[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.00,0:00:05.83,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:09.38,0:00:12.44,Default,,0000,0000,0000,,- [Alex] Okay -- this talk is going\Nto be a bit more involved.
Dialogue: 0,0:00:12.44,0:00:16.01,Default,,0000,0000,0000,,What we're going to show\Nis how a constant cost industry
Dialogue: 0,0:00:16.01,0:00:19.19,Default,,0000,0000,0000,,generates a flat supply curve.
Dialogue: 0,0:00:19.20,0:00:20.59,Default,,0000,0000,0000,,Let's begin.
Dialogue: 0,0:00:25.21,0:00:28.06,Default,,0000,0000,0000,,A constant cost industry\Nis one where it's very easy
Dialogue: 0,0:00:28.06,0:00:31.86,Default,,0000,0000,0000,,to expand output\Nwithout pushing up costs.
Dialogue: 0,0:00:32.23,0:00:35.93,Default,,0000,0000,0000,,So for example, pencils, rutabagas,\Ndomain name registration --
Dialogue: 0,0:00:35.93,0:00:38.48,Default,,0000,0000,0000,,these are all constant cost\Nindustries.
Dialogue: 0,0:00:38.48,0:00:40.05,Default,,0000,0000,0000,,Think about pencils.
Dialogue: 0,0:00:40.05,0:00:42.53,Default,,0000,0000,0000,,We can easily increase\Nthe supply of pencils
Dialogue: 0,0:00:42.53,0:00:47.37,Default,,0000,0000,0000,,by quite a bit without pushing up\Nthe cost of producing pencils.
Dialogue: 0,0:00:47.37,0:00:50.48,Default,,0000,0000,0000,,Why not? Well, what do we need\Nto produce more pencils?
Dialogue: 0,0:00:50.49,0:00:52.87,Default,,0000,0000,0000,,We need more wood,\Nwe need more graphite,
Dialogue: 0,0:00:52.87,0:00:54.30,Default,,0000,0000,0000,,we need more rubber.
Dialogue: 0,0:00:54.30,0:00:57.55,Default,,0000,0000,0000,,However, we'd need\Njust a little bit more wood
Dialogue: 0,0:00:57.55,0:01:00.25,Default,,0000,0000,0000,,relative to the total\Nworld supply of wood.
Dialogue: 0,0:01:00.25,0:01:03.11,Default,,0000,0000,0000,,Just a little bit more graphite\Nrelative to the world supply
Dialogue: 0,0:01:03.11,0:01:04.11,Default,,0000,0000,0000,,of graphite.
Dialogue: 0,0:01:04.11,0:01:06.84,Default,,0000,0000,0000,,And just a little bit more rubber\Nrelative to the world supply
Dialogue: 0,0:01:06.84,0:01:08.20,Default,,0000,0000,0000,,of rubber.
Dialogue: 0,0:01:08.49,0:01:13.14,Default,,0000,0000,0000,,In other words, we can increase\Nthe number of pencils produced,
Dialogue: 0,0:01:13.14,0:01:16.91,Default,,0000,0000,0000,,but only increase the demand\Nfor the inputs by a small
Dialogue: 0,0:01:16.91,0:01:19.13,Default,,0000,0000,0000,,and non-appreciable amount.
Dialogue: 0,0:01:19.13,0:01:22.17,Default,,0000,0000,0000,,We're not going to be pushing up\Nthe price of wood, for example,
Dialogue: 0,0:01:22.17,0:01:25.18,Default,,0000,0000,0000,,when we produce more pencils.
Dialogue: 0,0:01:25.24,0:01:27.54,Default,,0000,0000,0000,,The story would be different\Nif it was housing.
Dialogue: 0,0:01:27.54,0:01:30.65,Default,,0000,0000,0000,,If we want to produce more housing,\Nthat's a big demander of wood.
Dialogue: 0,0:01:30.65,0:01:33.72,Default,,0000,0000,0000,,That would require a lot more wood\Nand could potentially push
Dialogue: 0,0:01:33.72,0:01:35.06,Default,,0000,0000,0000,,the price of wood up.
