questia.com
Review of The Long and the Short’, Economica, New Series, 26 (103),260-262.
Marshall, A. (1920). Principles of Economics, 9th ed., New York
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