PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved....
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Transcript of PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved....
![Page 1: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/1.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Market Structure
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Mor
e C
ompe
titiv
eLess C
ompetitive
![Page 2: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/2.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition
• Many buyers and sellers
• Buyers and sellers are price takers
• Product is homogeneous
• Perfect mobility of resources
• Economic agents have perfect knowledge
• Example: Stock Market
![Page 3: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/3.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopolistic Competition
• Many sellers and buyers
• Differentiated product
• Perfect mobility of resources
• Example: Fast-food outlets
![Page 4: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/4.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Oligopoly
• Few sellers and many buyers
• Product may be homogeneous or differentiated
• Barriers to resource mobility
• Example: Automobile manufacturers
![Page 5: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/5.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopoly
• Single seller and many buyers
• No close substitutes for product
• Significant barriers to resource mobility– Control of an essential input– Patents or copyrights– Economies of scale: Natural monopoly– Government franchise: Post office
![Page 6: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/6.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition:Price Determination
![Page 7: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/7.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition:Short-Run Equilibrium
Firm’s Demand Curve = Market Price
= Marginal Revenue
Firm’s Supply Curve = Marginal Cost
where Marginal Cost > Average Variable Cost
![Page 8: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/8.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition:Short-Run Equilibrium
![Page 9: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/9.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition:Long-Run Equilibrium
Price = Marginal Cost = Average Total Cost
Quantity is set by the firm so that short-run:
At the same quantity, long-run:
Price = Marginal Cost = Average Cost
Economic Profit = 0
![Page 10: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/10.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Perfect Competition:Long-Run Equilibrium
![Page 11: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/11.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopoly
• Single seller that produces a product with no close substitutes
• Sources of Monopoly– Control of an essential input to a product– Patents or copyrights– Economies of scale: Natural monopoly– Government franchise: Post office
![Page 12: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/12.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
MonopolyShort-Run Equilibrium
• Demand curve for the firm is the market demand curve
• Firm produces a quantity (Q*) where marginal revenue (MR) is equal to marginal cost (MR)
• Exception: Q* = 0 if average variable cost (AVC) is above the demand curve at all levels of output
![Page 13: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/13.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
MonopolyShort-Run Equilibrium
Q* = 500
P* = $11
![Page 14: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/14.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
MonopolyLong-Run Equilibrium
Q* = 700
P* = $9
![Page 15: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/15.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Social Cost of Monopoly
![Page 16: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/16.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopolistic Competition
• Many sellers of differentiated (similar but not identical) products
• Limited monopoly power
• Downward-sloping demand curve
• Increase in market share by competitors causes decrease in demand for the firm’s product
![Page 17: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/17.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopolistic CompetitionShort-Run Equilibrium
![Page 18: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/18.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopolistic CompetitionLong-Run Equilibrium
Profit = 0
![Page 19: PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Market Structure Perfect Competition Monopolistic Competition.](https://reader035.fdocuments.us/reader035/viewer/2022062511/5515f80b55034694308b47d9/html5/thumbnails/19.jpg)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
Monopolistic CompetitionLong-Run Equilibrium
Cost without selling expenses
Cost with selling expenses