supply curve

Question 1

what’s the firm goal?

Answer 1

The firm’s goal of maximizing profit can be rephrased as solving this problem:
max. pq-c(w,q)
q≥0

Basically, instead of thinking about maximizing profits in one step
(as was done before), we consider the following two steps procedure:
1. First, for each possible level of output, we find the input bundle that
minimizes the cost of producing it
2. Then, we choose that output that maximizes the difference between
the revenues it generates and its cost

Question 2

how is the output choosen in this case?

Answer 2

output is chosen so that price equals marginal costs (p= MC ).
p = [∂c(w,q*)/∂q]

Question 3

what is the average cost?

Answer 3

The average cost is the production cost per unit of output.
AC=c/q

Question 4

what is marginal cost?

Answer 4

The marginal cost is the rate of change in the production cost when
output changes marginally
MC= ∂c/∂q

Question 5

How is the average cost curve shaped?

Answer 5

In the short-run (when some factors of production are fixed), as we
increase output, average variable costs
− may initially decrease,
− but then will eventually increase by the law of diminishing MP.
This results in a U-shaped average cost curve.