The Model of Perfect Competition
|
|
- Godwin Tate
- 6 years ago
- Views:
Transcription
1 The Model of Perfect Competition
2 Key issues The meaning of perfect competition Characteristics of perfect competition and output under competition Competition and economic efficiency Wider benefits of competition in markets
3 Assumptions behind a perfectly competitive market Many suppliers - each with an insignificant share of the market Each firm is too small to affect price via a change in market supply each business is a price taker Identical output produced by each firm i.e. homogeneous products that are perfect substitutes for each other Consumers have complete information about prices
4 Assumptions behind a perfectly competitive market Transactions are costless - Buyers and sellers incur no costs in making an exchange All firms (i.e. industry participants and new entrants) have equal access to resources (e.g. technology) No barriers to entry and exit of firms in long run market is open to competition from new suppliers No externalities in production and consumption
5 Examples of perfectly competitive markets? Agricultural markets Pig farming, cattle Farmers markets for apples, tomatoes, etc. Wholesale markets for vegetables, fish, flowers Street food markets in developing countries
6 Examples of perfectly competitive markets? Foreign exchange dealing: Homogeneous product - US dollar or the Euro Many buyers and sellers Usually each trader is small relative to total market and has to take price as given Sometimes, traders can move currency markets
7 Approximations of perfect competition Fruit sellers at a weekly local market Chinese restaurants in a big city s Chinatown
8 -taking firms Competitive firms in competitive markets have little direct influence on the ruling market price Examples of price-taking behaviour: Local farmers selling to large supermarkets A local steel firm selling as much as it can at the ruling international price of steel The law of one price may hold true most of the existing firms sell at the prevailing price
9 Short-run price and output Market forces determine the price MS MD
10 Short-run price and output Market forces determine the price MS MD
11 Short-run price and output Market forces determine the price MS Taking MD
12 Short-run price and output Market forces determine the price MS Taking AR=MR MD
13 Short-run price and output Market forces determine the price MS Assume profit maximizing firms AR=MR MD
14 Short-run price and output Market forces determine the price MS Assume profit maximizing firms AR=MR MD Q1
15 Short-run price and output MS MR= Maximum Profits AR=MR MD Q1
16 Short-run price and output MS MR= Maximum Profits AR=MR 1 MD Q1
17 Short-run (abnormal) profits MS Profits = (-1) x Q1 AR=MR 1 MD Q1
18 Abnormal profits Profits = (-1) x Q1 AR=MR Possible for firms in a perfectly competitive market to make abnormal (i.e. Supernormal) profits in the short run 1 This is where price > Remember that normal profit is assumed to be included in the curve Q1
19 Effect of a rise in market demand MS AR=MR MD Q1
20 Effect of a rise in market demand MS AR=MR MD2 MD Q1
21 Effect of a rise in market demand MS P2 AR=MR MD2 MD Q1
22 Effect of a rise in market demand MS P2 P2 AR2=MR2 AR=MR MD2 MD Q1
23 Effect of a rise in market demand MS P2 P2 AR2=MR2 AR=MR MD2 MD Q1 Q2
24 Effect of a rise in market demand MS New level of supernormal profits P2 P2 AR2=MR2 AR=MR MD2 MD Q1 Q2
25 What is a long-run equilibrium? Usual interpretation of a long run equilibrium is as follows: (1) The quantity of the product supplied in the market equals the quantity demanded by all consumers (2) Each firm in the market maximizes its profit, given the prevailing market price (3) Each firm in the market earns zero economic profit (i.e. normal profit) so there is no incentive for other firms to enter the market You Tube video on perfect competition
