ECON 5311 chapter 8 and 9 - LECTURE SESSION FOUR According...

This preview shows page 1 - 2 out of 4 pages.

LECTURE - SESSION FOUR According to Virgil O. Smith of Biola University, "& the character requirements of trust are virtually identical to the scriptural elements of agape love." (I Corinthians 13:4-7) In the old days, in Texas, a person would be insulted if you requested a written contract. Why? Because a man's word (and handshake) was his bond. As we look at the behavior of different firms under different degrees of competition, it may be observed that trustworthiness in business is an essential factor in assessing potential outcomes. Oligopolistic markets in particular are characterized by strong interdependence between the firms. The essential feature of monopolistic competition is product differentiation and advertising. Monopolies generate government intervention as Microsoft has discovered. Perfect competition, the ideal consumer-friendly market, is dominated by the elastic demand curve which faces every individual firm and the prospect of zero long-run profit. CHAPTER 8 - PERFECT COMPETITION MARKET STRUCTURE - Important features of a market, such as the number of firms, uniformity of product among firms, ease of entry, and forms of competition. It is important for business leaders to identify the type of market in which the firm operates in order to predict the behavior of competitors and to adopt appropriate strategies for success in the market. PERFECT COMPETITION - A market structure in which there are large numbers of fully informed buyers and sellers of a homogeneous product, with no obstacles to entry or exit of firms in the long run. In other words, it would be likely to provide more to the market at a lower price because all buyers and sellers are "price takers." The degrees of competition in a market shape the behavior of its members. Control over price gives a great deal of security to decision-makers in devising strategies to increase and protect market share. The perfect competition model provides no such advantage to any firm since all are obliged to accept and work with the price established by the market. Each firm has a horizontal, perfectly elastic demand curve. Characteristics of a perfectly competitive market 1. Many buyers and sellers. 2. Production of a standardized, homogenous, product. 3. Buyers and sellers are fully informed about the price and availability of all resources and products. 4. Firms and resources are freely mobile with no obstacles, such as patents, licenses, high capital costs, nor ignorance about available technology, to prevent new firms from entering or existing firms from leaving the market. PRICE TAKER - A firm that faces a given market price and whose actions have no effect on that market price. Must "take" or accept that price. See exhibit. All firms in perfect competition are price takers.
Image of page 1

Subscribe to view the full document.

Image of page 2

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern