SECTION 10
Behind the Supply Curve: Profit, Production, and Costs
In Section 9 we examined the factors that affect consumer choice—
Consider the Spinning Spur Wind Project in Texas, which cost an estimated $322 million to build in 2012. The wind farm’s 70 turbines have the capacity to produce 161 megawatts of electricity at a negligible additional cost per kilowatt-
The Current Creek natural gas–
Given the complexity of cost and revenue stories, the need to visualize them with graphs is clear. In 2014, Google liked what it saw in the graphs for the Spinning Spur Wind Project enough to invest $200 million in the operation. In this section you will learn several analytical tools used to inform such decisions.
After a discussion of profit maximization, we will investigate the production function, which shows the relationship between the inputs used for production and the output that is produced. Then we’ll consider the costs that influence firms’ decisions about supply. The final module in this section introduces the models of market structure used to understand how the supply side of the economy works.