26 Long-run equilibrium price MS AR=MR MD
27 Long-run equilibrium price MS MS2 AR=MR P2 MD
28 Long-run equilibrium price MS P2 MS2 AR=MR AR2=MR2 MD
29 Long-run equilibrium price MS P2 MS2 AR=MR AR2=MR2 MD Q2
30 The long-run equilibrium MS In the long run equilibrium, normal profits are made, i.e. price = average cost MS2 P2 AR2=MR2 MD Q2
31 The long-run equilibrium Normal profit is the profit just sufficient to keep a business in their current market in the long run In the long run equilibrium, normal profits are made i.e. price = average cost It is also the opportunity cost of capital AR2=MR2 Profits act as an incentive for enterprise Q2
32 Competition and economic efficiency Economic efficiency has several meanings: Productive efficiency when output is produced at the lowest feasible average cost (either in the short run or the long run) Allocative efficiency Achieved when the market provides goods and services that meet consumer needs and wants Achieved when the price of output reflects the true marginal cost of production This is where price=marginal cost
33 Productive efficiency Cost per unit Productive efficiency occurs when the equilibrium output is supplied at minimum average cost. This is attained in the long run for a competitive market LR Q1 Q2 Q3
34 Allocative efficiency Allocative efficiency achieved when it is impossible to make someone better off without making someone else worse off Also called Pareto Optimality No trades are left that would make one person better off without hurting someone else Occurs when price = marginal costs of production This occurs in the long run under perfect competition
35 Allocative efficiency Consumer Surplus Market Supply When price is equal to marginal cost (P=), allocative efficiency is achieved. At the ruling price, consumer and producer surplus are maximized. Producer Surplus Market Demand No one can be made better off without making some other agent at least as worse off i.e. we achieve a Pareto optimum allocation of resources Q1
36 Allocative inefficiency P2 Consumer Surplus Market Supply Deadweight loss of welfare Producer Surplus Market Demand Q2 Q1
37 Competition and economic efficiency Technological efficiency where maximum output is produced from given inputs Dynamic efficiency Refers to the range of choice and quality of service Also considers the pace of technological change and innovation in a market
38 Importance of a competitive environment The standard view is that competition drives an improvement in welfare and efficiency Competition forces under-performing firms out of the market and shifts market share to more efficient firms in the long run Competition encourages firms to innovate and adopt best-practise techniques
39 How useful is model of perfect competition? Assumptions are not meant to reflect real world markets where most assumptions are not satisfied Pure competition is devoid of what most people would call real competitive behaviour by businesses! The model provides a theoretical benchmark used to compare and contrast imperfectly competitive markets Consider perfect competition as an interesting point of reference but one with few real world applications Useful when considering The effects of monopoly / imperfect competition The case for free international trade
40 Real world imperfect competition! 1. Most suppliers have a degree of control over market supply 2. Some buyers have monopsony power against suppliers because they purchase a significant percentage of total demand 3. Most markets have heterogeneous products due to product differentiation and constant innovation 4. Consumers nearly always have imperfect information and their preferences and choices can be influenced by the effects of persuasive marketing and advertising 5. Finally there may be imperfect competition in related markets such as the market for essential raw materials, labour and capital goods.