Dialogue: 0,0:01:35.06,0:01:38.100,Default,,0000,0000,0000,,As we'll see, that would correspond\Nto an increase in cost industry.
Dialogue: 0,0:01:39.75,0:01:42.26,Default,,0000,0000,0000,,What about rutabagas?\NAgain, the idea's the same.
Dialogue: 0,0:01:42.26,0:01:45.77,Default,,0000,0000,0000,,We can easily increase\Nthe supply of rutabagas by a lot
Dialogue: 0,0:01:45.77,0:01:48.56,Default,,0000,0000,0000,,without increasing\Nthe price of the input,
Dialogue: 0,0:01:48.56,0:01:50.76,Default,,0000,0000,0000,,such as land or fertilizer.
Dialogue: 0,0:01:50.76,0:01:54.67,Default,,0000,0000,0000,,Rutabagas are simply too small\Na portion of the market
Dialogue: 0,0:01:54.67,0:01:56.90,Default,,0000,0000,0000,,for land or the market\Nfor fertilizer
Dialogue: 0,0:01:56.90,0:02:00.67,Default,,0000,0000,0000,,to have an appreciable effect\Non the price of these inputs,
Dialogue: 0,0:02:00.67,0:02:04.43,Default,,0000,0000,0000,,even if we were to increase\Nthe supply of rutabagas by a lot.
Dialogue: 0,0:02:05.15,0:02:07.42,Default,,0000,0000,0000,,Same thing with domain name\Nregistration.
Dialogue: 0,0:02:07.42,0:02:11.66,Default,,0000,0000,0000,,As the internet has expanded,\Ntremendously, it still costs
Dialogue: 0,0:02:11.66,0:02:14.71,Default,,0000,0000,0000,,about six or seven dollars\Nto register a domain name,
Dialogue: 0,0:02:14.71,0:02:16.57,Default,,0000,0000,0000,,since it's very cheap to do that
Dialogue: 0,0:02:16.57,0:02:19.40,Default,,0000,0000,0000,,with just a few additional\Ncomputers.
Dialogue: 0,0:02:19.40,0:02:21.93,Default,,0000,0000,0000,,A little bit more\Ncomputer resources --
Dialogue: 0,0:02:21.93,0:02:24.88,Default,,0000,0000,0000,,very small portion\Nof the total number of computers --
Dialogue: 0,0:02:24.88,0:02:27.96,Default,,0000,0000,0000,,and we can increase the supply\Nof domain name registrars
Dialogue: 0,0:02:27.96,0:02:29.65,Default,,0000,0000,0000,,very, very easily.
Dialogue: 0,0:02:30.48,0:02:34.76,Default,,0000,0000,0000,,The implication of all this\Nis that long run supply curves
Dialogue: 0,0:02:34.76,0:02:37.71,Default,,0000,0000,0000,,for these goods, for goods\Nlike pencils, rutabagas,
Dialogue: 0,0:02:37.71,0:02:40.90,Default,,0000,0000,0000,,and domain name registration,\Nthe long run supply curve
Dialogue: 0,0:02:40.90,0:02:43.17,Default,,0000,0000,0000,,is going to be flat.
Dialogue: 0,0:02:43.18,0:02:45.52,Default,,0000,0000,0000,,Let's take a closer look\Nwith a diagram.
Dialogue: 0,0:02:46.08,0:02:47.69,Default,,0000,0000,0000,,So in this diagram,\Nwe're going to show
Dialogue: 0,0:02:47.69,0:02:51.22,Default,,0000,0000,0000,,how a constant cost industry\Nadjusts to a shift
Dialogue: 0,0:02:51.22,0:02:53.36,Default,,0000,0000,0000,,in increase in demand.
Dialogue: 0,0:02:53.36,0:02:57.20,Default,,0000,0000,0000,,And in so doing, we'll in fact show\Nwhy it's a constant cost industry.
Dialogue: 0,0:02:57.62,0:03:00.44,Default,,0000,0000,0000,,We're going to do so by looking\Nat two things simultaneously:
Dialogue: 0,0:03:00.44,0:03:03.64,Default,,0000,0000,0000,,the market\Nand the representative firm.
