Lecture 15
THE SUPPLY CURVE

• Individual firm's supply curve
• Industry supply
• Zero profits in the long run

1. Individual firm

• The marginal cost is the supply curve (Why?)
• Upward-sloping curve

2. Industry supply curve

• Sum of all the individual supply curves
• Upward-sloping
  

3. Industry eqbm in the short run

• Intersection of the industry demand and supply curves
  (Note: The industry demand curve is downward-sloping!)
• Eqbm price and quantity in the market
• Individual firm could make a profit or a loss in the short run
  

4. Eqbm in the long run

• Possibility of free entry and exit
• Zero economic profits in the long run:
      Price = minimum of Average cost
• Firm's eqbm output at the point where P=MC=AC