Tutor2u Economics Essay Plans Summer 2002
Microeconomics Revision Essay (7) Perfect Competition and Monopoly (a) Explain why perfect competition might be expected to result in an allocation of resources which is both productively and allocatively
More information2007 Thomson South-Western
Monopolistic Competition Characteristics: Many sellers Product differentiation Free entry and exit In the long run, profits are driven to zero Firms have some control over price What does the costs graph
More informationMarket structures Perfect competition
Market structures Perfect competition Market Structures Market structure refers to the number and size of buyers and sellers in the market for a good or service. A market can be defined as a group of firms
More informationSlides and Images, Worth Publishers Inc. 8-1
Perfect Competition Michael J. Murray Slides and Images, Worth Publishers Inc. 8-1 Market Structure Analysis By observing a few industry characteristics, we can predict pricing and output behavior of the
More informationMICROECONOMIC FOUNDATIONS OF COST-BENEFIT ANALYSIS. Townley, Chapter 4
MICROECONOMIC FOUNDATIONS OF COST-BENEFIT ANALYSIS Townley, Chapter 4 Review of Basic Microeconomics Slides cover the following topics from textbook: Input markets. Decision making on the margin. Pricing
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
PRACTICE FOR PERFECT COMPETITION Fatma Nur Karaman MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) What is the difference between perfect competition
More informationThe economics of competitive markets Rolands Irklis
The economics of competitive markets Rolands Irklis www. erranet.org Presentation outline 1. Introduction and motivation 2. Consumer s demand 3. Producer costs and supply decisions 4. Market equilibrium
More informationECONOMICS CHAPTER 9: FORMS OF MARKET
ECONOMICS CHAPTER 9: FORMS OF MARKET Class: XII(ISC) 2017-2018 Q1) Difference between Oligopoly and Monopolistic competition. Basis Oligopoly Monopolistic competition 1. Meaning It is that form of market
More informationMonopoly. Firm s equilibrium. Muhammad Rafi Khan
1 Monopoly It is a type of market structure where there is only one producer and many buyers. The monopolist produces an industry s entire output. In contrast to perfectly competitive firms, which are
More informationPerfect competition the competitive firm s supply decision. Microeconomics
Perfect competition the competitive firm s supply decision Microeconomics Industries and the number of firms An industry is the set of all firms making the same product. The output of an industry is the
More informationPerfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.
Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities
More informationMonopolistic Competition
16 Monopolistic Competition PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Monopolistic Competition Imperfect competition Between perfect competition and monopoly Oligopoly
More informationPerfect Competition. What is a market structure? What is a Perfectly Competitive Market/Perfect Competition? David Kelly
What is a market structure? Perfect Competition A market structure refers to the conditions under which a good or service is bought and sold. The notes that follow examine two extremes - perfect competition
More informationWebnote 1599 Syllabus: Item 65
SYLLABUS REFERENCE 2.2 1 Economics Models : erfect Competition + Monopoly The C model suggests that: 1. Efficient - firms forced to produce at lowest point on AC curve 2 2. Lower prices 3. Higher output
More informationUNIT 4 FORMS OF MARKET & PRICE DETERMINATION POINTS TO REMEMBER Market implies a system with the help of which the buyers and seller of a commodity or service come to contact with each other and complete
More informationEdexcel (B) Economics A-level
Edexcel (B) Economics A-level Theme 4: Making Markets Work 4.1 Competition and Market Power 4.1.1 Spectrum of competition Notes Characteristics of monopoly, oligopoly, imperfect and perfect competition
More informationSupply and demand: Price-taking and competitive markets
Supply and demand: Price-taking and competitive markets ECONOMICS Dr. Kumar Aniket Bartlett School of Construction & Project Management Lecture 8 CONTEXT Firms with market power can set their own price.
More informationMonopoly and How It Arises
Monopoly and How It Arises A monopoly is a market: That produces a good or service for which no close substitute exists In which there is one supplier that is protected from competition by a barrier preventing
More informationMonopolistic Competition. Chapter 17
Monopolistic Competition Chapter 17 The Four Types of Market Structure Number of Firms? Many firms One firm Few firms Differentiated products Type of Products? Identical products Monopoly Oligopoly Monopolistic
More informationMICROECONOMICS - CLUTCH CH PERFECT COMPETITION.