Dialogue: 0,0:03:03.76,0:03:05.75,Default,,0000,0000,0000,,So there are lots of firms\Nin this industry
Dialogue: 0,0:03:05.75,0:03:07.37,Default,,0000,0000,0000,,and we're going to pick\Njust one of them
Dialogue: 0,0:03:07.37,0:03:09.01,Default,,0000,0000,0000,,to represent them all.
Dialogue: 0,0:03:09.01,0:03:10.93,Default,,0000,0000,0000,,Now we're going to begin\Nwith the market side,
Dialogue: 0,0:03:10.93,0:03:12.54,Default,,0000,0000,0000,,with which we're very familiar.
Dialogue: 0,0:03:12.54,0:03:17.23,Default,,0000,0000,0000,,Here is our demand curve and here\Nis our short run supply curve.
Dialogue: 0,0:03:17.72,0:03:20.52,Default,,0000,0000,0000,,The quantity demanded is equal\Nto the quantity supplied --
Dialogue: 0,0:03:20.52,0:03:23.94,Default,,0000,0000,0000,,that determines our initial\Nor short run equilibrium.
Dialogue: 0,0:03:23.94,0:03:26.84,Default,,0000,0000,0000,,In fact, this is also going\Nto be the long run equilibrium
Dialogue: 0,0:03:26.84,0:03:29.61,Default,,0000,0000,0000,,for reasons\Nwhich will become clear.
Dialogue: 0,0:03:29.61,0:03:32.79,Default,,0000,0000,0000,,Now we also want\Nthe representative firm
Dialogue: 0,0:03:32.79,0:03:34.91,Default,,0000,0000,0000,,to be in equilibrium.
Dialogue: 0,0:03:34.91,0:03:37.70,Default,,0000,0000,0000,,So the firm is profit maximizing,\Nso that means the price
Dialogue: 0,0:03:37.70,0:03:40.22,Default,,0000,0000,0000,,is going to be equal\Nto marginal cost.
Dialogue: 0,0:03:40.22,0:03:42.69,Default,,0000,0000,0000,,And in addition,\Nprice will be equal
Dialogue: 0,0:03:42.69,0:03:46.87,Default,,0000,0000,0000,,to average cost, because the firm\Nis going to be earning normal,
Dialogue: 0,0:03:46.87,0:03:49.37,Default,,0000,0000,0000,,or zero economic profits.
Dialogue: 0,0:03:49.37,0:03:50.97,Default,,0000,0000,0000,,Normal profits.
Dialogue: 0,0:03:50.97,0:03:53.52,Default,,0000,0000,0000,,So this is our initial equilibrium\Nfor the market side --
Dialogue: 0,0:03:53.52,0:03:56.57,Default,,0000,0000,0000,,quantity demanded is equal\Nto the quantity supplied.
Dialogue: 0,0:03:56.57,0:03:59.84,Default,,0000,0000,0000,,And on the firm side,\Nprice is equal to marginal cost,
Dialogue: 0,0:03:59.84,0:04:02.64,Default,,0000,0000,0000,,so firms are profit maximizing,\Nand price is equal
Dialogue: 0,0:04:02.64,0:04:06.85,Default,,0000,0000,0000,,to average cost, so profits\Nare normal or zero.
Dialogue: 0,0:04:07.83,0:04:10.59,Default,,0000,0000,0000,,Okay, now let's look\Nat what happens
Dialogue: 0,0:04:10.59,0:04:12.52,Default,,0000,0000,0000,,when we increase demand.
Dialogue: 0,0:04:12.52,0:04:14.62,Default,,0000,0000,0000,,Two things are going to happen\Non the market side --
Dialogue: 0,0:04:14.62,0:04:17.40,Default,,0000,0000,0000,,of course the demand curve\Nwill shift out pushing up the price
Dialogue: 0,0:04:17.40,0:04:19.04,Default,,0000,0000,0000,,to a new equilibrium.
Dialogue: 0,0:04:19.04,0:04:21.38,Default,,0000,0000,0000,,On the firm side,\Nas the price goes up
Dialogue: 0,0:04:21.38,0:04:25.15,Default,,0000,0000,0000,,the firm will be expanding\Nalong its marginal cost curve.
