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INTERMEDIATE MICROECONOMICS
worksheet
Chapter 5: Pure competition
I. FIRM SUPPLY
1. The firm’s short-run supply decision
The profit maximization problem facing a competitive firm is:
First- and second-order profit maximization conditions:
Shutdown condition:
2. The firm’s long-run supply decision
The profit maximization problem facing a competitive firm is:
First- and second-order profit maximization conditions:
The firm will exit the industry if:
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The firm’s short-run supply curve
The firm’s long-run supply curve
II. INDUSTRY SUPPLY
1. Industry short-run supply
In an industry with n firms, let Si(p) be the supply curve of firm i, the industry (market) supply function is:
2. Short-run industry equilibrium
Firm 1
Firm 2
Firm 3
3. Long-run industry equilibrium
The relevant parts of the market
short-run supply curves
The market long-run supply curve
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