Pure Competition Pure Monopoly Monopolistic Competition Oligopoly Demand : perfectly elastic because it must take the market price Short Run : fixed plant Long Run : Constant-cost: supply is perfectly elastic (horizontal line) Increasing-cost: upward sloping Productive Efficiency : P=minimum AC Allocative Efficiency : P=MC; if P>MC, under-allocation; if P<MC, over-allocation. Efficient Allocation : P=MB=MC Barriers : economies of scale, patents/licenses, ownership of resources, price cutting/advertising. Assumptions : (1) secured by barriers; (2) not-regulated; (3) single-price Demand : downward-sloping *P>MR so monopolist must lower price to sell additional unit. *Price-maker. *Avoids inelastic segment. Supply : no supply curve because there is no relationship between price and quantity supplied. Misconceptions : (1) doesn’t charge highest price; (2) total profits (not unit) is goal; (3) can receive profits in long-run *Will sell smaller output at higher price *P>MC because it exceeds MR
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