Dialogue: 0,0:04:25.15,0:04:27.58,Default,,0000,0000,0000,,Let's look at the market --\Nboth of these things
Dialogue: 0,0:04:27.58,0:04:29.20,Default,,0000,0000,0000,,are going to happen\Nsimultaneously --
Dialogue: 0,0:04:29.20,0:04:30.79,Default,,0000,0000,0000,,let's look at what happens\Nin the market
Dialogue: 0,0:04:30.79,0:04:33.75,Default,,0000,0000,0000,,and then we'll do it again to focus\Non the representative firm.
Dialogue: 0,0:04:34.03,0:04:36.84,Default,,0000,0000,0000,,So here we go --\Nan increase in demand --
Dialogue: 0,0:04:36.84,0:04:40.62,Default,,0000,0000,0000,,the price shifts up,\Nwe come to a new equilibrium
Dialogue: 0,0:04:40.62,0:04:45.89,Default,,0000,0000,0000,,at point B on the market side,\Nand as I said each firm expands
Dialogue: 0,0:04:45.89,0:04:49.76,Default,,0000,0000,0000,,along its marginal cost curve\Nso we have a new equilibrium
Dialogue: 0,0:04:49.76,0:04:53.17,Default,,0000,0000,0000,,for the representative firm,\Nalso at point B.
Dialogue: 0,0:04:53.17,0:04:55.25,Default,,0000,0000,0000,,Now in case you missed it,\Nlet's show that again.
Dialogue: 0,0:04:55.25,0:04:56.92,Default,,0000,0000,0000,,For the representative firm,\Nlooking now
Dialogue: 0,0:04:56.92,0:04:58.31,Default,,0000,0000,0000,,at the representative firm.
Dialogue: 0,0:04:58.71,0:05:00.74,Default,,0000,0000,0000,,Now looking\Nat the representative firm,
Dialogue: 0,0:05:00.74,0:05:04.61,Default,,0000,0000,0000,,here is the increase in demand --\Nit drives price up
Dialogue: 0,0:05:04.61,0:05:08.58,Default,,0000,0000,0000,,as it does so each firm expands\Nalong its marginal cost curve.
Dialogue: 0,0:05:08.87,0:05:12.31,Default,,0000,0000,0000,,In fact, the reason\Nwhy the supply curve
Dialogue: 0,0:05:12.31,0:05:16.91,Default,,0000,0000,0000,,in the short run is upward sloping\Nis precisely that each firm
Dialogue: 0,0:05:16.91,0:05:20.28,Default,,0000,0000,0000,,currently in the industry\Nis expanding
Dialogue: 0,0:05:20.28,0:05:23.50,Default,,0000,0000,0000,,as price increases\Nalong its marginal cost curve.
Dialogue: 0,0:05:23.50,0:05:26.13,Default,,0000,0000,0000,,By the short run,\Nwhat we actually mean,
Dialogue: 0,0:05:26.13,0:05:30.35,Default,,0000,0000,0000,,is the time period before new firms\Nhave a chance to enter
Dialogue: 0,0:05:30.35,0:05:31.69,Default,,0000,0000,0000,,into the industry.
Dialogue: 0,0:05:31.69,0:05:36.26,Default,,0000,0000,0000,,So the entire increase in supply\Nin the short run is being driven
Dialogue: 0,0:05:36.26,0:05:40.96,Default,,0000,0000,0000,,by the increased output\Nof currently existing firms
Dialogue: 0,0:05:40.96,0:05:46.16,Default,,0000,0000,0000,,as they expand to take advantage\Nof the increase in price.
Dialogue: 0,0:05:46.98,0:05:51.20,Default,,0000,0000,0000,,Now notice that initially,\Nthe representative firm
Dialogue: 0,0:05:51.20,0:05:55.07,Default,,0000,0000,0000,,was making zero economic profit,\Nit was making normal profits.
Dialogue: 0,0:05:55.07,0:05:57.72,Default,,0000,0000,0000,,With the increase in demand,\Nthey're making positive,
Dialogue: 0,0:05:57.72,0:05:59.55,Default,,0000,0000,0000,,above normal profits.
