chap 24

chap 24 - Econ, Feb 12 Pure Competition Many buyers and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ, Feb 12 Pure Competition Monopolistic Competition Oligopoly Monopoly Many buyers and sellers Many buyers and sellers Small number of competitors Single seller of good Homogeneous product—no difference between brand names Heterogeneous goods Concise interdependence of decision-making No close substitute Freedom of entry and exit: no legal/strategic barriers to keep firms from entering/leaving Freedom of entry and exit: no legal/strategic barriers to keep firms from entering/leaving No profit in long run Diffused market power and no control over price Decision making is mutually independent Major barriers to entry Potential long-run profit Shared power and control over market price Guarantee you can make money? Not necessarily (economic poetry, pantyhose weavers, automatic fish hook baitor) Potential long run profit Barriers to entry No profit in long run, EP=0 Diffused market power and no control over price Market power and control over price perfect competition: perfect information and mobility; a perfectly competitive firm will be perfectly efficient in the long run; zero transaction costs If most firms are making profits, other firms will enter the market, increasing supply and decreasing the price. Profit disappears, and entry into the market stops when economic profit does not equal zero. In the long run, pure competitors operate at output levels where P=MR=MC=SRATC=LRATC Long run supply curve positive sloped for increasing cost industries (costs rise), horizontal for constant cost industries (average total cost unaffected by supply), and negatively sloped for decreasing cost industries (costs decline) Purely competitive market efficient because goods desired by consumers are produced at the lowest possible opportunity cost Marginal social benefits=marginal social costs (b/c of supply and demand); also equals price?!
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/22/2008 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.

Page1 / 3

chap 24 - Econ, Feb 12 Pure Competition Many buyers and...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online