Review Class Nine - 中山大学精品课程.ppt

Review Class Nine Brief review for the former contents____Producer theory The key sentence of Producer theory: A representative firm will maximize his profit under the restriction of technology and market structure. Recall how to translate this sentence? Ch 18 has told us how to describe the technology in the arithmetic way and geometrical way. In Ch 19, we impose the definition of short-run and long-run, and solve for the profit-maximization problem. Brief review for the former contents____Producer theory In order to analyze the firm supply behavior, we should take a deeper sight on it. Profit maximization problem facing a typical firm can be divided into two parts: Part 1: Given any production level of ,how to choose the optimal inputs bundle to minimize cost? (Ch 20 and Ch 21) Part 2: How to choose the proper output level of y, such that the profit can be maximized? (Ch 22 and Ch 23 are referred to perfect competition, while Ch 24 and Ch 25 are referred to Monopoly.) Brief review for the former contents____Producer theory For part 1, you should remember that cost minimization problem is not the objective or the end, the purpose for us is to obtain the cost function, which measures the minimum cost of producing y units of output when factor prices are (w1,w2). For part 2, having got the cost function, we will return to the profit maximization problem, and analyze the behavior of firm supply. We divide our discussion into two parts in accordance with market structures: Ch 22 and Ch 23 are referred to perfect competition, while Ch 24 and Ch 25 are referred to Monopoly. Puzzle? You can observe that what we did is only referred to the market structures of limiting cases, which are perfect competition and Monopoly. But for the typical firm, what will he do, or precisely speaking, what is his supply behavior if the market structure facing to them is the case of oligopoly? The tool of game theory can help us, which is our topic in tonight’s class. (Ch 28 a