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Chapter6PerfectlyCompetitiveSupply:TheCostSideofTheMarketCopyrightc2009byTheMcGraw-HillCompanies,Inc.?Allrightsreserved.
ThinkingAboutSupply:
ImportanceofOpportunityCostExampleHowmuchtimeshouldHarryspendrecyclingsoftdrinkcontainers?
ThinkingAboutSupply:
ImportanceofOpportunityCostHarryischoosingbetweenwashingdishesfor$6/hourandcollectingcontainersat2centseach.Opportunitycostofcollectingcansis$6/hour.
ExampleSearchtime(hours/day) 0 0 1 600 2 1,000 3 1,300 4 1,500 5 1,600TotalnumberofcontainersfoundAdditionalnumberofcontainersfound600400300200100
ThinkingAboutSupply:
ImportanceofOpportunityCostCostsandBenefits1hourcollectingcans=(600)(.02)=$12Benefit($12)OpportunityCost($6)2ndhourbenefit($8)OpportunityCost($6)3rdhourbenefit($6)=OpportunityCost($6)
ThinkingAboutSupply:
ImportanceofOpportunityCostQuestionWhatisthelowestredemptionpricethatwouldinduceHarrytorecycle1hour/day?Solution600containersx1cent=$6=opportunitycostofwashingdishes
ThinkingAboutSupply:
ImportanceofOpportunityCostReservationPrice
ThinkingAboutSupply:
ImportanceofOpportunityCostReservationPrice1hourrecycling=p(600)=$6=1cent2hoursrecycling=p(400)=$6=1.5cents3hoursrecycling=p(300)=$6=2cents4hoursrecycling=p(200)=$6=3cents5hoursrecycling=p(100)=$6=6cents
AnIndividualSupply
CurveforRecyclingServicesRecycledcans(100sofcans/day)Deposit(cents/can)0610131663211.515Harry’sSupplyCurve
TheMarketSupplyCurve
forRecyclingServicesRecycledcans(100sofcans/day)Recycledcans(100sofcans/day)Deposit(cents/can)++Deposit(cents/can)6101316632101.515Harry’sSupplyCurve6101316632101.515Barry’sSupplyCurve
Recycledcans(100sofcans/day)Deposit(cents/can)12202632632101.530TheMarketSupplyCurve
forRecyclingServicesMarketSupplyCurve
TheMarketSupplyCurve
with1,000IdenticalSellersRecycledcans(100,0
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