Dialogue: 0,0:05:59.55,0:06:03.67,Default,,0000,0000,0000,,Remember profit is price\Nminus average cost times quantity.
Dialogue: 0,0:06:03.67,0:06:06.94,Default,,0000,0000,0000,,So profit here is positive,\Nit's above normal.
Dialogue: 0,0:06:06.94,0:06:11.04,Default,,0000,0000,0000,,And those above normal profits\Nare going to attract other firms.
Dialogue: 0,0:06:11.04,0:06:13.100,Default,,0000,0000,0000,,Other firms are going to say,\N"I want a piece of the action.
Dialogue: 0,0:06:13.100,0:06:15.97,Default,,0000,0000,0000,,I want a piece of the pie."
Dialogue: 0,0:06:15.97,0:06:19.39,Default,,0000,0000,0000,,Remember when price\Nis above average cost,
Dialogue: 0,0:06:19.39,0:06:22.11,Default,,0000,0000,0000,,that's when new firms\Nenter into the industry.
Dialogue: 0,0:06:22.43,0:06:25.01,Default,,0000,0000,0000,,So what is that entry going to do?
Dialogue: 0,0:06:25.01,0:06:26.38,Default,,0000,0000,0000,,Well, it's going to do two things.
Dialogue: 0,0:06:26.38,0:06:28.84,Default,,0000,0000,0000,,On the market side,\Nit's going to shift out
Dialogue: 0,0:06:28.84,0:06:30.81,Default,,0000,0000,0000,,the short-run supply curve.
Dialogue: 0,0:06:30.81,0:06:33.13,Default,,0000,0000,0000,,It's going to shift\Nthe short-run supply curve
Dialogue: 0,0:06:33.13,0:06:38.30,Default,,0000,0000,0000,,to the right, and as that happens,\Nprice is going to be pushed down.
Dialogue: 0,0:06:38.30,0:06:41.92,Default,,0000,0000,0000,,As price is pushed down,\Neach firm will contract
Dialogue: 0,0:06:41.92,0:06:46.24,Default,,0000,0000,0000,,along its marginal cost curve,\Nprofits falling all the way
Dialogue: 0,0:06:46.24,0:06:47.35,Default,,0000,0000,0000,,until we reach a point
Dialogue: 0,0:06:47.35,0:06:49.73,Default,,0000,0000,0000,,of normal economic profits\Nonce again.
Dialogue: 0,0:06:49.73,0:06:51.69,Default,,0000,0000,0000,,So let's show this again,\Nwe'll show it twice,
Dialogue: 0,0:06:51.69,0:06:53.37,Default,,0000,0000,0000,,first of all we can look\Nat the market side
Dialogue: 0,0:06:53.37,0:06:55.55,Default,,0000,0000,0000,,and then we'll look\Nat the representative firm.
Dialogue: 0,0:06:55.55,0:06:59.47,Default,,0000,0000,0000,,So, profits in the short run\Nare going to attract new entry.
Dialogue: 0,0:06:59.47,0:07:01.91,Default,,0000,0000,0000,,As we get new entry,\Nthe supply curve
Dialogue: 0,0:07:01.91,0:07:04.45,Default,,0000,0000,0000,,in the short run expands,\Nshifts outward,
Dialogue: 0,0:07:04.45,0:07:06.90,Default,,0000,0000,0000,,pushing down the price\Nuntil we reach
Dialogue: 0,0:07:06.90,0:07:09.93,Default,,0000,0000,0000,,a new long run equilibrium\Nwhich is here
Dialogue: 0,0:07:09.93,0:07:13.51,Default,,0000,0000,0000,,and until profits\Nare zero over here.
Dialogue: 0,0:07:13.51,0:07:16.51,Default,,0000,0000,0000,,Again, now let's look at this again\Nfor the representative firm.
Dialogue: 0,0:07:17.01,0:07:19.48,Default,,0000,0000,0000,,Okay here's the representative firm\Non the right.
Dialogue: 0,0:07:19.48,0:07:21.47,Default,,0000,0000,0000,,As profits attract entry
Dialogue: 0,0:07:21.47,0:07:24.11,Default,,0000,0000,0000,,entry is going to push\Nprice down and here we go,
Dialogue: 0,0:07:24.11,0:07:25.41,Default,,0000,0000,0000,,let's see what happens.
