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Marginal Cost as the Supply of Output This page describes a relationship between a firm's marginal cost curve (MC) and the firm's supply of the the output. Restated, as the price of the output (MR) rises or falls, profit maximizing quantity of output (where MR = MC) also rises and falls. This idea that a firm will produce and sell a different quantity of output based on the market price of the product is the same idea that the quantity of a product supplied will rise and fall as the market price rises and falls. Accordingly, the marginal cost curve (MC) is that firm's supply curve for the output; as price of output rises, the firm is willing to produce and sell a greater quantity. Combining the MC curves for all the firms producing the product is the supply curve for the industry. Example to illustrate the impact of technology Technology shifts the TPP or production function (higher), TVC (lower), and the marginal cost curve (lower). The MC curve illustrates the firm's supply curve for it output. Thus a change in technology shifts the firm's (and the industry's) supply curve.
This relation is described in the determinents of supply, but now we have an understanding of the intermediate steps that lead to that outcome. In summary
The next section explains strategies a manager may pursue when the business is unprofitable. Last Updated October 22, 2009 |
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Email: David.Saxowsky@ndsu.edu This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions. |
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