2.6 Second Recitation

2.6 Second Recitation - Second Recitation 2.6 Markets...

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Second Recitation 2.6 Markets Perfect Competition : ☼ “Price takers” → take price as is b/c so many buyers + sellers in the market ☼ No entry / exit barriers For example: If marginal benefit > marginal cost to sell, will sell ☼ All goods are identical ☼ Example: supermarkets? Monopolistic Competition : ☼ Slightly differentiated goods → brands ☼ Many buyers + sellers ☼ Example: sneakers? Oligopoly : ☼ Not always aggressive competition: sellers may work together / cooperate in the market Few sellers ☼ Example: oil market? Monopoly : ☼ One seller = market power ☼ Entry / exit barriers Monopsony : ☼ One consumer Free Trade: Assume Perfect Competition PPFs Fur Hats Vodka Bolivia 100 50 Russia 100 100 → Straight lines in this example Opportunity Costs: ☼ Bolivia: comparative advantage in hats 1 unit of vodka = 2 fur hats 1 fur hat = ½ unit of vodka ☼ Russia: comparative (+ absolute) advantage in vodka 1 unit of vodka = 1 fur hat
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2.6 Second Recitation - Second Recitation 2.6 Markets...

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