Dialogue: 0,0:07:25.41,0:07:27.52,Default,,0000,0000,0000,,As the price goes down,\Neach firm contracts
Dialogue: 0,0:07:27.52,0:07:29.32,Default,,0000,0000,0000,,along its marginal cost curve.
Dialogue: 0,0:07:29.32,0:07:33.47,Default,,0000,0000,0000,,In fact, we can now see why\Nthe long run cost curve is flat.
Dialogue: 0,0:07:33.85,0:07:38.28,Default,,0000,0000,0000,,Because we begin at point A\Nat the minimum point
Dialogue: 0,0:07:38.28,0:07:43.27,Default,,0000,0000,0000,,of the average cost curve,\Nand we end at point C,
Dialogue: 0,0:07:43.28,0:07:46.21,Default,,0000,0000,0000,,here's point C, which is also\Nat the minimum point
Dialogue: 0,0:07:46.21,0:07:48.13,Default,,0000,0000,0000,,of the average cost curve.
Dialogue: 0,0:07:48.13,0:07:52.60,Default,,0000,0000,0000,,So the long run supply curve\Nis flat at the minimum point
Dialogue: 0,0:07:52.60,0:07:54.48,Default,,0000,0000,0000,,of the average cost curve.
Dialogue: 0,0:07:54.50,0:07:58.84,Default,,0000,0000,0000,,Now where does our assumption\Nof constant industry cost come in?
Dialogue: 0,0:07:58.84,0:08:00.25,Default,,0000,0000,0000,,It comes in right here.
Dialogue: 0,0:08:00.25,0:08:04.15,Default,,0000,0000,0000,,Because the idea is that\Nwhen the industry expands
Dialogue: 0,0:08:04.15,0:08:07.71,Default,,0000,0000,0000,,with new entry,\Nthat isn't driving up
Dialogue: 0,0:08:07.71,0:08:10.18,Default,,0000,0000,0000,,the representative firm's costs.
Dialogue: 0,0:08:10.18,0:08:14.20,Default,,0000,0000,0000,,And the reason that is,\Nis that this industry is small
Dialogue: 0,0:08:14.20,0:08:16.35,Default,,0000,0000,0000,,relative to its input markets.
Dialogue: 0,0:08:16.35,0:08:19.75,Default,,0000,0000,0000,,So when this industry expands,\Nit doesn't drive up the price
Dialogue: 0,0:08:19.75,0:08:20.90,Default,,0000,0000,0000,,of its inputs.
Dialogue: 0,0:08:20.90,0:08:24.34,Default,,0000,0000,0000,,That means that this average\Ncost curve isn't changing
Dialogue: 0,0:08:24.34,0:08:27.88,Default,,0000,0000,0000,,as the industry expands\Nor contracts.
Dialogue: 0,0:08:27.88,0:08:30.83,Default,,0000,0000,0000,,Because this cost curve\Nfor the representative firm
Dialogue: 0,0:08:30.83,0:08:33.67,Default,,0000,0000,0000,,isn't changing,\Nthe only equilibrium
Dialogue: 0,0:08:33.67,0:08:37.37,Default,,0000,0000,0000,,with zero economic profit\Nis at the minimum point,
Dialogue: 0,0:08:37.37,0:08:39.42,Default,,0000,0000,0000,,is when price is equal\Nto average cost.
Dialogue: 0,0:08:39.42,0:08:43.27,Default,,0000,0000,0000,,So that's always going to --\Nprice is going to be driven down
Dialogue: 0,0:08:43.27,0:08:46.76,Default,,0000,0000,0000,,in the long run to the minimum\Nof this average cost curve,
Dialogue: 0,0:08:46.76,0:08:49.54,Default,,0000,0000,0000,,to the point where\Nthere's zero economic profits.
Dialogue: 0,0:08:49.54,0:08:54.54,Default,,0000,0000,0000,,So A and C are along a long-run\Nindustry supply curve,
Dialogue: 0,0:08:54.54,0:08:56.77,Default,,0000,0000,0000,,which is flat.