!! www.clutchprep.com CONCEPT: THE FOUR MARKET MODELS Market structure describes the environment in which a firm operates, determined by the Perfect Competition Monopolistic Competition Oligopoly Monopoly
More informationEco402 - Microeconomics Glossary By
Eco402 - Microeconomics Glossary By Break-even point : the point at which price equals the minimum of average total cost. Externalities : the spillover effects of production or consumption for which no
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Micro - HW 4 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In central Florida during the spring, strawberry growers are price takers. The reason
More informationEPUB - WHAT IS PERFECT COMPETITION
27 January, 2018 EPUB - WHAT IS PERFECT COMPETITION Document Filetype: PDF 326.2 KB 0 EPUB - WHAT IS PERFECT COMPETITION Recall that businesses are trying to maximize profits, and Profit = Total Revenue
More informationTutor2u Economics Essay Plans Summer 2002
Microeconomics Revision Essay (2): Pricing Power and Discrimination (a) (b) Explain the factors that affect the pricing power of producers within a particular market or industry To what extent does price
More informationPerfect Competition Chapter 8
Perfect Competition Chapter 8 A Perfectly Competitive Market A perfectly competitive market is one in which economic forces operate unimpeded. A Perfectly Competitive Market For a market to be perfectly
More information4. A situation in which the number of competing firms is relatively small is known as A. Monopoly B. Oligopoly C. Monopsony D. Perfect competition
1. Demand is a function of A. Firm B. Cost C. Price D. Product 2. The kinked demand curve explains A. Demand flexibility B. Demand rigidity C. Price flexibility D. Price rigidity 3. Imperfect competition
More informationLesson-28. Perfect Competition. Economists in general recognize four major types of market structures (plus a larger number of subtypes):
Lesson-28 Perfect Competition Economists in general recognize four major types of market structures (plus a larger number of subtypes): Perfect Competition Monopoly Oligopoly Monopolistic competition Market
More information2010 Pearson Education Canada
What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have
More informationJoven Liew Jia Wen Industrial Economics I Notes. What is competition?
Industrial Economics I Notes What is competition? Competition in markets is generally considered a good thing (welfare economics) Competition authorities look at whether change in market structure or firm
More informationEconomic Foundation. Dr. Christoph Stork. Monday, 2 July 12
Economic Foundation Dr. Christoph Stork Introduction Purpose of this lecture is to place competition policy and regulation in its economic context Regulatory requirements and the need for a competition
More informationThe Four Main Market Structures
Competitive Firms and Markets The Four Main Market Structures Market structure: the number of firms in the market, the ease with which firms can enter and leave the market, and the ability of firms to
More informationConsumer Behavior & Public Policy. Lecture #3 Microeconomics
Consumer Behavior & Public Policy Lecture #3 Microeconomics Topics 1. Welfare economics: how understanding consumer behavior is important for making public policy. 2. Budget constraint and indifference
More informationCH 13. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.
Class: Date: CH 13 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. One requirement for an industry to be perfectly competitive is that a. sellers and buyers
More informationFINALTERM EXAMINATION FALL 2006
FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1) - PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.
More informationPrinciples of Microeconomics Module 5.1. Understanding Profit
Principles of Microeconomics Module 5.1 Understanding Profit 180 Production Choices of Firms All firms have one goal in mind: MAX PROFITS PROFITS = TOTAL REVENUE TOTAL COST Two ways to reach this goal:
More informationReview Chapters 1 & 2
Review Chapters 1 & 2 ECON 1 Midterm 1 Review Session Scarcity or No Free Lunch Principle. Cost-Benefit Principle. Reservation Price. Economic Surplus = Benefit Cost. Opportunity Cost (DO NOT FORGET!!).
More information2) A production method that relies on large quantities of labor and smaller quantities of capital equipment is referred to as a: 2)
Micro: TA Session 4, Problem set MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The main difference between a short-run production function and
More informationMonopoly. Business Economics
Business Economics Monopoly Managerial Decisions for Firms with Market ower Monopoly Thomas & Maurice, Chapter 12 Herbert Stocker herbert.stocker@uibk.ac.at Institute of International Studies University
More informationMonopolistic Competition
Monopolistic Competition CHAPTER16 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Describe and identify monopolistic competition. 2 Explain how
More informationMonopolistic Competition
CHAPTER 16 Monopolistic Competition Goals in this chapter you will Examine market structures that lie between monopoly and competition Analyze competition among firms that sell differentiated products
More informationMonopoly and How It Arises
13 MONOPOLY Monopoly and How It Arises A monopoly is a market: That produces a good or service for which no close substitute exists If a good has a close substitute, even if it is produced by only one
More informationWHAT IS A COMPETITIVE MARKET?
