* Costs
** Short/long run
** Minimize cost in long run
** Maximize profit
*** MC = MR = p
*** Check shutdown rule

* Welfare economics
** Producer/consumer surplus
** Wedge between demand and supply - government
** Monopoly
*** MR = p(q) + p'(q) * q


* Production
** Firms have technology
*** Production function q = F(K,L)
** Scale: increasing/constant/decreasing returns to scale
*** F(\lambda K, \lambda L) >/=/< \lambda F(K,L)
*** Usually decreasing returns in practice

** Firm: Inputs -> Outputs
*** Goal: maximize profits = revnue - costs
**** Costs are economic: include opportunity costs
*** Short run vs long run
**** Some inputs (capital) fixed in short run

* Maximizing profits 
** Minimize costs
*** Inputs: labor L (cost w), capital K (cost K)
*** Long run - can vary both inputs
**** Isoquants: amount of labor/capital that produces given quantit
**** Minimize costs: isoquant tangent to isocost = \abs{slope} (= MRTS) = w/r
**** Cost function C(q) = cheapest cost to produce quantity q
**** C(q) = w L(q) + r K(q)
*** Short run - capital fixed
**** q = F(\overline{K}, L)
**** gives L(q)
**** C_{SR} = w L(q) + r \overline{K}
*** Cost functions
**** Total cost = C
**** Average cost AC = C/q
**** Average fixed cost AFC = FC/q
**** Average variable cost AVC = VC/q
**** Marginal cost MC = C'(q)
** Maximize profits
*** Long run
**** profits are zero: minimum of average cost = supply
**** Supply curve is horizontal
**** Can sometimes determine number of firms if quantity fixed at min(AC)
***** i.e. if returns to scale are not constant
*** Short run profits
**** maximize \pi = pq - C(q)
**** p = MC(q)
**** Supply curve is MC curve
**** MUST check shutdown decision
***** p > AVC
**** Market supply
***** S_1(p) + S_2(p) + ...
***** Graphs are backwards, so use horizontal sum

* Welfare
** Efficiency vs equity
*** Efficiency: at market equilibrium, no deadweight loss.
** Find welfare
** Total welfare = PS + CS (+ tax revenue)
** Profit = PS - fixed costs = PS w/o fixed costs

* Monopoly
** R = P(Q) Q - p is a function of q
** MR = P'(Q)*Q + P(Q)
** MR still equals MC

* What's on the test
** Competitive frameworkc
*** Derive cost function, etc
** Monopoly
** NOT price discrimination
** When a market is competitive
** Price regulation (ceilings/floors) - deadweight loss
** Determine number of firms in the market
*** Find min(LRAC) - determines amount q^* produced at efficient scale
*** LR supply is horizontal at min(AC) - intersect w/ demand curve to find equilibrium quantity Q
*** n = Q/q^*
** Shocks = taxes
** 5 short answer and 2 long answer
*** second part of last long answer question is hard