Dialogue: 0,0:08:57.10,0:09:00.18,Default,,0000,0000,0000,,All right, that's\Na huge amount to take in.
Dialogue: 0,0:09:00.18,0:09:03.44,Default,,0000,0000,0000,,Let's just go over it briefly\Nusing this diagram.
Dialogue: 0,0:09:04.05,0:09:07.73,Default,,0000,0000,0000,,We began with an initial\Nequilibrium at point A,
Dialogue: 0,0:09:07.73,0:09:10.45,Default,,0000,0000,0000,,an increase in demand\Npushed us in the short run
Dialogue: 0,0:09:10.45,0:09:15.37,Default,,0000,0000,0000,,to point B, where each firm\Nwas making positive profits.
Dialogue: 0,0:09:15.76,0:09:19.64,Default,,0000,0000,0000,,Those profits attracted new firms\Ninto the industry.
Dialogue: 0,0:09:19.64,0:09:22.41,Default,,0000,0000,0000,,Those new firms shifted\Nto the right,
Dialogue: 0,0:09:22.41,0:09:26.24,Default,,0000,0000,0000,,the short-run supply curve,\Npushing prices down
Dialogue: 0,0:09:26.24,0:09:30.08,Default,,0000,0000,0000,,until we reach a new point\Nof long-run equilibrium.
Dialogue: 0,0:09:30.08,0:09:32.56,Default,,0000,0000,0000,,That new point\Nof long-run equilibrium
Dialogue: 0,0:09:32.56,0:09:34.81,Default,,0000,0000,0000,,is precisely when we're\Nback to zero
Dialogue: 0,0:09:34.81,0:09:37.89,Default,,0000,0000,0000,,or normal economic profits\Nat the minimum point
Dialogue: 0,0:09:37.89,0:09:39.54,Default,,0000,0000,0000,,of the average cost curve.
Dialogue: 0,0:09:39.54,0:09:43.58,Default,,0000,0000,0000,,The average cost curve\Nisn't shifting because input prices
Dialogue: 0,0:09:43.58,0:09:47.53,Default,,0000,0000,0000,,aren't changing as this industry\Nexpands or contracts,
Dialogue: 0,0:09:47.53,0:09:51.03,Default,,0000,0000,0000,,and that's why\Nthe long-run supply curve is flat.
Dialogue: 0,0:09:51.70,0:09:55.33,Default,,0000,0000,0000,,Whew! All right.\NThat was a lot. What else?
Dialogue: 0,0:09:55.77,0:09:58.91,Default,,0000,0000,0000,,So we've now shown how an increase\Nin cost industry leads
Dialogue: 0,0:09:58.91,0:10:00.96,Default,,0000,0000,0000,,to an upward sloped supply curve.
Dialogue: 0,0:10:00.96,0:10:02.63,Default,,0000,0000,0000,,A constant cost industry leads
Dialogue: 0,0:10:02.63,0:10:05.34,Default,,0000,0000,0000,,to a flat or horizontal\Nsupply curve.
Dialogue: 0,0:10:05.34,0:10:08.43,Default,,0000,0000,0000,,And we're about to show\Nhow a decreasing cost industry,
Dialogue: 0,0:10:08.43,0:10:12.13,Default,,0000,0000,0000,,the unusual case, leads\Nto a downward sloped supply curve,
Dialogue: 0,0:10:12.13,0:10:13.93,Default,,0000,0000,0000,,at least over some range.
Dialogue: 0,0:10:13.93,0:10:15.53,Default,,0000,0000,0000,,Let's do that next.
Dialogue: 0,0:10:16.57,0:10:18.22,Default,,0000,0000,0000,,- [Narrator] If you want\Nto test yourself,
Dialogue: 0,0:10:18.22,0:10:20.20,Default,,0000,0000,0000,,click "Practice Questions,"
Dialogue: 0,0:10:20.20,0:10:23.69,Default,,0000,0000,0000,,or if you're ready to move on,\Njust click, "Next Video."
Dialogue: 0,0:10:23.69,0:10:28.43,Default,,0000,0000,0000,,♪ [music] ♪