Chapter 14. Firms in Competitive Markets WHAT IS A COMPETITIVE MARKET? A perfectly competitive market has the following characteristics: There are many buyers and sellers in the market. small relative
More information9.1 Zero Profit for Competitive Firms in the Long Run
9.1 Zero Profit for Competitive Firms in the Long Run Chapter 9 Applications of the Competitive Model With Free Entry into the Market Along with identical costs and constant input prices, implies firms
More informationEconomics. Monopolistic Perfect Competition. Monopolistic Competition. Monopolistic Competition 11/29/2013. The Big Picture. Perfect Competition
16 Modified by Joseph Tao-yi Wang Ron Cronovich The Big Picture Chapter 13: The cost of production Now, we will look at firm s revenue But revenue depends on market structure 1. Competitive market (chapter
More informationSample Exam Questions/Chapter 12. Use the following to answer question 1: Figure: Short-Run Costs
Sample Exam Questions/Chapter 12 Use the following to answer question 1: Figure: Short-Run Costs 1. (Figure: Short-Run Costs) Look at the figure Short-Run Costs. At the given price, the most profitable
More informationEconomics 101 Section 5
Economics 101 Section 5 Lecture #22 April 13, 2004 Chapter 10 Monopolistic Competition Oligopoly Game Theory Monopolistic Competition 3 characteristics of a monopolistically competitive market 1) Many
More informationAQA Economics A-level
AQA Economics A-level Microeconomics Topic 5: Perfect Competition, Imperfectly Competitive Markets and Monopoly 5.6 Monopoly and monopoly power Notes Characteristics of monopoly: Monopolies can be characterised
More informationAssessment Schedule 2016 Economics: Demonstrate understanding of the efficiency of different market structures using marginal analysis (91400)
NCEA Level 3 Economics (91400) 2016 page 1 of 11 Assessment Schedule 2016 Economics: Demonstrate understanding of the efficiency of different market structures using marginal analysis (91400) Assessment
More informationPostgraduate Diploma in Marketing December 2017 Examination Economic and Legal Impact (Econ)
Postgraduate Diploma in Marketing December 2017 Examination Economic and Legal Impact (Econ) Date: 20 December 2017 Time: 0830 Hrs 1130 Hrs Duration: Three (03) Hrs ) Total marks for this paper is 100
More informationPrinciples of Economics. January 2018
Principles of Economics January 2018 Monopoly Contents Market structures 14 Monopoly 15 Monopolistic competition 16 Oligopoly Principles of Economics January 2018 2 / 39 Monopoly Market power In a competitive
More informationManagerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay. Lecture -29 Monopoly (Contd )
Managerial Economics Prof. Trupti Mishra S.J.M School of Management Indian Institute of Technology, Bombay Lecture -29 Monopoly (Contd ) In today s session, we will continue our discussion on monopoly.
More informationMicroeconomics. Use the Following Graph to Answer Question 3
More Tutorial at www.dumblittledoctor.com Microeconomics 1. To an economist, a good is scarce when: *a. the amount of the good available is less than the amount that people want when the good's price equals
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following statements is correct? A) Consumers have the ability to buy everything
More informationCONTENTS. Introduction to the Series. 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply Elasticities 37
CONTENTS Introduction to the Series iv 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply 17 3 Elasticities 37 4 Government Intervention in Markets 44 5 Market Failure 53 6 Costs of
More informationObjective. Sessions on Economics. Types of Economic Analysis. Session 2
Objective Sessions on Economics Pharm 532 Lou Garrison, Ph.D. April 9-23, 2007 Understand the basic principles of economics as applied to health care and integrate there principles into policy analysis.
More informationChapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets
Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All
More informationLecture # Long Run Equilibrium/Perfect Competition and Economic Welfare
Lecture # 15 -- Long Run Equilibrium/Perfect Competition and Economic Welfare I. Economic Rent Question: in real life, we certainly see firms earning positive profits, even in the long run. How do we explain
More informationEcon 2113: Principles of Microeconomics. Spring 2009 ECU
Econ 2113: Principles of Microeconomics Spring 2009 ECU Chapter 12 Monopoly Market Power Market power is the ability to influence the market, and in particular the market price, by influencing the total
More informationLecture 12. Monopoly
Lecture 12 Monopoly By the end of this lecture, you should understand: why some markets have only one seller how a monopoly determines the quantity to produce and the price to charge how the monopoly s
More informationEco 300 Intermediate Micro
Eco 300 Intermediate Micro Instructor: Amalia Jerison Office Hours: T 12:00-1:00, Th 12:00-1:00, and by appointment BA 127A, aj4575@albany.edu A. Jerison (BA 127A) Eco 300 Spring 2010 1 / 61 Monopoly Market
More informationBusiness Economics. Introduction: Market Structure and the Equilibrium:
Business Economics Introduction: After globalisation the level of competition has significantly increased among the business units in each and every industry. In present economic scenario there has been
More informationAP Microeconomics Review With Answers
AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show
More informationEconomics. Monopolistic Competition. Firms in Competitive Markets. Monopolistic Competition 11/22/2012. The Big Picture. Perfect Competition
16 Modified by Joseph Tao-yi Wang Ron Cronovich The Big Picture Chapter 13: The cost of production Now, we will look at firm s revenue But revenue depends on market structure 1. Competitive market (chapter
More informationQuestion Collection. European Competition Policy Chair of Economic Policy
Question Collection European Competition Policy Chair of Economic Policy Question 1: - Perfect Competition Suppose a perfect competitive market where all firms produce a homogenous good. Assume the cost
More informationTutor2u Economics Essay Plans Summer 2002
Microeconomics Revision Essay (6) Economic Efficiency and Competition Policy (a) Distinguish carefully between static efficiency and dynamic efficiency. (20 marks) (b) Discuss the importance of these concepts
More informationINTERMEDIATE MICROECONOMICS LECTURE 13 - MONOPOLISTIC COMPETITION AND OLIGOPOLY. Monopolistic Competition
13-1 INTERMEDIATE MICROECONOMICS LECTURE 13 - MONOPOLISTIC COMPETITION AND OLIGOPOLY Monopolistic Competition Pure monopoly and perfect competition are rare in the real world. Most real-world industries
More informationB.V. Patel Institute of Business Management, Computer & Information Technology, Uka Tarsadia University : Managerial Economics
Unit-1 Introduction of Managerial Economics and Cost Analysis Answer the following. (1 mark) 1. Define Managerial Economics? 2. How does Managerial Economics help managers to become efficient and competent?
More informationThree Rules and Four Models
Three Rules and Four Models Three Rules: How to find the profit maximizing quantity: A firm will maximize its profit (or minimize its losses) by producing that output at which marginal revenue and marginal
More informationThree Rules and Four Models
Three Rules and Four Models Three Rules: How to find the profit maximizing quantity: A firm will maximize its profit (or minimize its losses) by producing that output at which marginal revenue and marginal
More informationINTRODUCTION ECONOMIC PROFITS
INTRODUCTION This chapter addresses the following key questions: What are profits? What are the unique characteristics of competitive firms? How much output will a competitive firm produce? Chapter 7 THE
More information7.1 Perfect Competition and Monopoly Objectives
7.1 Perfect Competition and Monopoly Objectives Distinguish the features of perfect competition. Describe the barriers to entry that can create a monopoly. Compare the market structures of monopoly and
More informationA monopoly market structure is one characterized by a single seller of a unique product with no close substitutes.
