Chapter 8.6: The Short-Run Market Supply Curve

Short-Run Market Supply Curve

shows the amount of output that the industry will produce in the short run for every possible price.

Industry’s Output

the sum of the quantities supplied by all of its individual firms.

upward

Increasing input prices shifts a firm’s marginal cost curve ___.

The price elasticity of market supply

measures the sensitivity of industry output to market price.

positive

The short-run elasticity supply is always ___.

low

When marginal cost increases rapidly in response to increases in output, the elasticity of supply is ___.

Perfectly inelastic supply

arises when the industry’s plant and equipment are so fully utilized that greater output can be achieved only if new plants are built

Perfectly Elastic Supply

arises when marginal cost is constant

Consumer Surplus

the difference between the maximum that a person would pay for an item and its market price.

Producer surplus

the sum over all units produced of the differences between the market price of the good and the marginal cost of production. measures the area above a producer’s supply curve and below the market price

Variable profit/producer surplus

Revenue - Variable Cost

Total Profit

Revenue - VC - FC