These notes provided by Laura Lamb are intended to complement class lectures. The notes are based on chapter 12 of Microeconomics and Behaviour 2 nd Canadian Edition by Frank and Parker (2004). Chapter
More informationChapter 6. Competition
Chapter 6 Competition Copyright 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 1-1 Chapter 6 The goal of this
More informationECON 102 Brown Final Exam Practice Exam Solutions
www.liontutors.com ECON 102 Brown Final Exam Practice Exam Solutions 1. B 2. C 3. C All products are identical (homogenous) in perfect competition so there is no such thing as brand preference. 4. C Breakeven
More informationLecture 11. Firms in competitive markets
Lecture 11 Firms in competitive markets By the end of this lecture, you should understand: what characteristics make a market competitive how competitive firms decide how much output to produce how competitive
More informationMicroeconomics Exam Notes
Microeconomics Exam Notes Opportunity Cost What you give up to get it Production Possibility Frontier Maximum attainable combination of two products (Concept of Opportunity Cost). Main Decision Makers:
More information- pure monopoly: only one seller of a good/service with no close substitutes
Micro 101, Chapter 10 1 Chapter 10: Monopoly Main objectives: 1. Define what constitutes a monopoly - pure monopoly: only one seller of a good/service with no close substitutes 2. Describe types of barriers
More informationMonopoly. Basic Economics Chapter 15. Why Monopolies Arise. Monopoly
1 Why Monopolies Arise Basic Economics Chapter 15 Monopoly Monopoly - The monopolist is a firm that is the sole seller of a product (or service) without close substitutes - The monopolist is a price maker
More information1.1 Efficiency in economics What is efficiency in economics?
1 Economic Efficiency Efficiency is one of the most important concepts in A Level Economics. There are two aspects to economic : allocative and productive. Confusingly, there are many types of. Learn definitions
More informationAP Microeconomics Chapter 10 Outline
I. Learning Objectives In this chapter students should learn: A. How the long run differs from the short run in pure competition. B. Why profits encourage entry into a purely competitive industry and losses
More informationiv. The monopolist will receive economic profits as long as price is greater than the average total cost
Chapter 15: Monopoly (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- Monopolies have no close competitors and,
More informationEconomics 110 Final exam Practice Multiple Choice Qs Fall 2013
Final Exam Practice Multiple Choice Questions - ANSWER KEY Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structure the firm
More informationMonopoly. The single seller or firm referred to as a monopolist or monopolistic firm. Characteristics of a monopolistic industry
Monopoly Monopoly: a market structure in which there is only one seller of a good or service that has no close substitutes and entry to the market is completely blocked. The single seller or firm referred
More informationIntroduction. Learning Objectives. Chapter 24. Perfect Competition
Chapter 24 Perfect Competition Introduction Estimates indicate that since 2003, the total amount of stored digital data on planet Earth has increased from 5 exabytes to more than 200 exabytes. Accompanying
More informationUnit 6 Perfect Competition and Monopoly - Practice Problems
Unit 6 Perfect Competition and Monopoly - Practice Problems Multiple Choice Identify the choice that best completes the statement or answers the question. 1. One characteristic of a perfectly competitive
More informationMicroeconomics. Claudia Vogel EUV. Winter Term 2009/2010. Market Power: Monopoly and Monopsony
Microeconomics Claudia Vogel EUV Winter Term 2009/2010 Claudia Vogel (EUV) Microeconomics Winter Term 2009/2010 1 / 34 Lecture Outline Part III Market Structure and Competitive Strategy 10 The Social Costs
More informationCOMPETITION AND MARKETS BEFORE YOU BEGIN. Market Structures. Looking at the Chapter. Date Period. Chapter
COMPETITION AND MARKETS BEFORE YOU BEGIN Looking at the Fill in the blank spaces with the missing words. Market Structures Perfect Competition sellers product No barriers to entry Price taker Produce where
More informationMicroeconomics: MIE1102
TEXT CHAPTERS TOPICS 1, 2 ECONOMICS, ECONOMIC SYSTEMS, MARKET ECONOMY 3 DEMAND AND SUPPLY. MARKET EQUILIBRIUM 4 ELASTICITY OF DEMAND AND SUPPLY 5 DEMAND & CONSUMER BEHAVIOR 6 PRODUCTION FUNCTION 7 COSTS
More informationEdexcel (B) Economics A-level
Edexcel (B) Economics A-level Theme 4: Making Markets Work 4.2 Market Power and Market Failure 4.2.1 Market failure Notes Significance of market power: o Cartels, collusion, restrictive practices and tacit
More informationREDEEMER S UNIVERSITY
REDEEMER S UNIVERSITY Km 46/48 Lagos Ibadan Expressway, Redemption City, Ogun State COLLEGE OF MANAGEMENT SCIENCE DEPARTMENT OF ECONOMICS AND BUSINESS STUDIES COURSE CODE /TITLE ECO 202/Microeconomics
More informationECON 311 MICROECONOMICS THEORY I
ECON 311 MICROECONOMICS THEORY I Profit Maximisation & Perfect Competition (Short-Run) Dr. F. Kwame Agyire-Tettey Department of Economics Contact Information: fagyire-tettey@ug.edu.gh Session Overview
More informationECONOMICS SOLUTION BOOK 2ND PUC. Unit 5
Unit 5 I. Choose the correct answer (each question carries 1 mark) 1. In perfect competition, buyers and sellers are: a) Price makers b) Price takers c) Price analysts d) None of the above 2. A situation
More informationPolicies that Help Develop Well-Functioning Markets [Market Development Policy] C. Some institutions that promote well-functioning markets:
Gallagher Econ 460 February 2006 Policies that Help Develop Well-Functioning Markets [Market Development Policy] (I) Intro A. The assumptions of pure competition: 1. Large # of small firms 2. Homogeneous
More informationChapter 13. What will you learn in this chapter? A competitive market. Perfect Competition
Chapter 13 Perfect Competition 214 by McGraw-Hill Education 1 What will you learn in this chapter? What the characteristics of a perfectly competitive market are. How to calculate average, marginal, and
More informationMonopoly. While a competitive firm is a price taker, a monopoly firm is a price maker.
Monopoly Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker. Monopoly A firm is considered a monopoly if... it is the sole seller of its product. its product does not
More informationECO 211 Microeconomics Yellow Pages ANSWERS. Unit 3
Spring 2013 ECO 211 Microeconomics Yellow Pages ANSWERS Unit 3 Mark Healy William Rainey Harper College E-Mail: mhealy@harpercollege.edu Office: J-262 Phone: 847-925-6352 1 Four Market Models CHARACTERISTIC
More informationc Pareto efficiency requires production of the right things at the lowest cost. B D Q**
1 INTRODUCTION A Normative Approach, the role of government is to promote the public interest 1 Improve economic efficiency a Production (technical, management) efficiency b Allocative efficiency c Dynamic
More informationPrinciples of. Economics. Week 6. Firm in Competitive & Monopoly market. 7 th April 2014
Principles of Economics Week 6 Firm in Competitive & Monopoly market 7 th April 2014 In this week, look for the answers to these questions:!what is a perfectly competitive market?!what is marginal revenue?
More informationEdexcel (A) Economics A-level
Edexcel (A) Economics A-level Theme 3: Business Behaviour & the Labour Market 3.4 Market Structures 3.4.5 Monopoly Notes Characteristics of monopoly: Monopolies can be characterised by: o Profit maximisation.
More informationIB Economics Competitive Markets: Demand and Supply 1.4: Price Signals and Market Efficiency
IB Economics: www.ibdeconomics.com 1.4 PRICE SIGNALS AND MARKET EFFICIENCY: STUDENT LEARNING ACTIVITY Answer the questions that follow. 1. DEFINITIONS Define the following terms: [10 marks] Allocative
More information